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Washington Licensing Change Expected to Bring Frenzy of Business Activity

August 10, 2017
(styf22/iStock)
Update 08/11/2017: This story has been updated to note that the WSLCB licensing changes take effect immediately.

 

A decision by Washington state cannabis regulators to undo a policy limiting businesses or individuals to only one cannabis-production license is expected to kickstart a rush of industry activity in the state. Under a change approved Wednesday by the Washington State Liquor and Cannabis Board (WSLCB), entities can now hold up to three production licenses.

According to Daniel Shortt, a Seattle-based attorney focused at the cannabis-focused law firm Harris Bricken, the change has been in the works for some time. While the move isn’t expected to increase the number of producer licenses available, it does affect who can own them.

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“This is allowing individuals that already own licenses to buy or acquire new licenses,” he told Leafly. “This is not creating new licenses.”

The updated policy could usher in a frenzy of mergers and acquisitions among cannabis companies now that entities can hold a greater number of licenses, Shortt added. “I think what this will allow is, for those who can grow well, [they] can take on other licenses and expand.”

It’s not only large companies that stand to benefit, Shortt said. “When you think about the smaller companies, now you are going to have the ability to merge,” he explained. “It also gives some exit strategies for licensees [who] for whatever reason want to leave the industry. They can—there are more buyers in the market now.”

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The change, which takes effect immediately, has been in the works for a while, Shortt said, with support from local producers and other  industry stakeholders. As for whether it’s a good change or a bad one, he said, “you can make cases for both sides.”

On one hand, some critics have expressed concern with large corporations coming into the state, buying up smaller cannabis businesses, and coming to dominate the industry. While that’s a legitimate concern, Shortt said, he believes the policy change will actually be a positive in terms of cannabis products.

“I think this is a good move, I think that growing marijuana, growing cannabis, is a very difficult thing to do and some growers are better than others,” Shortt said. “I think what this will allow, is, for those who can grow well, can take on other licenses and expand.”

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“The way this state regulates cannabis is by canopy size,” he explained. “An efficient grower can do more with that space. Now those growers have the opportunity to merge with other businesses, acquire other businesses, and expand.”

The WSLCB will not issue producer licenses to any new applicants, nor will its policies on canopy space change. Shortt said. “I expect that people will think this will result in a new application process, but this is not what this is.” The change simply means that anyone who already holds a Washington state producer’s license will now be able to expand production by acquiring other licensed production businesses.

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Gage Peake

Gage Peake is a former staff writer for Leafly, where he specialized in data journalism, sports, and breaking news coverage. He's a graduate of the University of Nebraska-Lincoln's College of Journalism and Mass Communications.

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  • davidaquarius

    My question is can a ‘cartel’ of Tier 3 growers/producers collaborate on prices, availability of popular strains, and market share under this law? I don’t see how a small grower can compete in this environment. Big Green will undercut their prices, lock them out of retail outlets until they give up and relinquish their licenses.

    It was our industry for decades, now it’s been usurped by capitalists. I had a chance to meet the owner of one of my favorite pot shops. He said he had never tried pot, could care less what strain did what and was generally hostile to the whole ‘tie-dye’ culture. I’ve cannabis user for over 45 years and consider myself part of that culture. I joined NORML in 1977, been active in advocating medical and recreational cannabis. I tossed a seed in the ground for a bit and faced a judge a few times. It’s disheartening to see decades of our hard work pushed
    aside by spreadsheets and board rooms. I’m told that this is the future, deal with it.

    The WSLCB, I believe, is actively promoting this. They would rather deal with a few large corporate entities (who can spend $$$ on lobbying) than hundreds of small licensees. This law is a prime example of it.