The Department of Labor and Industries notified the president of the Funtastic Rides Company, which operates the Phoenix Wheel, that it may not operate the ride until it obtains a new permit. The process involves a new inspection of the ride.
Two of the three people who fell out of the Ferris wheel were released from the hospital Friday, a day after the incident at the Rhododendron Festival in Port Townsend, north of Seattle.
A 47-year-old woman and 7-year-old boy were treated and released from Jefferson Healthcare, said police spokeswoman Keppie Keplinger.
The third victim, a 59-year-old woman, was airlifted to the hospital after the accident, Susan Gregg with Harborview Medical Center said. The woman is "serious but stable in intensive care with non-life threatening injuries," Gregg said.
Authorities revised the victims' ages from earlier reports after receiving accurate information.
The three victims fell an estimated 15 feet after the cart in which they were riding abruptly flipped, sending them up in the air, said Bill Beezley, a spokesman with the East Jefferson Fire Department. All three landed on the metal casing supporting the Ferris wheel on the ground.
CNN was unable to reach Funtastic Rides for comment.
The festival posted a statement on its Facebook
page thanking "all the volunteers and employees that stepped up out of the crowd to make sure the victims were attended to and the incident was controlled."
A 'violent accident'
One witness, Laura Lewis, was on a different ride with her two children at the festival when she said she saw one of the buckets in the Ferris wheel flip and dump three people out.
She estimated the people were about 15 to 20 feet from the platform when the bucket flipped, and she said it appeared they were propelled higher than the bucket itself.
The Ferris wheel had been moving in a counter clockwise rotation, and the affected cart had just come around the top of the ride when the accident occurred, she said.
"People on the ride began screaming," Lewis said. "And people watching the ride started screaming. It took a few seconds for the ride operator to stop the ride."
She estimated that about 15 people were riding the Ferris wheel at the time and described it as a "violent accident."
Washington state's Labor and Industries Department is investigating, reported CNN affiliate KIRO.
Police were told the ride made a grinding sound and something fell out when the cart tipped over, the Seattle-based station reported.