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Originally published Saturday, January 29, 2011 at 10:02 PM

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Pot dispensaries sprouting statewide

Medical-marijuana dispensaries are opening across the state, exploiting a loophole in the state medical-marijuana law that neither explicitly allows nor prohibits them. Under pressure from all sides to clear the haze, the Legislature is considering a wholesale rewrite of the law that would legalize, regulate and tax dispensaries and create the state's first authorized commercial marijuana farms.

Seattle Times staff reporter

Medical marijuana

The current law

Qualifying: A patient must suffer from a "terminal or debilitating medical condition" such as cancer, HIV, multiple sclerosis, intractable pain or other illness defined by the state Medical Quality Assurance Commission. Depression and anxiety do not qualify.

Recommending: Clinicians can't legally prescribe marijuana but can recommend it to qualified patients. Doctors, naturopaths and physician assistants, among others, sign recommendations on tamper-resistant paper.

Possession: A recommendation is an "affirmative defense" in court, but not protection from arrest. Patients can have a 60-day supply (24 ounces and 15 plants); patients can exceed that limit with a proven medical need.

Dispensaries: Patients may grow their own supply or get it from a "designated provider" who can help only one patient "at any one time." Law does not allow or prohibit dispensaries or patient collectives. In the absence of clarity, dispensaries say they are legally acting as providers.

Federal law: Marijuana remains illegal under federal law. The U.S. Justice Department has said it will not target users in compliance with state medical-marijuana laws.

Source: state Department of Health; ACLU of Washington

Proposed changes

Elements of Senate Bill 5073 (and companion House Bill 1100):

Possession: "Affirmative defense" would become arrest protection for qualified patients possessing legal amounts. Legal use of medical marijuana could not be a basis for discrimination in employment, housing or child-custody matters.

Production: The state Department of Agriculture would license both nonprofit and for-profit marijuana farms and regulate products to ensure quality; size of production sites is not defined. Community gardens for up to seven patients and 99 plants would be allowed.

Dispensaries: The Department of Health would license and regulate dispensaries, run as nonprofits, where retail sales would be allowed. Dispensaries could sell only products from licensed producers. Felons would be barred from obtaining licenses, except those with convictions for marijuana-related crimes.

Registry: The Health Department would maintain a voluntary patient registry. Police could use it only to verify patient qualification and check addresses of registered grow sites. Civil penalties would apply for unauthorized disclosures.

Source: Washington State Legislature

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When Wes Abney and David Jablinske decided to open their own shop, they incorporated with the help of a lawyer, got city and state business licenses and insurance for their inventory and leased a former sports bar in North Seattle.

Then they invited the cops in for a visit. Their shop, after all, is a medical-marijuana dispensary called West Coast Wellness.

"We want to do everything out in the open, above board," said Jablinske, a needle-thin 20-year-old. Abney, 22, nodded, saying, "The police can come in anytime."

Depending on how you view the state's 12-year-old medical-marijuana law, Abney and Jablinske are innovative pioneers or numskulls looking to get arrested.

Either way, they're clearly not alone.

Washington's new "potrepreneurs" are suddenly serious about catching up with California and Colorado in the medical-marijuana dispensary industry.

In the past seven months, dispensaries have sprouted across the state, exploiting a loophole in the state medical-marijuana law that neither explicitly allows nor prohibits them. State tax officials estimate at least 120 are open, mostly in the Puget Sound area. Dozens more likely remain underground.

The options are dizzying. Pot in many connoisseur strains or cannabis-infused food, from lollipops to pasta primavera? Home delivery or strip-mall storefronts aspiring for a pharmacy look?

And there are trappings of legitimacy, including an industry newspaper, credit-card processing, startup business consulting and, soon, a venture-capital fund.

The astonishingly rapid expansion of out-in-the-open pot businesses exploits the vagueness of the state's 1998 voter-approved medical-marijuana law.

Under pressure from all sides to clear the haze, the Legislature is considering a wholesale rewrite. A bill, SB 5073, would legalize, regulate and tax dispensaries and create the state's first authorized commercial marijuana farms.

