Washington State “Battle Royale”

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An effort by state regulators to rein in sales of out-of-state cannabis has some major business interests crying foul.

The Washington Liquor and Cannabis Board has requested a change in the law that would enable it to prohibit the sale of intoxicating materials derived from hemp. The request comes on the heels of rulemaking started last year after it was discovered that some retailers were selling products produced from hemp, which, unlike marijuana, is legal under federal law.

Producers in the state argue that the ban is necessary to avoid an existential crisis for their businesses, as hemp producers can provide raw material for pennies on the dollar, compared to licensed marijuana producers that must adhere to a costly set of state regulations.

But at least one major cannabis industry trade organization has offered its own legislation in rebuttal to the Liquor and Cannabis Board’s plan, saying the state will stifle growth in an industry that produces tens of millions of dollars in excise tax revenue each month.

“This is going to be the big battle royale this year,” said Chris Marr, a former state legislator and Liquor and Cannabis Board member who now consults with clients in Washington’s legal marijuana marketplace.

The Liquor and Cannabis Board legislation has bipartisan sponsorship in both houses of the Legislature. It restricts the use of “nonimpairing cannabinoids,” including the cannabidiol found in hemp, only in “enhancing the nonimpairing cannabinoid concentration” for products sold in legal retailers.

Justin Nordhorn, director of policy and external affairs for the Liquor and Cannabis Board, said the bill recognizes that hemp-derived THC is an intoxicant and potentially poses a safety hazard for users. A recent fact sheet from the agency supporting its rulemaking noted that poison control centers nationwide received 660 calls reporting exposure to that version of THC in the first seven months of 2021.

“We realize that [hemp THC] is less potent,” Nordhorn said in an interview last week, citing the small but growing evidence of the drug’s effect on the body. “However, it’s not like it’s not potent at all.”

If it can be manufactured using plants that do not fall under the agency’s authority to test and track, Nordhorn said, there are also potential health concerns. The agency has also seen products that exceed the maximum dosage of THC per serving size as mandated under law.

“These products need to be regulated,” he said.

That’s a position shared by those who say the state’s bill goes too far, said Vicki Christophersen, executive director and lobbyist for the Washington Cannabusiness Association. The law’s restriction of nonimpairing cannabinoids, paired with a measure that would require rulemaking before the sale of any “synthetically derived cannabinoid,” puts Washington at a competitive disadvantage compared to other states that are allowing the introduction of substances safely into their markets, and the illicit market, she said.

“It feels like the bill doesn’t really address the overarching problem,” she said.

WACA, which represents growers of all sizes, retailers and processors, as well as those in the hemp industry, has offered its own rebuttal legislation. That bill lists specific impairing cannabinoids, beyond just hemp-derived THC, and allows them to be introduced into products for sale in retailers, subject to potency testing and labeling.

Their bill better positions the state as the industry approaches the 10-year anniversary of passage of Initiative 502, which created the legal recreational market in Washington, Christophersen said.

“We don’t want to come back every year and say, now we found this thing,” Christophersen said. “Let’s define an impairing cannabinoid, so we can all agree.”

The explosion in hemp growth following passage of the farm bill, which started with the sale of hemp THC products in some states that hadn’t permitted marijuana sales, created the current situation for the board, Marr said.

“We’re on the verge of a whole new science around the plant,” he said.

Yet another faction of marijuana growers wants to keep that new science from not only undermining those who’ve been operating in the legal market for nearly a decade, but also upending people’s perceptions about what they’re putting in their bodies.

“For me, the important part is the distinction between the natural and the synthetic,” said Micah Sherman, owner and operator of Raven, a mid-tier producer and processor in Olympia. He’s also a board member of the Washington State Sun and Craft Growers Association, which advocates on behalf of largely outdoor growers across the state.

Sherman said the legislation is a good first step toward regulating products that can be made cheaper and avoid scrutiny by state officials. But he said if such products were to be made available, they should be segregated in stores from naturally grown flower and products made from it, while also being clearly labeled as a synthetic product.

“We don’t know whether or not these things are safe,” Sherman said. “We don’t have thousands of years of human consumption to look at.”

Christophersen said there is no distinction between the hemp plants that are used to distill CBD and the flowering marijuana plants growing at production facilities across the state. Federal law’s only distinction between hemp and marijuana is the level of THC, which can’t be more than 0.3%.

They’re the same plant, Christophersen said, they just differ in their content of cannabinoids, which means they should be allowed, under regulation, to be sold in the same marketplace.

“There’s nothing wrong with safely deriving cannabinoids,” she said. “It’s just about how you do it safely.”

Both the state board-backed bill, Senate Bill 5547, and the industry bill, Senate Bill 5767, bills have been introduced in the state Legislature. A hearing is scheduled for Thursday before the Senate Labor, Commerce and Tribal Affairs Committee.