Cannabis Licensing. How To Prepare For Zigs And Zags.

The rules for cannabis licenses are always changing.

The Washington State Liquor Control Board just reversed course on what it considers a proper application for a cannabis license for cultivation and for retail sale.

As early as last month, the Board was saying that any application that listed a location within 1,000 feet of a venue frequented by minors would be immediately disqualified. According to the Board, those improper applicants would be receiving disqualification letters.

But today’s Seattle Times makes clear that no such letters have gone out, nor will they. The Seattle Times article, entitled, State gives pot applicants more time to find business locations, explains:

Instead, the board has reversed what appeared to be its firm position last month. It is now allowing applicants 30 days from the time they receive notice from the board to secure a legal address. Notifications started going out about two weeks ago.

The board is allowing entrepreneurs who applied with an illegal location … to change to a legal one.

Canna Law Blog’s own Robert McVay provided the following bit of legal analysis for the Times article:

For others, the changes are more nuanced, said Robert McVay, an attorney at the Canna Law Group, which represents about 100 applicants.

While the changes are maddening to some of his clients, McVay said, for others they‘re welcome relief — and that includes some who thought they had locked up legal locations only to hit a snag.

“The bigger concern,” he said, “is we’re halfway through the process and it still feels like rules are being changed on the fly, ad hoc.”

Anyone applying for a cannabis license anywhere should take away the following from what has just happened here in Washington:

1. The rules are always changing, even up until the last minute. This is because legal marijuana is new and no state has a clear path on exactly what it is going to do, or even on what it wants to do.

2. The rules are always changing, even up until the last minute. This means you must be prepared for delays. This latest Washington State rule change is expected to delay already sluggish initial licensing by at least thirty days.

3. The rules are always changing, even up until the last minute. Therefore, you must constantly stay abreast of the rules and not listen to someone quoting the rules. Every single day we get multiple calls from our clients and from potential clients quoting last weeks’ rules as though they are this weeks’ rules. Every day we have to tell someone that they just wasted a lot of money doing something under an old rule or a under rumored rule that makes no sense under the existing rules.

4. The rules are always changing, even up until the last minute. As a result, you must act strategically in what you do. Does it make sense to form a legal entity now when you do not know what sort of legal entity is going to be required in your state? Probably yes, because forming a legal entity is not very expensive and it is usually the first step towards securing your license. Also, a qualified cannabis business attorney will be able to make an educated assessment as to the type of legal entity that will be required in your state. Does it make sense to sign a long term property lease without a proper escape clause? Probably not. You are going to have to make all sorts of these strategic decisions, both big and small, along the way towards securing your cannabis license.

5. The rules are always changing. Or not. As the Seattle Times article makes clear, not all of the rules are going to change and certain application mistakes are fatal. The article talks of how those who applied with an improper location are back in the retail licensing hunt, but those who applied for the wrong license cannot now change their application to make it for the right license. The article gave as an example a baker who applied for a retail license when those who make baked goods must apply for a processing license. In other words, the rules are going to change, but you still must strive to get everything right on your application the first time. Right now, much of our work is dealing with trying to fix licensing applications for applicants who did NOT use us for their application. And fixing problems is virtually always more expensive and less effective than doing something right the first time.

Did we tell you that the rules for cannabis businesses are always changing?

Be prepared!

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