The Cannabis Alliance Membership survey |
Out of State Funding Membership Poll, HB1341/SB5377
As legislation moves through Olympia we want to make sure we represent our members and their positions on topics being considered. Please take a few minutes to read the summary, as well as Pro/Con points below before completing the survey.
HB 1341/SB 5277 Purports to allow out-of-state residents to have ownership in cannabis companies in Washington. Currently, the law requires that a person must be a WA resident for at least 6 months in order to qualify for holding a cannabis license.
HB 1341/SB 5277 Purports to allow out-of-state residents to have ownership in cannabis companies in Washington. Currently, the law requires that a person must be a WA resident for at least 6 months in order to qualify for holding a cannabis license.
The bill also provides in part:
- The board must suspend a cannabis producer's license issued under RCW 69.50.325 if no activity has been recorded on the license after July 1, 2021. If suspended pursuant to this section, it must be reissued when either:
- Federal Law allows for interstate commerce in cannabis; or
- The US DOJ issues an opinion that tolerates interstate commerce in cannabis
This bill abolishes the requirement that a licensee must have been a resident of WA for at least 6 months prior to obtaining a license.
The bill requires background checks for persons or entities holding more than a 10% ownership stake to qualify for ownership but removes the background check for anyone holding 10% or less ownership. It does provide that anyone holding more than a 1% ownership stake needs to be disclosed to the Liquor and Cannabis Board.
The board may impose additional licensing fees to recover additional costs incurred in investigating a nonresident required to be investigated under this section. If, after reasonable efforts, the board is unable to sufficiently investigate a nonresident the board may deny a license or license renewal to an entity.
Arguments:
PRO:
- Licensees may want to sell ownership, or a portion of ownership, to non-resident persons or entities and take some cash off the table.
- Licensees want to give up shares of ownership to non-resident persons or entities in exchange for capital investment rather than seek a loan.
- Residency requirements may be proven unconstitutional. Recent 1st circuit case finding residency requirements unconstitutional.
- Interstate Commerce is coming. Expansion is needed to prepare for a future national market. Allowing for any person or entity to become a license owner would move toward cannabis normalcy in business. This would allow for companies to become better prepared prior to National Legalization.
CON:
- I-502 was designed to benefit the residents of Washington State; particularly those impacted by the War on Drugs.
- License fees were kept small to encourage the cottage industry’s legacy market to become legal.
- Washington state courts have upheld the state constitutionality of the residency requirement.
- The owner-operators that remain after 10 years need protections for their small business model prior to allowing out-of-state corporate entities to enter the state.
- Currently, Washington is in a state of abundant cannabis overproduction; funds to expand and grow more are not needed.
- With over 1000 brands, Washington has perhaps the most diverse and extensive brand and product distribution in the country. Allowing for out-of-state ownership will put many of those brands in jeopardy.