Washington Licensing Change Expected to Bring Frenzy of Business Activity
Update 08/11/2017: This story has been updated to note that the WSLCB licensing changes take effect immediately.
A decision by Washington state cannabis regulators to undo a policy limiting businesses or individuals to only one cannabis-production license is expected to kickstart a rush of industry activity in the state. Under a change approved Wednesday by the Washington State Liquor and Cannabis Board (WSLCB), entities can now hold up to three production licenses.
According to Daniel Shortt, a Seattle-based attorney focused at the cannabis-focused law firm Harris Bricken, the change has been in the works for some time. While the move isn’t expected to increase the number of producer licenses available, it does affect who can own them.
“This is allowing individuals that already own licenses to buy or acquire new licenses,” he told Leafly. “This is not creating new licenses.”
The updated policy could usher in a frenzy of mergers and acquisitions among cannabis companies now that entities can hold a greater number of licenses, Shortt added. “I think what this will allow is, for those who can grow well, [they] can take on other licenses and expand.”
It’s not only large companies that stand to benefit, Shortt said. “When you think about the smaller companies, now you are going to have the ability to merge,” he explained. “It also gives some exit strategies for licensees [who] for whatever reason want to leave the industry. They can—there are more buyers in the market now.”
The change, which takes effect immediately, has been in the works for a while, Shortt said, with support from local producers and other industry stakeholders. As for whether it’s a good change or a bad one, he said, “you can make cases for both sides.”
On one hand, some critics have expressed concern with large corporations coming into the state, buying up smaller cannabis businesses, and coming to dominate the industry. While that’s a legitimate concern, Shortt said, he believes the policy change will actually be a positive in terms of cannabis products.
“I think this is a good move, I think that growing marijuana, growing cannabis, is a very difficult thing to do and some growers are better than others,” Shortt said. “I think what this will allow, is, for those who can grow well, can take on other licenses and expand.”
“The way this state regulates cannabis is by canopy size,” he explained. “An efficient grower can do more with that space. Now those growers have the opportunity to merge with other businesses, acquire other businesses, and expand.”
The WSLCB will not issue producer licenses to any new applicants, nor will its policies on canopy space change. Shortt said. “I expect that people will think this will result in a new application process, but this is not what this is.” The change simply means that anyone who already holds a Washington state producer’s license will now be able to expand production by acquiring other licensed production businesses.