January 9, 2019

Washington Is the Only State with Adult-Use Legalization to Not Allow Investment from Out-Of-State Residents


Lobbyists for Washington cannabis businesses are aiming to pass legislation that will loosen restrictions on out-of-state investment in the industry, as well as allow retailers to sell CBD products manufactured outside of the state’s licensed cannabis system, among other objectives. According to a report from The Olympian, Executive Director of the Washington CannaBusiness Association (WACA) Vicki Christophersen recently shared the industry group’s legislative agenda with media outlets.

As noted, one of the industry group’s legislative priorities for the coming year is to convince state lawmakers to permit out-of-state investment in the Washington cannabis market. Currently, Washington is the only state with adult-use legalization that does not allow any investment at all from out-of-state residents. If WACA is successful in convincing lawmakers to allow out-of-state investment, Washington cannabis businesses would of course theoretically have access to a larger pool of funding sources. However, whether investors would be willing to place monies in Washington cannabis businesses given opportunities to invest in legal cannabis businesses elsewhere is an open question.

Additionally, all monies that are invested in Washington cannabis businesses must first be vetted and approved by the state Liquor and Cannabis Board (LCB). The LCB recently loosened this policy slightly, approving interim regulations that allow for true parties of interest in a licensed businesses to invest their own funds in the operation while the LCB is vetting them. The LCB’s interim policy will allow owners of licensed businesses to more easily inject capital into them when needed.

Returning to WACA’s legislative priorities, the group hopes that state lawmakers will allow licensed cannabis retailers to sell CBD products manufactured outside Washington’s licensed cannabis system. Currently, licensed retailers may only sell products generated by licensed cannabis producers and processors in Washington, according to The Olympian report. While the new allowance could help to boost retailer revenues, it appears as if permitting new supplies of CBD products from outside Washington’s licensed system could hurt producers and processors already making and selling such items, as increased supply would presumably work to drive to prices down further.