Buying A Cannabis Business? Be Careful

Our cannabis lawyers have been receiving phone calls lately from companies asking us about Craiglist ads offering “Retail Marijuana Licenses,” “Applications for Licensure” and “I-502 Businesses” for sale. Our response has been to run (not walk) away from any such deals, at least for now. This is our advice for many reasons.  Buying a Marijuana Business

First, the State of Washington has yet to issue any cannabis licenses under I-502, so nobody can have any licenses to sell.

Second, even if people did have such licenses, the Washington State Liquor Control Board (“LCB”) has made clear that it will not allow any such sales. The LCB will allow someone to sell a business entity that holds a license, with the license going in the sale as an asset of the entity being sold, but the actual transfer of ownership of that license is subject to LCB approval. What this means is that if you buy a business that holds an I-502 license you will not get a license to produce, process, or sell cannabis at retail unless and until you satisfy the LCB that you have met the personal background, financial, and operational plan requirements necessary to be an I-502 license holder.

Third, applications for licensure also cannot be sold. The LCB is currently reviewing applications for producer, processor, and retailer licenses, the applications for which have all been filed on behalf of a specified business entity with a defined Washington Unified Business Identifier. The application cannot be switched from the existing Unified Business Identifier to another and those businesses that applied during the November-to-December application window are the only ones in line for potential licenses.

We have no doubt that deals will close for businesses with Washington State cannabis licenses but for now, the LCB mechanisms for reviewing and approving these deals is still evolving. Until it becomes clear exactly what the LCB will require to sign off on such a deal, we urge care.

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