Washington Cannabis: Beware “Pay to Play” Arrangements

The Washington Point out Liquor and Cannabis Board (“WSLCB”) posted an field update on Oct 25 detailing a latest maximize in complaints by cannabis producers and processors of “pay to play” terms.

Apparently, some cannabis producers and processors have been paying out suppliers to acquire shelf house for their cannabis solutions. These arrangements have come to be outstanding sufficient that some merchants are inquiring processors to pay for shelf space as if it is common apply.

Shelling out a retailer for shelf house is unlawful

Like quite a few other hashish business activities that Washington prohibits, this is the sort of point that an ordinary businessperson may possibly not believe two times about. Nevertheless, fork out to participate in arrangements are unlawful underneath the state’s hashish laws. Washington legislation prohibits producers and processors from having a direct or oblique money desire in a certified hashish retailer.

The WSLCB’s situation is that a fork out to perform arrangement between a producer or processor and a retailer violates that rule. In addition, the WSLCB stated that these specials violate Washington regulation that prohibit a hashish field member from getting into into an agreement that success in just one member owning undue impact about another. The WSLCB’s placement on pay out to perform arrangements is not off the mark based mostly on the textual content of the principles.

Fork out to participate in is an all-far too prevalent prevalence

Unfortunately, we see problems like this in the hashish house more than we would like to. As well normally, hashish operators get their licenses but are unsuccessful to hold up or run in compliance with the rules. Washington has some of the strictest guidelines governing cannabis operators in the place and a lot of run afoul of the guidelines without the need of at any time understanding it.

To make issues more difficult, the WSLCB is understaffed and from our knowledge terribly occupied so equally training (the WSLCB’s choice in most if not all situations of insignificant violations) and violation enforcement are frequently outpaced by what is going on in the sector.

Ultimately, when licensees present the assets or fairness of the business enterprise for sale, regulatory violations practically often come to mild whether or not they ended up caught by the WSLCB or not. If licensees really do not heed the WSLCB’s word, these pay back to perform preparations may perhaps grow to be the latest skeleton in the closet to arise down the road in Washington hashish acquisitions.

The WSLCB deserves some credit listed here for trying to keep its ear to the floor and publishing a perfectly-written article in an endeavor to curb this actions by notifying the market. Given how busy the WSLCB is, publishing notices like it has for pay out to play arrangements is exactly the right way to go about working with rising marketplace developments that violate the procedures.

To be sure, licensees are in a tough placement for the reason that the rules are sophisticated, adjust frequently, and in a lot of cases are unclear about what they need or prohibit. With that being stated, ignorance of the legislation is no defense and the burden for making certain regulatory compliance is and generally has been on licensees.

If a pay back to engage in arrangement is memorialized in a penned settlement, licensees ought to contact counsel for information on how to terminate it. Frequently speaking, contracts commonly consist of a termination provision enabling the get-togethers to terminate the agreement if its substance is illegal. If no this kind of provision exists in the contract, frequent regulation deal defenses may well also be readily available.

A life raft and a warning for pay back to engage in licensees

Even while Washington’s adult use cannabis market has been all-around for quite a few yrs, as the WSLCB’s write-up signifies it’s however considerably of the wild west. Licensees are effectively advised to pay interest to the WSLCB’s posts about regulatory troubles taking area in the marketplace.

If you’re in a spend to play offer, the WSLCB is presenting each a everyday living raft and a warning– get out of people specials now, or else. Exactly where the WSLCB is offering a general public warning about business enterprise actions it sights as unlawful, 1 can be confident it won’t be sympathetic to an uncured violation down the road.