By Jonathan Kaminsky

OLYMPIA, Wash. Dec 10 (Reuters) - Thanks to a successful ballot initiative last month, Washington state residents can legally smoke marijuana in the privacy of their living rooms as of Thursday.

When that gets old, bar owner Frank Schnarr suggests, area stoners have another option: grab a booth at Frankie's Sports Bar & Grill in Olympia and toke up there.

Schnarr, 62, says he is not acting out of a love of cannabis - he says he hasn't smoked the stuff since he was a soldier stationed in Southeast Asia in the 1970s. Rather, he's looking for new sources of income.

"I stay up at night," he said. "I'm about to lose my business. So I've got to figure out some way to get people in here."

Schnarr, who waged an ultimately successful battle with local and state officials over Washington's 2006 smoking ban, appears to be the first restaurant or bar owner in the state to test the recently expanded limits on recreational marijuana use.

So, is he breaking the law?

Federal, state and local officials appear unsure. Or if they are, they're not saying.

"Marijuana remains illegal under federal law," said Emily Langlie, spokeswoman for the U.S. Attorney's Office in Seattle. "I can't tell you whether what he's doing is legal or not."

Says Tom Morrill, Olympia's city attorney: "We're looking into it. There are a lot of changes in state law right now. That's all I can say."

Mikhail Carpenter, spokesman for the state's Liquor Control Board, newly empowered to make rules for and oversee the state's planned regime for the cultivation, processing and sale of marijuana, is similarly noncommittal.

"The board is weighing its options with regard to Frankie's," he said. "It's not perfectly crystal clear as to who this falls to."

Carpenter said he knows of no other bar or restaurant in the state that allows marijuana smoking.

The legal gray area that Schnarr is exploiting exists in part thanks to his earlier fight over the smoking ban.

In order to flout it, Schnarr renamed his establishment's smoking-friendly second floor as "Friends of Frankie's," a private room limited to those who pay a $10 annual membership fee.

A full range of alcoholic beverages are for sale and the room is staffed by comely bartenders and cocktail waitresses. They are volunteers entitled to reimbursement for travel expenses and childcare but otherwise making their living off tips.

"Frank's ahead of the curve on (allowing marijuana use)," says Shawn Newman, Schnarr's attorney. "A lot of other taverns, bars and restaurants would like to do this, but they didn't have enough chutzpah to fight the smoking ban so they're locked into non-smoking operations."

Schnarr says "Friends of Frankie's" has over 10,000 members, with upwards of 40 joining in the two days since he announced that marijuana would be welcome.

To help appeal to his new target market, Schnarr has introduced a $4.20 appetizer menu - included are breaded shrimp, breaded cheese sticks and breaded mushrooms - and he is toying with the possibility of opening a medical marijuana dispensary on a nearby property.

But he isn't looking to attract Olympia's sizable transient crowd, or stoned college students.

"I'll have security in here, and if I see a bunch of guys just trying to get ripped, they're gone," he said.

Early last Friday evening, a few dozen customers played pool, drank beer, smoked cigarettes and loosened up for an impending shuffleboard tournament.

Only a small group at the back of the bar appeared to be smoking pot, a glass jar of the stuff sitting on the table between them.

Chris Sapp, 28, a long-haired diesel mechanic and longtime Frankie's member, said being able to smoke pot at the bar makes him feel like he's in Amsterdam.

"If I wasn't a friend of Frankie's already I'd be one now because you can come here and smoke and feel free," he said after taking a pull from a small pipe. "That's how it should be. We shouldn't have to hide weed."

Across the room, another patron commended Schnarr for welcoming pot use but begged off giving his name. As a volunteer firefighter, he said, he wasn't supposed to be in contact with marijuana smoke.

"I cannot be in this room," he lamented. "It's not like I'm sitting here smoking a joint or anything. My problem is that I'd love to, but I can't.

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