The end of cannabis prohibition - beyond the tipping point

The first system of state government regulated production and supply of cannabis for non-medical use came one step closer this week, with the publication by the Washington State Liquor Control Board of its latest draft rules for the production and supply of marijuana. (See below for highlights)

These proposed new rules appear to meet the requirements laid down by US Attorney General Eric Holder in his recent announcement that the Federal Government will allow individual states to proceed with marijuana legalization, as long  they ensure production and supply are well regulated, including restricting access to minors, and preventing excess production being sold into states that have not legalized.

Transform welcomes the broad thrust of Washington State's regulations which, are in line with what we have been calling for, including in our book After the War on Drugs: Blueprint for Regulation, and in our forthcoming publication How to Regulate Cannabis: A Practical Guide.

We also find the detail fascinating, shaped as it is by a combination of the requirements of the wording of the ballot initiative that voters passed; existing federal and state regulatory frameworks and laws they must accommodate and comply with, for example on packaging, advertising, intoxicants etc; the Federal Government's specific requirements; and last but not least, the rapidly changing US political and cultural landscape too.

Included in that changing landscape is the fact that cannabis legalisation ballot initiatives significantly increase the number of young voters who make it to the ballot box, something that favours Democratic candidates (by and large).  As a result, with over half of all Americans now supporting marijuana law reform, and 83% saying the war on drugs has been lost, for Democrats at least, cannabis law reform is no longer a third rail issue - it is a vote winner, whether Obama can say so publicly or not. How do the Republicans respond to this? Calling for the Federal Government to stamp all over states rights is not acceptable for most of them, and with even former Presidential Candidate John McCain saying "Maybe we should legalize" marijuana, surely the game is up.

Internationally, these changes combined with a general reduction in international influence means that the US can no longer effectively dictate a global prohibitionist approach to cannabis, as underlined by Uruguay's bold moves. With legislators in many other regions expressing support for Uruguay, or interest in legalizing cannabis in their own cities or countries, it is clear we are not at a tipping point on ending cannabis prohibition. We have passed it.

September 4, 2013

LCB Rulemaking Objective

• Creating a tightly controlled and regulated marijuana market;
• Including strict controls to prevent diversion, illegal sales, and sales to minors; and
• Providing reasonable access to products to mitigate the illicit market.

LCB Role and Responsibility

• Ensuring public safety is the top priority;
• Creating a three-tier regulatory system for marijuana;
• Creating licenses for producers, processors, and retailers;
• Enforcing laws and rules pertaining to licensees; and
• Collecting and distributing taxes.

Timeline

• December 6, 2012 Effective date of new law
• September 4, 2013 File Supplemental CR 102 with revised proposed rules
• October 9, 2013 Public hearing(s) on proposed rules (time and location TBD)
• October 16, 2013 Board adopts or rejects proposed rules (CR 103)
• November 16, 2013 Rules become effective
• November 18, 2013 Begin accepting applications for all three licenses (30-day window)
• December 1, 2013 Deadline for rules to be complete (as mandated by law)
• December 18, 2013 30-day window closes for producer, processor and retailer license applications

Proposed Rules Highlights

License Requirements


30-day Window

• The LCB will open registration for all license types for a 30-calendar-day window (November 18, 2013)
• LCB may extend the time or reopen application window at its discretion

State Residency Requirement

•  I-502 requires a three month state residency requirement (all license structure types)

Background Checks

• Personal criminal history completed by applicant. Risk of license forfeiture if incomplete or incorrect.
• Fingerprinting of all potential licensees 
• Background checks of license applicants and financiers

Point System

• The LCB will apply a disqualifying point system similar to liquor
• All applicants must disclose all arrests and/or convictions
• Non-disclosure of arrests regardless of conviction will result in point accumulation

License Limits

• Licensed entity or principals limited to three producer licenses 
• Licensed entity or principals limited to three processor licenses
• Licensed entity or principals limited to three retail licenses. 
• Multiple-location licensees not allowed to hold more than 33 percent of the allowed licenses in any county or city. 

Production Limits

• The maximum amount of space for marijuana production is limited to two million square feet.
• Applicants must designate on their operating plan the size category of the production premises and the actual square footage in their premises that will be designated as plant canopy.

 There are three categories:

• Tier 1: Less than 2,000 square feet;
• Tier 2: 2,000 square feet to 10,000 square feet;
• Tier 3: 10,000 square feet to 30,000 square feet.

