The marijuana industry regulator in Washington State has noted a significant increase in the number of complaints that cannabis producers and processors are purchasing shelf space for their products from retailers.
The Washington State Liquor and Cannabis Board (WSLCB) advised in its industry update that such “pay to play” arrangements are unlawful but have apparently become so widespread that cannabis retailers are often asking producers upfront for shelf space payments.
This practice may be common and legal in many traditional industries, but under Washington State’s cannabis laws it is prohibited for a marijuana producer or processor to have any financial interest in a licensed marijuana retailer. As such, pay to play arrangements are illegal.
WSLCB goes on to state that this practice may violate another law that prohibits marijuana businesses from entering into an arrangement whereby one party holds undue influence over the other.
According to Jack Scrantom, cannabis attorney at Harris Bricken, these are just two examples of laws that many marijuana businesses in Washington State are, unwittingly or otherwise, failing to comply with.
“Unfortunately, we see issues like this in the cannabis space more than we would like to,” he said. “Too often, cannabis operators get their licenses but fail to keep up or operate in compliance with the regulations. Washington has some of the strictest laws governing cannabis operators in the country and many run afoul of the rules without ever knowing it.”
Scrantom goes on to note that WSLCB is chronically understaffed which makes it difficult to keep pace with market activity by educating cannabusiness owners and following up on violation enforcements.
Despite being one of the country’s most mature cannabis markets, the WSLCB’s advisory note is a reminder that many practices in the marijuana industry still often fall short of standards expected in traditional industries.