Police, prosecutors, city officials and patient advocates agree changes are long overdue. The current law leaves authorities unsure whether to ignore pot sales or to crack down on dispensaries helping to ease suffering. In the void, each jurisdiction opts for its own interpretation, leaving patients confused and scared.

If the law were to pass as proposed, an estimated 250 dispensaries would register in the first year. By 2017, legislative staff estimate, there would be 1,000 dispensaries serving nearly 70,000 patients.

Whatever happens, the state seems on course for what one dispensary operator called "a green rush."

"We're trying to be in this early on and to do this right," said Abney, who also is editor of the industry newspaper, Northwest Leaf. "It's just crazy out there right now."

Co-ops to dispensaries

A decade ago, Seattle's medical-marijuana patients were served by three nonprofit collectives. The collectives grew plants and took donations from members, making them legally equivalent to a hippie P-Patch.

Qualified patients can either grow their own 60-day supply — defined by health authorities as 24 ounces and 15 plants — or have a designated provider to grow it for them.

Police generally tolerated the collectives, except for some high-profile crackdowns early on.

But the co-op model has given way to the retail store, first patterned in California and then in Colorado, which has more than 700 dispensaries. Nationally, at least 17 medical-marijuana companies are publicly traded.

"There were no states that regulated dispensaries three years ago. Now six states do," said Karen O'Keefe, state policy director for the Marijuana Policy Project, an advocacy group in Washington, D.C. "It's really a dramatic shift."

The shift here started with U.S. Attorney Eric Holder's late-2009 memo declaring his agency would not pursue people who are in "unambiguous compliance" with state law. King County Prosecutor Dan Satterberg also indicated that he had a high threshold before prosecuting patients or providers who were trying to follow the law.

In June, a new state law expanded the type of clinicians, including physician assistants and naturopaths, who can recommend medical pot, broadening the customer base.

But the biggest spur to the green rush was the case of Steve Sarich, founder of the region's most prominent dispensary. King County sheriff's deputies found 375 plants and $10,700 in cash at his Kirkland house in March after a failed burglary attempt. Satterberg's office has not charged him.

Though the case involved a violent attempted robbery, entrepreneurs saw the lack of prosecution as a sign of less risk. Since June, at least 50 nonprofit organizations and for-profit corporations have filed with the Secretary of State's Office to open dispensaries. Seattle has issued business licenses classifying some dispensaries as "restaurants" or "chiropractic offices."

Brionne Corbray, founder of the nonprofit Greenpiece Alternative Medicine and Education Center, has opened three King County dispensaries since July and is opening two more. He saw Sarich's operation while shooting a documentary, "The House That Mary Jane Built," and had a revelation.

"I said, 'If they're letting him do all that, I can do this,' " said Corbray, a 46-year-old father of four. "I didn't see any downside."

A lucrative model

Once mostly underground, marijuana businesses now fill ad pages in newsweeklies and on websites such as www.thclist.com.

Some are tucked in rundown offices with matted couches and old copies of "High Times." But others use industrial air filtration and display crystalline buds and "medible" food items in spotless jewelry cases. Security cameras and steel doors are common.

Travis, a 22-year-old techie from Renton, walked out of one recently with a Ziploc bag of "Orange Kush" and a container of cannabis-infused butter. He has Crohn's disease, a qualifying illness, and can't grow pot in his apartment.

"I walk in, get my medicine and no one has to know," he said, declining to give his last name for fear of repercussions at work. "We need to end the shame, man."

It's unclear how much dispensaries make, but the business model appears lucrative. Dispensary operators say they buy marijuana for about $2,000 to $3,000 a pound and then sell it in small amounts that equate to $5,000 or more a pound. Operators of one dispensary said they're on track for a $120,000 net profit; at another dispensary, expectations were even higher. Asked where the supply comes from, all said they buy only from qualified patients, sometimes on consignment arrangements.

