Washington State Caps New Marijuana Retail Licenses at 556

Washington State will be getting 222 more cannabis dispensaries, but even that may not be enough.
Washington State will be getting 222 more cannabis dispensaries. (Ron Gilbert, http://bit.ly1lYFmK9)

Earlier this week, the Washington State Liquor and Cannabis Board (LCB) announced that it will increase marijuana retail stores in Washington State from 334 to 556 in order to ensure that medical patients have sufficient access to marijuana. The LCB will announce emergency rules related to this new cap on January 6, 2016.

The application process for these new stores is part of the unification of Washington’s medical and recreational markets, as mandated by Washington State Senate Bill 5052. The LCB began accepting only retail license applications on October 12, 2015  and has so far received 1,194 applications. The LCB did not initially state the number of licenses it would issue and a number of the applicants were under the impression (now obviously wrong) that they were a “sure thing” or that the retail license window would be open indefinitely. The LCB is capping new stores at 556 based on its belief that is the number necessary to provide cannabis for the state’s medical patients–and we don’t know when the LCB will hit that cap and stop accepting new applications.

SB 5052 also established the following priority system for determining who among the 1,194 applicants will get a cannabis retail license:

First priority applicants are those who applied for a marijuana retail license prior to July 1, 2014, operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license and have a history of paying state taxes and fees.

Second priority applicants are those who failed to apply for a marijuana retail license prior to July 1, 2014, but who operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license, and have a history of paying state taxes and fees.

Third priority applicants are those who do not meet the first or second priority criteria.

Of the 1,194 applications, 39 have been determined as priority one and 42 have been determined as priority two. In its press release, the LCB states that it will use a “method that distributes the number of locations proportionate to the most populous cities within each county.”

Consequently, the LCB plans to double the number of available licenses in the ten counties with the highest medical sales to date. However, that will not include Yakima and Benton Counties, which have enacted bans on selling marijuana. This means that the 100% increase will transfer to the two next highest counties for medical needs, those being Skagit and Cowlitz Counties. Other counties will receive a 75% increase in the number of retail licenses.

Medical marijuana will also be sold those retailers who are already operating. The LCB stated that 70% of existing retail recreational marijuana stores have received an endorsement on their license to sell medical marijuana.

The LCB’s announcement about the new retail license cap came the day after BOTEC Analysis Corporation provided its final report, Estimating the Size of the Medical Cannabis Market in Washington State. The LCB contracted with BOTEC for a similar analysis of the potential recreational market before initially accepting applications in 2013. BOTEC (which stands for “Back of the Envelope Calculations”) is a research and consulting firm that specializes in researching public policy issues. The most recent BOTEC report analyzed the overall marijuana market in Washington, which includes the regulated recreational market, the medical market, and the illicit market. Its report estimates that the overall Washington State cannabis market is about $1.3 billion annually, broken down as follows: $480 million for medical cannabis (37%), $460 million for state-licensed recreational stores (35%), and $390 million for illicit cannabis sales (28%). The BOTEC report acknowledges the difficulties in tracking medical marijuana sales not subject to reporting standards and illicit cannabis sales.

BOTEC’s logic about Washington marijuana revenue seems to assume that retail stores, new and old, will enjoy an increase in sales after medical marijuana fully transitions into the I-502 system. And let’s hope BOTEC is right in that these new 222 retail licenses will adequately address the needs of Washington’s medical marijuana patients. But only time will tell. It’s also worth mentioning that the LCB has been completely silent about whether it will re-open the application window for additional producers and processors to meet current medical marijuana patient needs.