On March 31, 2020, Governor Inslee signed HB 2870 into law, which will reopen the marijuana retail license process for the first time since 2015 and which establishes Washington’s first substantive effort to right the wrongs of past drug laws that disproportionately affected certain communities. This bill stands as a business opportunity for qualifying individuals and businesses, so stakeholders in the marijuana industry should take note. According to the bill’s most recent fiscal note, the Washington State Liquor and Cannabis Board (“WSLCB”) has 13 retail licenses that will be available to qualifying applicants beginning December 1, 2020.

 

Social Equity Applicants

The licenses will be issued to “social equity applicants” who submit a “social equity plan,” terms that are defined in the new law. Understanding these terms are important, because applications that do not qualify will be rejected. A social equity applicant is defined as,

(i) An applicant who has at least fifty-one percent ownership and control by one or more individuals who have resided for at least five of the preceding ten years in a disproportionately impacted area; or

(ii) An applicant who has at least fifty-one percent ownership and control by at least one individual who has been convicted of a marijuana offense or is a family member of such an individual.

An applicant need only qualify for one of the above, not both. Note that on (ii), an applicant convicted of a “marijuana offense” (which is not actually defined) would still have to qualify under the WSLCB’s other rules related to criminal history. They could still be disqualified if their criminal record was serious enough.

 

Disproportionately Impacted Areas

Subpart (i) requires an applicant have lived for five of the past ten years in a “disproportionately impacted area,” which also has its own definition:

“Disproportionately impacted area” means a census tract or comparable geographic area that satisfies the following criteria, which may be further defined in rule by the board after consultation with the commission on African American affairs and other agencies and stakeholders as determined by the board:

• The area has a high poverty rate;
• The area has a high rate of participation in income-based federal or state programs;
• The area has a high rate of unemployment; and
• The area has a high rate of arrest, conviction, or incarceration related to the sale, possession, use, cultivation, manufacture, or transport of marijuana.

It is important to note that this list is all inclusive; all the above must apply. Presumably the WSLCB will clarify which census tracts will qualify.

 

Social Equity Plan

Applicants will also have to provide a social equity plan with their application in order to be considered for licensure. This is defined in the law:

“Social equity plan” means a plan that addresses at least some of the elements outlined in this subsection (6)(d), along with any additional plan components or requirements approved by the board following consultation with the task force created in section 5 of this act. The plan may include:

• A statement that the social equity applicant qualifies as a social equity applicant and intends to own at least fifty-one percent of the proposed marijuana retail business or applicants representing at least fifty-one percent of the ownership of the proposed business qualify as social equity applicants;
• A description of how issuing a marijuana retail license to the social equity applicant will meet social equity goals;
• The social equity applicant’s personal or family history with the criminal justice system including any offenses involving marijuana;
• The composition of the workforce the social equity applicant intends to hire;
• Neighborhood characteristics of the location where the social equity applicant intends to operate, focusing especially on disproportionately impacted areas; and
• Business plans involving partnerships or assistance to organizations or residents with connection to populations with a history of high rates of enforcement of marijuana prohibition.

Again, applicants should expect further clarification from the WSLCB on what a social equity plan will have to contain. If you have further questions on this new law, or other matters concerning the marijuana and hemp industries, be sure to contact an attorney experienced in those regulations.