Initiative 502 (I-502), which legalized marijuana in Washington state, directed the Liquor Control Board to establish policy rules by December 1, 2012 for growing, processing and selling the drug. The Liquor Control Board approved a set of draft rules earlier in July.
The rules blaze a long-sought path to legitimacy for medical marijuana business owners who have remained in a legal limbo for years. The rest of Washington state, and the world, are waiting to see how our communities cope with that legitimacy.
“It’s a brand new market,” said Nate, who runs a low-profile medical marijuana growing operation that services dozens of collectives throughout Western Washington.
He has navigated Seattle’s previously undecided stance on marijuana since 2006. Nate asked that his last name not be published.
“It’s free market capitalism at its truest,” he said. “We’re kind of nervous. We really feel like we’re just about to enter a kind of dog fight — a real scramble.”
Nate is of Hawaiian, Japanese and European descent. All five of his employees are Asian and Pacific Islander (API). Nate said he’s noticed a high amount of APIs in the medical marijuana industry, including a lot of shop owners.
“[APIs] have good business acumen,” Nate said. “So much of this business has to do with networking, and I think [APIs] just know how to mobilize.”
Nate has had to rely on his ability to mobilize in order to adapt to the changing landscape of the marijuana industry. Seven years ago, Nate began growing medicinal marijuana as a care provider for a single patient who suffered from brain aneurysms to control his nausea, seizures and pain.
“It started off that I was growing more than [the single patient] needed, so I found other patients,” Nate said. “Next thing you know, I was growing for so many different people, that we were essentially a co-op.”
In order to truly appreciate the rules established by the Liquor Control Board, one has to understand what it was like without any rules, Nate said. He described a situation where medical marijuana co-ops existed in a gray area, where state law did not specifically prevent the existence of a medical marijuana industry.
“There was never a law that said you can’t pool together multiple patients and grow collectively for them,” Nate said. “The state’s been trying to play catch-up this whole time. That’s what I-502 is really all about. Rather than even trying to write the official rulebook for the medical side of things, it’s like, ‘Let’s just go ahead and make it legal for everybody.’ And let’s tax it and regulate it and create an official industry that will include patients and anybody over 21, as long as it meets these rules and standards.”
Rules bring order to chaos
Until the Liquor Control Board’s draft rules become official, Washingtonians must continue to obtain marijuana through medical marijuana dispensaries or from the black market.
Medical marijuana dispensaries, known in the industry as access points, are collectives. Each patient is allowed to have a 60-day supply limit of 15 plants under state law. Patients in a collective pool their plants together in one garden. Patients go to the access points to withdraw from the collective. The patients compensate dispensary owners for their time and resources.
“You sell somebody a gram for $10 at cost of labor, risk, and expenses,” Nate said. “That’s kind of how the industry developed. At a certain point, it just became obvious that it was just a store selling weed. The state showed that they were okay with that as long as the dispensaries were paying their taxes and following the same rules as other businesses.”
Because the state did not take an official position on medical marijuana, no regulations about where you could open a storefront existed. Nate had to figure out the state’s boundaries by watching how the government responded to the location of marijuana dispensaries. If a medical marijuana storefront opened up and the state didn’t shut it down, it was interpreted by dispensaries as an endorsement. If a storefront opened up too close to a school and the state shut it down, the state has demonstrated that it will allow storefronts, just as long as it’s not too close to a school.
“[Prior to I-502], it’s been this very indirect, passive-aggressive approach,” Nate said. “What I actually like about I-502 is that we have something on paper that we can look at. That’s what I’ve always wanted being on the medical side. I want to follow the rules. I want to be legitimate. I don’t want to feel like a criminal. And here I’ve had to act like one because there was no rulebook to follow.”
The Liquor Control Board’s draft rules have strict rules on storage, packaging and label requirements. These rules protect consumers from long-running problems in the unregulated medical marijuana industry, Nate said, pointing to the currently unchecked food preparation in marijuana-infused foods. By contrast, a coffee shop would have to abide by strict health codes and ensure their employees had food handler’s permits.
“Prior to I-502, the Department of Health refused to regulate any marijuana-infused food because there was no playbook for how to do that,” Nate continued. “So what did they do? Nothing. They didn’t regulate it. So if you went to a dispensary, and there’s a brownie on the counter, it could have been made in someone’s home kitchen by somebody who’s never had a food handler’s permit. The dose of medicine in there is completely unregulated, untested and often with widely varying doses. It could have mold in there and you couldn’t know. And no one was looking.”
Nate said that once the Liquor Control Board’s rules are finalized, medical marijuana businesses who have not been meeting certain standards will have to spend money to become legitimate.
“There’s a lot of people whose operations are not at the moment compliant with the new set of laws,” Nate said. “It’s going to cost them a lot of money to get there. They’re going to have to change their methods, their facilities, their way of doing business. There are a lot of people who don’t pay taxes. And now the state is essentially saying it’s time to play by the rules.”
Playing by the rules
Community organizations such as the American Civil Liberties Union (ACLU) of Washington and the Asian Pacific Islander Coalition Against Tobacco (APICAT) have cautioned government officials to focus their efforts on protecting public health and safety.
“We’ve had some success with preventing and reducing tobacco use through advertising restrictions, labeling requirements, and public health education campaigns,” said APICAT director Elaine Ishihara in a statement “However, lawmakers, public health advocates, and community members must commit to working together to sustain programs and strategies that work, and to protect our more vulnerable populations from preventable negative public health outcomes.”
