Last month, I reported on a proposed rule change by the Washington State Liquor and Cannabis Board (the “LCB”) that would allow out of state financiers as well as proposed legislation that would allow out of state ownership of marijuana businesses.
Since that time, the LCB has indicated that the rule change allowing out of state financing will likely take occur in June. This rule change, however, would not allow non resident investors to take an equity interest in a marijuana business in exchange for providing funding.
A bill that would have allowed out of state residents to hold a minority ownership interest in marijuana business entities, HB 2364, was reintroduced during the 2016 special legislative session. But, the special session was adjourned without action on this bill. Consequently, only Washington residents will be able to have equity interests in licensed marijuana businesses in the near term.
I may be proven wrong, but I think it is unlikely that much out of state capital will flow to marijuana businesses in Washington State until such time as out of state ownership is allowed. Rather, non residents will likely continue to seek other ways of participating in the Washington’s marijuana industry via consulting agreements, property development, etc.
Aside from financing issues, Washington’s marijuana market continues to evolve. The closing of medical marijuana collectives/dispensaries and the full merger of legal recreational and medical marijuana sales is on the horizon. As of July 1, medical marijuana may only be sold by licensed I502 retail outlets and grown and processed by licensed I502 producers and processers.
The LCB recently released a retail store status update showing which jurisdictions have retail allotments remaining. Many jurisdictions are full and/or in the process of filling their allotments. The opening of these new retail stores and the incorporation of the medical marijuana market into the recreational market may require increased marijuana production capacity. Could this mean that more production and processing licenses in the future? Stay tuned for more information on this and other issues affecting the cannabis industry.
For more information on the regulation of marijuana businesses, please contact Heather Wolf.