A new bill co-sponsored by Washington state Sen. Rebecca Saldaña (D-Seattle) and eight other Democratic state senators would make significant amendments to the existing statutes establishing the Washington State Liquor and Cannabis Board’s (WSLCB) social equity in cannabis program, which aims to award retail cannabis licenses to people from the communities most impacted by the war on drugs. Black people and other minorities are currently underrepresented in ownership of cannabis businesses in Washington state. Senate Bill (SB) 5080, submitted at the request of the WSLCB, would streamline and improve the original social equity program established by House Bill (HB) 2870 in 2019.
However, one of its provisions is already drawing fire from industry lobbyists.
At the bill’s first hearing in the Jan. 10 Senate Labor & Commerce committee, representatives of the Washington CannaBusiness Association (WACA) and the Craft Cannabis Coalition (CCC) signed into public testimony as neither for or against the bill, instead urging lawmakers to limit the number of new retail licenses issued under the social equity program.
“I had really hoped to be able to sign in ‘pro’ today. We’re ‘other’ because of two very specific amendments we’d like the committee to consider,” said Vicki Christophersen, WACA’s executive director. “We do believe that the authority to expand licenses rests with the legislature. We believe that’s essentially in the spirit of the law now. We’d like to reaffirm that.”
Requiring legislative action before new cannabis licenses can be created would almost certainly slow down that process because the legislature does not meet year-round and is often forced to bump bills that aren’t critically important into the next session. Notably, none of the 49 social equity licenses already earmarked for the program have been issued nearly three years after the original bill’s passage.
The second concern? Saturation. HB 5080 includes a provision improving portability of social equity licenses, meaning that an establishment could theoretically open anywhere. Currently, all retail licenses are assigned to a city or county.
“What we would like to do is have some mechanism in the bill that ensures that — let’s say it’s 50 new licenses are created — they don’t all go to one jurisdiction,” Christophersen said, warning that such a concentration of stores could harm existing retailers and the newly opened social equity stores. Adán Espino Jr. her counterpart at the CCC, echoed Christophersen’s call to keep legislative control of new licenses, adding a number of his own concerns to the chorus.
“We are concerned with the way this bill ignores industry realities,” he said. “We believe it is misleading and unproductive to award hundreds of potential new licenses in an industry that is extremely difficult to get investment funding for and extremely difficult to sustain after the ‘open’ sign is turned on.”
From there, he listed a number of reasons why someone shouldn’t want to be involved in the cannabis industry.
“Nationwide, 58 percent of all cannabis businesses, retail and growers are not making any profit,” Espino said. “The industry is oversaturated. Retail stores are roiled in violent robberies. Growers are struggling to compete in the market, and there is an immediate threat to the community from unregulated hemp-derived cannabis.”
SB 5080 amends state law to allow the WSLCB to offer additional social equity licenses based on census and population data. Washington state caps the number of retail licenses at 556 for the whole state.
Currently, the only licenses available to the social equity program are 49 unused, revoked or otherwise inactive licenses that already exist within that cap. Any additional social equity licenses issued by the board would be the first new licenses since 2016, when the state merged its longstanding medical cannabis industry with the nascent recreational one via the Cannabis Patient Protection Act (SB 5052).
Even after that bill nearly doubled the number of retail cannabis stores, many in the industry felt that the balance of power within the state’s regulated market fell heavily in favor of retailers. An individual can own up to five retail licenses, and many have consolidated even further by working with family members or business associates to bring more licenses together under the same umbrella.
All four board members listed on the CCC’s website represent retailers, and three of the four represent chains. Zips Cannabis is the largest one with seven locations, followed by Evergreen Market with five and Lux with three. Evergreen Market’s CEO is also a board member of WACA.
Such groupings, especially given the state’s relatively low cap on retail licenses, give retailers outsized buying power, putting them at an advantage in price negotiations with producers and processors. Keeping things as close to the status quo as possible, where the overall number of licenses is set and those in lucrative locations don’t face competition from newcomers, would be a boon to existing retailers.
