October 1, 2023


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Washington Cannabis: Beware “Pay to Play” Arrangements

washington cannabis pay to play

The Washington Point out Liquor and Cannabis Board (“WSLCB”) printed an industry update on Oct 25 detailing a modern increase in issues by hashish producers and processors of “pay to play” phrases.

Seemingly, some cannabis producers and processors have been spending vendors to acquire shelf place for their hashish solutions. These preparations have turn into prominent plenty of that some shops are asking processors to pay for shelf house as if it is common follow.

Spending a retailer for shelf area is unlawful

Like a lot of other hashish business enterprise things to do that Washington prohibits, this is the variety of issue that an standard businessperson may well not imagine 2 times about. However, pay to perform arrangements are unlawful beneath the state’s cannabis guidelines. Washington law prohibits producers and processors from owning a direct or oblique money fascination in a certified cannabis retailer.

The WSLCB’s position is that a pay back to play arrangement involving a producer or processor and a retailer violates that rule. In addition, the WSLCB said that these specials violate Washington law that prohibit a cannabis market member from moving into into an agreement that final results in 1 member getting undue impact in excess of a further. The WSLCB’s situation on shell out to enjoy arrangements is not off the mark based mostly on the textual content of the principles.

Pay back to participate in is an all-too popular occurrence

Regretably, we see troubles like this in the cannabis area more than we would like to. As well typically, cannabis operators get their licenses but are unsuccessful to keep up or operate in compliance with the rules. Washington has some of the strictest legal guidelines governing hashish operators in the state and numerous operate afoul of the guidelines without the need of at any time figuring out it.

To make issues more difficult, the WSLCB is understaffed and from our encounter terribly fast paced so both education and learning (the WSLCB’s desire in most if not all occasions of small violations) and violation enforcement are normally outpaced by what is occurring in the market.

In the end, when licensees supply the assets or equity of the enterprise for sale, regulatory violations almost always appear to mild no matter whether they have been caught by the WSLCB or not. If licensees don’t heed the WSLCB’s word, these fork out to enjoy preparations may perhaps come to be the most recent skeleton in the closet to arise down the highway in Washington hashish acquisitions.

The WSLCB warrants some credit score listed here for maintaining its ear to the floor and putting up a perfectly-written article in an endeavor to suppress this conduct by notifying the sector. Specified how busy the WSLCB is, publishing notices like it has for pay out to participate in arrangements is specifically the right way to go about dealing with rising market place tendencies that violate the regulations.

To be guaranteed, licensees are in a challenging situation simply because the polices are intricate, adjust normally, and in several situations are unclear about what they call for or prohibit. With that being said, ignorance of the regulation is no defense and the burden for guaranteeing regulatory compliance is and always has been on licensees.

If a fork out to play arrangement is memorialized in a published agreement, licensees should get hold of counsel for assistance on how to terminate it. Typically talking, contracts commonly comprise a termination provision making it possible for the functions to terminate the contract if its material is illegal. If no this kind of provision exists in the deal, typical regulation contract defenses may also be obtainable.

A lifetime raft and a warning for shell out to participate in licensees

Even even though Washington’s adult use hashish market place has been all over for numerous yrs, as the WSLCB’s post signifies it’s still to some degree of the wild west. Licensees are well suggested to pay consideration to the WSLCB’s posts about regulatory issues getting spot in the market.

If you’re in a pay back to participate in deal, the WSLCB is providing both a daily life raft and a warning– get out of those discounts now, or else. Where by the WSLCB is providing a general public warning about company functions it sights as illegal, one can be positive it won’t be sympathetic to an uncured violation down the highway.