Developing Opportunity Cannabis producers can now own up to three licenses

On August 9, the Washington State Liquor and Cannabis Board (LCB) lifted its policy that limited cannabis producers to owning only one license. Effective immediately, individuals with an ownership stake in a cannabis producer license will be able to own up to three producer licenses.

Although WAC 314-55-075 has always provided that “any entity and/or principals within any entity are limited to no more than three marijuana producer licenses,” the LCB has had a running policy since the outset of adult-use cannabis legalization in Washington that limited producers to owning only one license. The LCB has officially repealed that policy.

“The LCB was clear in its announcement of this policy shift that this change will not in any way affect applications that are currently being processed.”

In order to add an additional interest in a producer license, a party must follow the protocols for adding true parties of interest, or for an assumption of an existing licensed business. The new policy will allow for the purchase of a licensed producer business, or the formation of a partnership with an existing producer licensee only. Additional producer licenses will not be issued. And although applicants for cannabis producer licenses were initially able to apply for up to three licenses, with two of the three licenses being placed on administrative hold, those two additional license applications would have been permanently withdrawn by the LCB; nothing in this policy shift will change that.

It is important to note that the entire vetting and approval process for the addition of a true party of interest or for a license assumption must be completed prior to any transfer of ownership, funds or interest, all in accordance with WAC 314-55. Any transfer of funds, ownership or control of a licensed business prior to approval by the LCB will constitute a true party of interest rules violation, and this could subject the license to cancellation.

The LCB was clear in its announcement of this policy shift that this change will not in any way affect applications that are currently being processed. The announcement also reiterated that co-locating producer licenses is not allowed. This means that even if two producer licenses have the same ownership, they must have their own distinct premises and cannot share a facility. And nothing in this policy change will affect the prohibition on producer licensees owning any interest in a retail licensee.

The licensing process will undoubtedly have some logistical issues that will need to be worked through in implementing this policy change, and the LCB will likely see an influx in change of ownership requests and license assumptions. Because these requests take time to process, it will be important for applicants to submit their applications sooner rather than later, as well as to have all their documentation in order.

Finally, it cannot be stressed enough that every change in ownership or control must be pre-approved by the LCB. Jumping the gun and failing to disclose a true party of interest to the LCB can result in immediate license cancellation. An increase in the number of producer licenses that may be owned by an individual should serve to decrease the finagling many licensees have undoubtedly engaged in to hide true parties of interest, and that will only benefit the industry overall.

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