Seattle City Attorney Peter Holmes has long been an outspoken opponent to marijuana prohibition. Holmes said education is a key tool in protecting public health. I-502 earmarks 60 percent of revenues from the 25 percent marijuana excise tax to go toward substance-abuse prevention, research, education and health care.
“Prohibition has prevented us from genuine education efforts,” Holmes said. “If you look at trends now for tobacco, education works.”
He would like for the legalization of marijuana to bring about dialogue on healthy, responsible living to the forefront.
“We’re trying to cultivate healthier attitudes toward marijuana that prohibition failed to achieve,” Holmes said.
The new rules provide incentives for businesses to follow legitimate practices; the Liquor Control Board can revoke licenses from those who don’t abide by the rules. Running a marijuana operation without a license is a felony.
The rules also set necessary parameters for people to act responsibly, Holmes said. I-520 legalizes marijuana possession for people 21 and older, creates a stronger marijuana Driving Under the Influence (DUI) law and sets a per se limit of active Tetrahydrocannabinol (THC) of five nanograms per milliliter of blood, and does not interfere with the law that allows employers to insist employees not use marijuana. I-520 also places tight restrictions on advertising and prohibits public use and display of marijuana.
Holmes said his overriding suggestion for everyone — recreational users, patients, business owners and the rest of the population — is to be patient.
“We’re building the first legal marijuana supply system on the planet,” Holmes said. “We’ll have to fine tune it.”
Regardless of what the Liquor Control Board decides are the final rules, several key questions remain: What happens to medical marijuana? What will the federal response be? Will marijuana prices plummet?
Holmes said that if I-520 succeeds in taking the lucrative marijuana market away from criminals and opening up the market to everyone, medical marijuana dispensaries will be a thing of the past.
“If I-502 is allowed to operate and realize its promise, you won’t need to have medical marijuana providers,” Holmes said, with the recreational product one day being able to satisfy patients’ needs.
As a business owner, Nate said he now believes the state is ready to fully support the marijuana industry.
“I truly believe that the state has a strong desire to see this succeed,” Nate said. “Everybody in the nation is looking at Washington and Colorado creating this historic, unprecedented market. It’s a big opportunity to either succeed and set a roadmap for how to create an industry, generate revenue, take money off the black market and put it into state coffers — or get egg on your face by messing it all up.”
Nate does, however, have reservations about the feds.
“We still don’t know what the federal government is going to do,” Nate said. “That’s the 800 pound gorilla. Over the years, one thing I’ve learned is that the federal government, especially the DEA (Drug Enforcement Administration), is very unpredictable. So I’m certainly not going to let my guard down anytime soon.”
Nate said he is also concerned about whether a drop in the price of marijuana will make his business unsustainable.
“One of the biggest fears within in the industry is that we don’t know if it’s going to be financially profitable for us,” Nate said. “They’re talking about the prices plummeting.There’s what some people consider a kind of exuberant tax on this at 25 percent. Already we’re running a pretty thin profit margin.”
Rent and other bills make up one third of Nate’s total cost. Labor another third. And legal services and administrative and plant supplies make up the final third.
“Three years ago, I could sell a pound of weed for close to $4,000,” Nate said. “A year ago, I was getting closer to $3,000. Today I’m getting closer to $2,000. Supply and demand, you know. As they have basically taken away the risk of entering this industry, there’s just been a lot more people growing, a lot more people producing, and so the prices have dropped significantly.”
“Now with massive commercial facilities and outdoor growing, you’re talking about creating a massive supply,” Nate continued. “Laws of economics tell you that it might be a $1,000 pound next year. Well, it costs me more than a $1,000 to produce a pound. So I’m already getting uncomfortably close to my bottom line. It’s just hard to say what the average consumer is going to be willing to pay.”
The customer is always right
Jerry, a Queen Anne resident of Chinese descent who works with computers, is a recreational marijuana user who regularly purchases from medical marijuana dispensaries. Jerry asked that his last name not be published.
“Most people who go to dispensaries, it’s just a facade [that they are there for medical reasons rather than recreation],” Jerry said. “Quality varies a bit, but overall, it’s good. Prices are good. They’re better than what street prices are. Ten bucks a gram is still pretty expensive for a plant that is named ‘weed’ because it grows like a weed. But I’m kind of OK with that. Overall, I’m very satisfied with the dispensaries.”
Jerry said he’s not sure whether the Liquor Control Board’s rules will have an immediate impact on him as a customer.
“In terms of how convenient or much better or how much easier it’ll be to access immediately, that’s still very much to be determined,” Jerry said. “It seems like at first, it’s not going to be that much easier or expensive for someone that already has a medical license.”
Jerry said his greatest concern is that his ability to grow homegrown marijuana with a medical license be protected. Homegrown marijuana for recreational use and sale is illegal.
“I want to be able to grow marijuana myself, for personal use, and not pay taxes for what I grow and consume for myself,” Jerry said. “If it’s accepted as legal, it should be within my rights to grow it and consume it myself — tax-free.”
Washington residents will have a chance to voice their concerns at four public hearings held throughout the state by the Liquor Control Board. The hearings are a required part of the rulemaking process and provide an opportunity for stakeholders to offer public testimony on the proposed rules for I-502.
For more information, visit www.liq.wa.gov/marijuana/I-502.
For more on how marijuana affects the API community, visit:
Legal Marijuana Needs Accountability in Vulnerable Communities
Co-ops: APIs Work to Break the Stigma of Medical Marijuana
Vietnamese Marijuana Growers Through the Eyes of their Defense Attorney
That’s Dope: Medical Marijuana Helps Relieve Man’s Gout