“The state of Washington has about half the number of stores per capita as other similar states. There’s a lot of space in our market for more retail licenses, and [we should do] anything we can do to make sure that there are as many licenses as possible and can be successful are allocated as result of this,” said Micah Sherman, owner of producer/processor Raven Grass and a member of the WSLCB’s Social Equity in Cannabis Task Force. He urged senators to add amendments allowing municipalities to request more licenses and be granted them at the WSLCB’s discretion.
“Don’t be deterred about allowing more of them to open,” he said of social equity licensees. “There’s lots of people in the industry that want to support these businesses.”
Easy access to licenses is the centerpiece of any social equity effort, according to experts.
A 2021 report by Leafly culture editor and social equity researcher Janessa Bailey recommended that states “eliminate license caps, or allow licenses commensurate with liquor license caps” to achieve equity. The report went even further, recommending a one-to-one license ratio of social equity to non-social equity licenses. Even with 49, Washington would be nowhere near that figure.
Locally, advocates for more Black ownership in cannabis showed up to support license expansion. At the Jan. 10 senate hearing, Peter Manning, president of the Black Excellence in Cannabis group, said, “Senate Bill 5080 is the right step. We support this bill 100 percent. There’s some reservations we have … but we do support it.”
Black Excellence in Cannabis vice president Mike Asai, a former Seattle-area medical cannabis dispensary owner, said in his testimony that, “[Senate] Bill 5052 was an illusion of inclusion for the Black medical cannabis pioneers. Because of this is why House Bill 2870 was created — social equity in cannabis. Three years since passage of House Bill 2870, we still have not seen one license issued for social equity. Today we are pro Senate Bill 5080, but we are against a few things in this bill.”
Those things included a provision to waive licensing fees for existing retailers who submit a social equity plan to the WSLCB, as well as a provision to move responsibility for evaluating social equity applicants away from the Commission on African-American Affairs to an unspecified third-party. He also suggested that the state add 100 new producer/processor licenses to the bill. Among everyone testifying in favor of the bill, which included WSLCB commissioner Ollie Garrett, the main message was that new licenses are needed.
Saldaña, who made an amendment to the original social equity bill to do exactly what Christophersen was asking for this time around — require legislative approval of new licenses — said she now sees the wisdom in allowing the WSLCB to make that decision.
“Current business retail license holders have legitimate concerns on saturation,” she said in a phone interview on Jan. 11, “but there’s no way there’s going to be saturation with either the 49 that are currently there or the 98 that more or less is what would be proposed under my bill.”
Her understanding, she said, is that the WSLCB expects to bring the total number of social equity licenses to 98 based on its initial research, which is inclusive of the 49 licenses already assigned to the program.
Garrett, in her testimony on Jan. 10, described that as a “modest number” of additional licenses. Christophersen, in hers, said WACA was ultimately on board with using population numbers as a method for determining new licenses, despite wanting to add hurdles to their creation. Saldaña said that the fact that existing retailers thought it went too far and equity advocates thought it needed to go further was a good indication that the bill was probably just about right.
“I do think it strikes a decent balance. [...] I mean, I do think it is a thoughtful, equity-centered approach that tries to strike a good next step that will actually then help us have more data,” she said, acknowledging the real elephant in the room on social equity: not a single license has been issued over three years after the original bill passed.
“This has been the problem, is that we’ve been asking — the community has been asking — for a long time, and we’ve been engaging with it in the legislative process for the last three years. Yet, there’s not a single one currently,” she said.
To that end, SB 5080 adds flexibility on locating licenses while also cleaning up and clarifying language on what qualifies someone as a social equity applicant and under what circumstances a social equity applicant can sell.
No amendments to it have been proposed, though SB 5080 has yet to pass out of the Labor and Commerce committee. It does not appear on the agenda for the committee’s next meeting, on Jan. 19.
Read more of the Jan. 18-24, 2023 issue.