The LCB may reduce a licensee’s or applicants’ square footage designated to plant canopy for the
following reasons:

• If the total amount of square feet for production of all licensees exceeds the two million square feet maximum, the LCB will reduce the allowed square footage by the same percentage.
• If 50 percent production space used for plant canopy in the licensee’s operating plan is not met in the first year of operation, the board may reduce the tier of licensure.
• If the total amount of square feet of marijuana production exceeds two million square feet, the LCB may reduce all licensees’ production by the same percentage or reduce licensee production by one or more tiers by the same percentage.

Maximum Allowable Amount on Licensed Location

Producer license

• Outdoor or greenhouse: 125 percent of its year’s harvest
• Indoor: six months of its annual harvest

Processor license

• Six months of their average useable marijuana (plant material); and
• Six months average of their total production (finished product).

Retailer license

• Four months of their average inventory
• Licensed Location: 1000 foot Measurement

Distance will be measured along the most direct route over or across established public walks, streets,
or other public passageway between the proposed building/business location to the perimeter of the
grounds of: an elementary or secondary school, playground, recreation center or facility, child care
center, public park, public transit center, library or arcade where admission is not restricted to those
age 21 and older.

Costs and Fees

• $250 application fee
• $1,000 annual renewal fee
• Additional fees for background check and filing for local business license

Taxes

• License applicants must submit a signed attestation that they are current on taxes owed to the Washington State Department of Revenue

Insurance

• Licensees are required to carry commercial liability insurance.

Public Safety

Producer Structures

• Rules allow producer operations in secure: indoor and outdoor grows as well as greenhouses

Traceability

• LCB will employ a robust and comprehensive traceability system (software) that will trace product from seed/clone to sale.
• LCB enforcement can match records to actual product on hand 

Background Checks

• Personal criminal history form
• Fingerprinting of all potential licensees
• Background checks of licensees and financiers

Point System

• LCB will apply a disqualifying point system similar to liquor (exceptions for possession)

Violation Guidelines / Standard Administrative Procedures Act Guidelines

•  $1,000 criminal penalty for sales to a minor
• Sets strict tiered system of violation record over a three year period

Group 1 public safety:

• First violation: 10 day suspension or $2,500
• Second violation: 30 day suspension
• Third violation: license cancellation

Local Authority Objections

• Substantial weight will be given to a local authority during the renewal process based upon chronic illegal activity associated with the licensee’s operation of the premises.

Child Resistant Packaging

•  Specific requirements for marijuana and marijuana-infused products in solid and liquid forms

Security and Safeguards

• Alarm and surveillance video camera requirements (including minimum pixels and lockbox 
• encasement)
• Strict transportation and record keeping requirements (no third party transport of product)
• Hours of operation limited to 8:00 a.m. to 12:00 a.m.

Advertising Restrictions

• Law restricts advertising within 1,000 feet of schools, public parks, transit centers, arcades, and other areas where children are present.
• May not contain statements or illustrations that are false or misleading, promotes overconsumption, represents that it has curative or therapeutic effects, depicts a child or may be appealing to children
• All advertising must contain two statements: a: “This product has intoxicating effects and may be habit 
• forming.” And, b) “Marijuana can impair concentration, coordination, and judgment. Do not operate a vehicle or machinery under the influence of this drug.” 

Limits on Retail Stores

• Total number or retail outlets limited to 334 statewide
• LCB to provide advance notice to local authority
• Per I-502, LCB to determine number of retail outlets per county
• BOTEC Analysis Corporation provided initial county consumption levels
• Retail stores allocation proportionate to population and consumption

Behind the Counter Storage

• No open containers or handling of product
• Sniff jars with sealed, screened-top lids allowed

Strict Packaging and Label Requirements

• Limited servings and concentration per package
• Lot number
• Warning label
• Net weight
• Concentration of THC 
• Usage warnings (specific warning for ingestible foods/liquids about effect delays)

Upon request

• Third party lab that tested lot and results
• All pesticides, herbicides, fungicides found in product

Defined Serving Size

• Defined serving sizes on marijuana-infused product label
• 10 mg of THC per serving
• 100 mg of THC per product
• A single unit of marijuana-infused extract for inhalation cannot exceed one gram

Transaction Limits on Concentrates (extracts)

• A single transaction is limited to seven grams of marijuana-infused extract for inhalation

Lab Tested and Approved (monograph)

• All lots will be tested by independent accredited labs
• Established and uniform testing standards
• Quality assurance testing

Store Signage and Product Warnings

• No minors allowed in stores
• Required product and usage signs within stores

For more information regarding Initiative 502, please visit the Liquor Control Board website at www.liq.wa.gov.
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