Is your spouse considered a True Party of Interest under Washington cannabis law?
Written by Neil Juneja, Founder & Managing Partner at Gleam Law PLLC.
It is not uncommon to hear people describe their spouse as a “partner” as our cultural understanding of domestic roles continues to shift and evolve. However, most people who say “partner” when describing their spouse are thinking of something more akin to a teammate or superhero duo (depending on your marriage), rather than a business partnership. Consequently, it can come as a surprise when the spouse of an applicant for a marijuana license has to undergo the same level of investigation as the applicant themselves. The Washington State Liquor and Cannabis Board (WSLCB) considers the applicant, their spouse, and a host of others as “true parties of interest” when it comes to obtaining a marijuana license. Every one of these true parties of interest must meet the same stringent standards, even if they themselves have no direct interaction with the business itself.
Washington State law states that no “license of any kind may be issued to” a business “unless all of the members thereof are qualified to obtain a license.” RCW 69.50.331(1)(b)(iii). The Washington Administrative Code defines some of these members, depending on the type of business, as proprietors, partners, members, managers, stockholders, and corporate officers. Attached to every one of these roles is “and their spouse(s).” WAC 314-55-035. For purposes of obtaining a marijuana license, the spouse of any member is seen as a party of true interest, regardless of how connected to the business they actually choose to be.
Even when, as in the case of Washington-state resident Libby Haines-Marchel, a spouse completely disavows any personal or legal interest in the business, the WSLCB will still consider them a party of true interest. What this can mean is that a license for a business as a whole can be denied if an otherwise unconnected spouse does not meet the licensing qualifications. The WSLCB’s investigation is far from cursory and includes an FBI background check. After the investigation, the WSLCB compares any criminal behavior against a points scale; too many points and the license will be denied. The WSLCB has even begun to expand their application of “spouse” to include live-in partners and others appearing to be operating in a spouse-like role. This more expansive approach may be non-intuitive to Washington residents given that the state does not recognize common law marriage.
The Washington State Attorney General’s office has stated that these requirements are important because of the potential for a spouse to act as a “straw person” by applying to the business in name only while their potentially unqualified spouse acts as the actual proprietor. The Attorney General’s office has cited the “long history of criminality” around marijuana as partial justification for this concern. This concern does not extend only to spouses, but also to other people with a financial interest in the business.
Any “financiers” of the business face similar scrutiny. This includes anyone (other than a bank) who gifts, loans, or otherwise financially invests in the business. The list of individuals who must meet these standards can quickly become extensive. At this time, most day-to-day employees do not need to meet the licensing standard, but they may if bonuses become too large.
Finally, even after an application has been approved, issues with true parties of interest can come back to bite the licensee. Failures to disclose true parties of interest can lead to fines and even revocation of a license. It is imperative that potential licensees are thorough and accurate in determining true parties of interest because even honest mistakes or misunderstandings could cost a business its license. If you are a Washington cannabis licensee, make sure you understand the regulatory risks facing your business and seek out qualified professional help if you find yourself facing off against the WSLCB.
Gleam Law, PLLC has unparalleled experience when it comes to the WSLCB’s licensing process and requirements, as well as defending marijuana businesses against True Party of Interest violations.