Currently Washington State prohibits vertical integration in the marijuana industry. As a result, marijuana producer and processor licensees are prohibited from holding a retail marijuana license and vice versa.
Two new bills recently introduced in the Washington State legislature, however, would undo this prohibition. HB 1945 and HB 1995 would each allow licensed marijuana producers and processors to sell directly to consumers. Both bills require the marijuana producer or processor licensee to do the following:
- Obtain a direct sales endorsement
- Limit sales to the marijuana producer’s marijuana crop and marijuana products created from their crop, or marijuana products produced by the processor
- Ensure that any direct sale of usable marijuana is at least 3.5 grams (there is no minimum sales quantity for concentrates or infused products)
But, HB 1945 and HB 1995 differ in important ways in regard to how licensees may qualify to hold a direct sales endorsement and where direct sales may occur. For instance, HB 1945 is based on the model of the farmers market. It requires direct sales of marijuana to comply with local land use requirements for agricultural direct marketing activities; and restricts sales of marijuana to temporary stands constructed within an outdoor controlled area or dedicated retail space.
Additionally, per HB 1945, marijuana producers that wish to engage in direct sales must meet the following criteria:
- Marijuana producers must further meet the definition of a small business per RCW 39.26.010;
- Must be located ten miles or more from the nearest marijuana retailer;
- Must have plant canopy of 15,000 feet or less; and
- Must be located in an area that is zoned to permit retail sales
Marijuana processors can only engage in direct sales if they also hold a marijuana producer license that meets the above criteria.
In contrast, HB 1995 takes a much less restrictive approach and only limits direct sales endorsements to licensees holding one marijuana producer and/or one marijuana processor license. HB 1995 does not limit direct sales to any part of the producer and/or processor’s licensed premises and does not include the retail distance, canopy, or small business restrictions of HB 1945.
Does this mean craft marijuana production and sales are the future of the marijuana industry in Washington State? Both bills have been referred to the Commerce and Gaming Committee. Thus, we will have to wait to see whether either bill makes it out of committee. Stay tuned here for updates on both of these bills and the possible vertical integration of the marijuana industry in Washington State.
For more information on the regulation of marijuana and hemp businesses in Washington State, please contact Heather Wolf.