Washington Cannabis: Beware “Pay to Play” Preparations

The Washington State Liquor and Cannabis Board (“WSLCB”) revealed an trade replace on October 25 detailing a latest enhance in complaints by hashish producers and processors of “pay to play” phrases.

Apparently, some hashish producers and processors have been paying retailers to amass shelf area for his or her hashish merchandise. These preparations have turn out to be distinguished sufficient that some retailers are asking processors to pay for shelf area as if it is not uncommon follow.

Paying a retailer for shelf area is illegal

Like many different hashish enterprise actions that Washington prohibits, that is the sort of factor that an extraordinary businessperson won’t assume twice about. Nonetheless, pay to play preparations are illegal beneath the state’s hashish legal guidelines. Washington legislation prohibits producers and processors from having a direct or oblique monetary curiosity in a licensed hashish retailer.

The WSLCB’s place is {that a} pay to play association between a producer or processor and a retailer violates that rule. Moreover, the WSLCB acknowledged that these offers violate Washington legislation that prohibit a hashish trade member from coming into into an settlement that ends in one member having undue affect over one other. The WSLCB’s place on pay to play preparations isn’t off the mark primarily based on the textual content of the principles.

Pay to play is an all-too frequent incidence

Unfortunately, we see points like this within the hashish area greater than we wish to. Too typically, hashish operators get their licenses however fail to maintain up or function in compliance with the laws. Washington has among the strictest legal guidelines governing hashish operators within the nation and lots of run afoul of the principles with out ever figuring out it.

To make issues extra sophisticated, the WSLCB is understaffed and from our expertise terribly busy so each schooling (the WSLCB’s choice in most if not all cases of minor violations) and violation enforcement are sometimes outpaced by what is occurring out there.

Ultimately, when licensees supply the belongings or fairness of the enterprise on the market, regulatory violations virtually all the time come to gentle whether or not they had been caught by the WSLCB or not. If licensees don’t heed the WSLCB’s phrase, these pay to play preparations might turn out to be the most recent skeleton within the closet to emerge down the highway in Washington hashish acquisitions.

The WSLCB deserves some credit score right here for holding its ear to the bottom and posting a well-written article in an try to curb this conduct by notifying the market. Given how busy the WSLCB is, publishing notices prefer it has for pay to play preparations is exactly the suitable technique to go about coping with rising market developments that violate the principles.

To make sure, licensees are in a troublesome place as a result of the laws are advanced, change typically, and in lots of cases are unclear about what they require or prohibit. With that being mentioned, ignorance of the legislation isn’t any protection and the burden for making certain regulatory compliance is and all the time has been on licensees.

If a pay to play association is memorialized in a written settlement, licensees ought to contact counsel for recommendation on how you can terminate it. Generally talking, contracts often comprise a termination provision permitting the events to terminate the contract if its substance is illegal. If no such provision exists within the contract, frequent legislation contract defenses may additionally be obtainable.

A life raft and a warning for pay to play licensees

Even although Washington’s grownup use hashish market has been round for a few years, because the WSLCB’s publish signifies it’s nonetheless considerably of the wild west. Licensees are nicely suggested to concentrate to the WSLCB’s posts about regulatory points happening out there.

If you’re in a pay to play deal, the WSLCB is providing each a life raft and a warning– get out of these offers now, or else. Where the WSLCB is giving a public warning about enterprise actions it views as illegal, one will be certain it received’t be sympathetic to an uncured violation down the highway.