Recreational Cannabis Legalization Comes to Nevada

Medical cannabis businesses have only been operating for a little over one year in Nevada, but voters didn’t hesitate to approve Question 2 last November to become the next state to implement adult use (recreational) legislation. The state has since moved quickly to implement the new and expanded program, and the Department of Taxation is expected to approve regulations today, which will create temporary licenses for current medical cannabis dispensaries to begin ‘early adult use sales’ this July. Question 2 and the permanent regulations are set to go into full effect by January 1, 2018. Nevada already has some of the most progressive medical cannabis laws in the country, with liberal reciprocity rules that allow out-of-state patients with valid doctor’s recommendations to shop at local dispensaries. It is inspiring and reassuring to see state officials move quickly and innovatively to implement the will of the voters, as many other states are unfortunately doing the exact opposite; Florida, Maine, and North Dakota to name a few.

Earlier this year, Nevada Governor Brian Sandoval signed Executive Order 2017-02 to create the Governor’s Task Force for the Regulation and Taxation of Marijuana, which has since been busy conducting public meetings and engaging stakeholders from industry, community, state and local government agencies. Eight working groups are discussing various topics in addition to the main Task Force. Working groups are addressing production/manufacturing, cultivation, law enforcement, laboratories, transportation, storage, disposal, taxation, revenue, regulatory structure, retail establishments, consumer safety, education, and health. The final recommendations of the Task Force will be presented in a report to the Governor before May 30 of this year. Some state officials and leading advocates in Nevada have noted the task force process was carefully modeled after Colorado’s task force and implementation for Amendment 64.

The Nevada state legislature has been busy working to implement Question 2, taking on a wide range of cannabis related legislation; including social consumption venues and events, consumer education, delivery services, tax rates, childproof packaging and labeling, pacts with tribal governments, and more — making it the busiest session ever at the state Capitol in Carson City. Nevada’s legislature is a bicameral body that meets every other year, consisting of the lower Assembly, with 42 members, and the State Senate, with 21 members. After the 2016 election, the legislature shifted from an entirely Republican controlled body to a Democratic controlled body, and brought in many new cannabis supporters. State Senator Tick Segerblom is a local champion for cannabis reform, and the primary sponsor for most cannabis related bills in the 2017 session. All bills have until June 5 to get through the legislative process and on to the Governor’s desk for final signings.

The first 18 months of adult use sales limit licensing for all adult use businesses to only current medical cannabis operators, a provision that was built into the legalization initiative to essentially prevent a “wild west” scenario, or a flood of new cannabis businesses. The state Department of Taxation is responsible for overseeing adult use regulations and licensing, and will have the ability to expand the program at a later date and hopefully create more opportunities in the future. In the meantime, rural counties where dispensary access is lacking may be able to approve new store locations, albeit, the vast rural desert region between the two population centers — Reno (north) and Las Vegas (south) — is sparsely populated and very conservative. Any businesses applying for the early start licenses must be in ‘good standing’ with the state, which means being current on all taxes and monies owed. Applications and fees must be completed by May 31. Fees are quite expensive at $30,000 for cultivation facilities and $20,000 for retail stores. Extensive disclosures are required for all owners and operators, including criminal background checks, financial documentation and signed attestations, consent forms, and other agreements. All businesses must also demonstrate approval from their local jurisdictions, many of which require building inspections and zoning permits.

What’s Different about Nevada’s Recreational Cannabis Legalization ?

Distributors

While Nevada is moving faster than any other state to implement its recreational cannabis legalization law, the state is also doing a few things a little differently, as compared to Colorado and other states with adult use in effect. For example, Nevada is the first state to require a distinct license for distributors, and requires distributors to be responsible for all wholesale sales and all transportation of cannabis between facilities. The distributor is similar to a longstanding regulatory structure in the alcohol industry, where there are clear degrees of separation between manufacturers (wholesale providers), distributors, and retailers. In fact, Nevada first required that distributor licenses only be issued to current alcohol distributors, however the state has recently decided to open up licensing for distributors to current medical cannabis license holders as well. The distributor model is controversial because of the costs associated with mandating a “middle man” to work between growers and sellers, having been the subject of much public comment provided to the task force.

