In May of this year, the Washington State Liquor and Cannabis Board (the “LCB”) announced that existing producer licensees would be able to hold up to three producer licenses starting in early 2017. Importantly, the LCB will not be issuing any new licenses. Existing producer licensees will only be able to purchase and assume licenses from existing licensees. We therefore won’t be seeing an increase in the number of licensed producers rather we will likely be seeing a consolidation of the marijuana producer market.
By way of background, when Washington State legalized recreational marijuana in 2012, the legislation allowed for any individual or entity to hold up to three marijuana producer licenses. The LCB, however, later placed applications for 2nd and 3rd producer licenses on hold and officially terminated these applications in May of this year. The LCB terminated these applications in the belief that these additional licenses were not needed to meet the statewide demand for legal marijuana. For more on meeting the statewide demand for legal marijuana, see my prior post on this issue.
Consequently, we will likely be seeing a number of license assignments next year. The next question is whether the LCB’s new policy will also allow existing producer licensees to become “True Parties in Interest” in two additional entities that each hold a marijuana producer license. In other words, will existing producer licensees be able to take an equity stake in two additional licensed marijuana producer businesses.
It would seem to me that if you can hold more than one license you should be able to hold an ownership interest in more than one licensed business, but this point was not directly addressed in the LCB’s May announcement. Thus, anyone seeking to invest in additional licensed producer businesses should consult with legal counsel and confirm with the LCB that their proposed transaction complies with LCB policies and regulations.
For more information on the regulation of marijuana businesses in Washington State, please contact Heather Wolf.