By Jonathan Kaminsky
OLYMPIA, Washington (Reuters) - After months of study, the Washington state agency charged with overseeing the first-of-its-kind recreational cannabis market released its draft rules for the industry on Thursday.
Under the proposed guidelines issued by the Washington State Liquor Control Board, licenses to grow, process and sell the marijuana would each cost $1,000 per year - in addition to a $250 application fee - with growers and processors barred from doubling as retailers.
The draft rules do not specify the number of retail licenses to be made available, but stipulate that they be issued on a county-by-county basis. For counties with more qualified applicants than licenses, a lottery will be held.
By contrast, no limits are expected to be set on the number of grower and processor licenses, nor on the size of those operations but the draft rules specify that pot must be grown indoors and tested for contaminants and potency.
The proposed rules "create a very tightly controlled and regulated market but at the same time allow for reasonable access for small and large businesses to participate," said Mikhail Carpenter, a spokesman for the Liquor Control Board.
"We've been working on this for eight months and we're still working on it, but it's the first time that people get to see what it's going to look like," he said.
Voters in Washington state and Colorado passed ballot initiatives to legalize the recreational use of marijuana in November. A bill enabling Colorado to set up such a market is still awaiting signature by that state's governor.
The drug is still illegal under federal law, and the Obama administration has yet to say whether it intends to sue to block the states from implementing their recreational-use markets.
The proposed rules are open to public comment, after which a second draft will be released in June. They are expected to be finalized in July, with applicants having a one-month window to apply for licenses beginning in September. The board plans to issue its first cannabis licenses in December, with the retail stores set to open sometime in 2014.
Under the ballot initiative, growers, processors and retailers will each pay a 25 percent excise tax, in addition to the state and local sales taxes paid by consumers.
Under the draft rules, licenses will be available to people with criminal records, but a felony conviction within the past decade, or two misdemeanors within the past three years, would disqualify most prospective applicants.
Exceptions are provided for misdemeanor marijuana possession convictions - addressing a concern raised by many who have expressed interest in entering the market, Carpenter said. The draft rules also specify that applicants must have been living in Washington state for at least three months.
Marijuana businesses will not be allowed to operate within 1,000 feet of schools, public parks, transit centers, playgrounds and day care centers.
Also included are guidelines for how the drug will be labeled. The proposed labels include the name of the drug, such as "Blueberry Haze," its potency and a warning that it "may be habit forming."
Left unaddressed is the state's largely unregulated and lightly-taxed medical marijuana industry, the exact size of which is not known. Seattle estimates that it is home to over 150 dispensaries.
The state's Department of Revenue reports collecting $1.2 million in fiscal year 2012 taxes from 52 likely medical marijuana businesses, but spokesman Mike Gowrylow said that, because the industry exists in a legal gray area, some medical cannabis providers aren't paying taxes on advice from lawyers.
State lawmakers are weighing legislation asking the Liquor Control Board and two other agencies to study and make recommendations on how to regulate medical marijuana similarly to the recreational industry.
(Editing by Dan Whitcomb and Tim Dobbyn)
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