Social Consumption

Seven states have legalized cannabis for adult use to date: Colorado, Washington, Alaska, Oregon, Nevada, California, Massachusetts, and the District of Columbia. While many of these states have already licensed businesses and began adult use sales, none of these states have implemented laws or regulations to address adult use in public or social settings. Most jurisdictions limit social consumption to private events or private clubs, which may require memberships and cannot advertise to the public. Nevada’s Senate Bill 236 would grant cities and counties to issue licenses to allow cannabis consumption in certain venues or at special events. The bill has already passed the state Senate and will soon be considered by the state Assembly. Under SB 236, consumption venues and events must be restricted to adults 21 or older and the consumption cannot be visible to the public. Legalization initiatives in California, Maine, and Alaska allow some form of cannabis consumption clubs/venues, however none of these states have taken action yet. Oregon explicitly prohibits consumption in public or at a place of business currently, but legislation is slowly making progress to change that. The City of Denver (CO) passed Initiative 300 last November to become the first city in the nation to permit businesses and events for “BYOB” consumption areas, and the program is expected to be fully implemented by next month. Nevada, and the city of Las Vegas in particular, is in a position to potentially be the first state in the nation to legalize adult use sales AND consumption venues/events within the same year, making it likely an international destination for cannabis tourism and culture.

Check back to our blog soon to read about DRC’s role in passing I-300 and the future of social use.

Las Vegas Tourism and Population Growth

Being a desert oasis nicknamed ‘Sin City’ for its open-minded approaches to gambling and adult entertainment, Las Vegas is a fitting location for cannabis culture to thrive, and an obviously lucrative marketplace for an array of canna-business. Since 2000, the city has experienced an explosion of new growth and has since been in Forbes Magazine’s top ten list for America’s fastest growing cities attracting 40 million+ visitors annually. To many locals, the city is on the brink of redefining its place in America as an alternative city offering excitement and glamour similar to LA or Miami, but on a smaller and more affordable scale. The city is gaining popularity with technology professionals and retirees, who are diversifying the historically working class population. Home to a number of mega-casino resorts, it bills itself as the entertainment capital of the world, but Las Vegas is no mega-city by any means. Boasting a little more than 2 million people in the metropolitan area, Las Vegas is a small city that knows how to do big things. As the city moves to become the next pot boom town, the workforce is ready to take on regulated cannabis; many casino and service-sector workers are familiar with working in highly secure and compliance-intensive settings. The adult use cannabis industry is likely going to create thousands of new jobs in the Vegas Valley, and bring in millions of dollars of revenue from both local and out-of-state consumers.

Conclusion

Many industry insiders and analysts predict the Nevada cannabis market could be worth upward of $100 million dollars per year. While no dispensary is open on the Vegas strip because of zoning laws, there are stores nearby the city center and airport, and many others spread throughout the valley who are eager to provide Las Vegas’ 40 million+ annual visitors with alternative means of relaxation in a city that can sometimes be overwhelming. The rest of the state of Nevada is finding cannabis to be a potential economic stimulus. Nevada will likely prove to be a leader for other states with legalization laws and the many other states considering legalization who will need guidance from active cannabis programs. The regulations are not perfect by any means, but state officials are working diligently to ensure the adult use laws are implemented quickly. Denver Relief Consulting (DRC) has been active in the Nevada market since the state began licensing medical cannabis businesses in 2014 and 2015, with partners Silver Sage Wellness and client Las Vegas Releaf in Las Vegas, and client Silver State Relief in Reno. We are excited about helping our partners and clients move forward with adult use expansion, by working to ensure proper licensing, compliance, and best practices in the next state to implement full legalization.