"It's not like there's a shortage of supply," said one dispensary operator.

Some longtime advocates chafe at the prices and practices of new dispensaries.

"I'm frustrated with the people out there that know they're not legal and don't care," said Dawn Darington, who runs a nonprofit medical-marijuana clinic. "And they're just ripping people off with the prices."

Seattle attorney Doug Hiatt, a longtime marijuana advocate, said he would have trouble defending dispensaries that have veered too far from the collective model and incorporated as for-profit entities.

"If they're just thinking about this as a business and it's all legal and it's all OK, they're just dreaming," said Hiatt.

Trek Hollnagel, co-founder of the nonprofit Conscious Care Cooperative, said that in the absence of clear guidelines for dispensaries, he borrows from the rules other states, avoiding school zones and garish signs.

"We want to set a precedent about how these look and feel so this can go forward," said Hollnagel, whose father turned to medical pot after a stroke.

He also is on the board of Green Flower Lending Corp., a Seattle company that sells accounting software and startup consulting to dispensaries and is raising capital for a venture fund.

"Medical marijuana is here to stay," said Hollnagel, 30, who has two King County storefronts. "Instead of it being the elephant in the room that you know is there but ignored, let's talk about regulating it, about working to make it safe."

Legal questions

This month, Snohomish County's drug task force raided a Lynnwood medical-marijuana home-delivery dispensary, Bizzee Bee Medical Group. Officers found 15 pounds of marijuana, about $25,000 in cash and a 9-mm handgun at the headquarters.

They also seized documents showing how the dispensary worked: Patients would designate a Bizzee Bee employee as their marijuana provider for 5- or 10-minute increments, according to Everett police Lt. Mark St. Clair, head of the task force.

That practice has been a complaint of police for years. It relies on a loose interpretation of the law allowing a designated provider to serve "only one patient at any one time."

King County's Satterberg doesn't believe voters intended to allow such drive-by relationships, said Ian Goodhew, Satterberg's deputy chief of staff.

"The question is, what does 'at any one time' mean? We think that does not mean one every five minutes," said Goodhew.

Prosecutors in Pierce, Spokane and Yakima counties, among others, have pursued felony charges against dispensaries. In Tacoma, the city sent, then rescinded, cease-and-desist orders to dispensaries.

The legal picture is further muddled by the state Department of Revenue's decision to apply the state sales tax to dispensaries. Agency staff have counted at least 129 dispensaries, although only about 40 are registered to pay taxes, and fewer still pay, said spokesman Mike Gowrylow.

"It's a mess. The whole thing is a mess, no matter which side you're on," said St. Clair. "We're trying to treat it like a medicine, but then we don't treat it like a medicine."

A law at a crossroads

The way out of the mess is just as unclear in Olympia. While police, municipal governments and patient advocates like and dislike parts of SB 5073, there is consensus that the Legislature needs to act.

Law enforcement describes the bill's legalized dispensaries as the "Starbucks approach," replicating California's wild marketplace. But cops endorse the patient registry in the bill, and the cities and counties they work for are anxious for clarity.

Dispensaries, which formed a trade group, the Washington Cannabis Association, and hired a lobbyist, are "begging to be regulated," said spokesman Philip Dawdy. "The bill is what you wish the (medical marijuana) initiative had looked like 12 years ago," he said.

Sen. Jeanne Kohl-Welles, D-Seattle, the bill's prime sponsor, visited Colorado, where dispensaries paid more than $5.1 million in state and local sales taxes last year. She said Washington's medical-marijuana law is at a crossroads: Either control the supply chain for the sake of patients and public safety, or "do nothing, with producers and dispensaries continuing to mushroom around the state unregulated."

The pressure to corral the boom might be enough to force a compromise.

Meanwhile, Abney and Jablinske, the young potrepreneurs, aren't waiting for the legislation.

Once their first West Coast Wellness dispensary gets off the ground, they plan to launch another. Then another. Then another.

Jonathan Martin: 206-464-2605 or jmartin@seattletimes.com

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