With approval of consumption lounges, state ushers in next expansion of cannabis industry

After a tumultuous round of dispensary licensing in 2018 brought uncertainty and infighting to the state’s nascent cannabis industry, the Cannabis Compliance Board (CCB) assumed the marijuana regulatory reins in 2020, cracking down on bad actors and providing specialized regulation that brought stability to the industry ahead of the 2021 legislative session.

From that baseline, lawmakers took a major step this session to expand and diversify the industry’s disproportionately white and male ownership and also provide tourists with a place to legally consume marijuana by creating a new license type for cannabis consumption lounges. They also approved a slew of other changes — including allowing permanent curbside pickup, revising how law enforcement determines whether someone is driving under the influence of marijuana and changing product labeling — built from lessons learned in the eight years since the state first authorized marijuana dispensaries.

“It's been a long journey from where we started, really, in the 2013 session and then launching dispensaries, so it's really nice to see how the industry has matured,” said Assemblyman Steve Yeager (D-Las Vegas). “The legislation that we see this session is really in recognition that we've primarily done things right and to try to take that next step.”

After the compliance board began its work governing the state’s marijuana industry in July 2020, the 2021 legislative session presented the agency with an important opportunity to hold conversations with lawmakers, said Tyler Klimas, the board’s executive director.

“We’re very pleased with how the CCB came out in this session … So much of this particular legislative session was about education for the CCB,” Klimas said. “In 2021, this was really our first chance to come back in front of the Legislature and update them on the progress of the CCB … I think the Legislature was very receptive to our message.”

The session saw a wide variety of cannabis-related legislation passed that Yeager emphasized was largely aimed at implementing best practices and making selective tweaks to existing regulations. He also noted that many of those changes came as the pandemic saw more people get comfortable with marijuana use.

“I think the stigma is definitely going to lessen. I think it did during the pandemic … I think we have a lot of new customers in the cannabis industry because of the pandemic,” Yeager said. “The more we sort of move forward as an industry, consumers will become more comfortable with it.”

Here’s a look at the bills that passed during the session related to the state’s marijuana industry and the work of the CCB, all of which have been signed into law by Gov. Steve Sisolak:

AB341: Authorizing cannabis consumption lounges

The biggest change for the marijuana industry from the 2021 legislative session comes by way of AB341, a bill that provides for the licensing and regulation of cannabis consumption lounges by the CCB.

The measure, introduced by Yeager, has been heralded as a major step by many in and around the industry as a way to increase diversity in the state’s disproportionately white group of cannabis business owners. Throughout the session, the Las Vegas-based assemblyman also described the consumption lounges as a way for the state to solve tourists’ dilemma of having no legal place to consume cannabis.

“I see that only as a plus from the tourism aspect,” Yeager told The Nevada Independent in an interview. “But then on the local side, right, being able to bring in new players into the business, having that create jobs — that's really important coming out of the pandemic.”

Assemblyman Steve Yeager on the final day of the 81st session of the Legislature on Monday, May 31, 2021, in Carson City. (David Calvert/The Nevada Independent)

Though a cannabis consumption lounge does already exist near Las Vegas in the form of NuWu Cannabis Marketplace, which sits on the land of the Las Vegas Paiute Tribe, Yeager’s bill allows for the first state-licensed and regulated locations where Nevadans will be able to consume cannabis outside of their homes — and where tourists will be able to legally use marijuana products. 

Lounges will be restricted to people 21 and over, and venues will be able sell ready-to-consume or single-use products, although not in quantities that would make them de facto retail cannabis dispensaries.

Scot Rutledge, a lobbyist who serves on the advisory board of the Chamber of Cannabis, a nonprofit organization whose members include individuals and businesses within the marijuana industry, said that many members have expressed enthusiasm about the lounges.

“There’s a tremendous amount of excitement because this is the first time in Nevada we're providing for a new license type,” Rutledge said. “The intent is to allow folks who aren’t in the industry to have as much of a chance, if not more, to participate.”

The bill allows for the initial licensing of up to 20 independent consumption lounges and 20 retail consumption lounges that will be attached to existing dispensaries, with the possibility of additional independent licenses if the CCB approves more than 20 retail lounge licenses before June 30, 2022.

Those new licenses open up the possibility of expanding diversity within the ownership of the industry, which has been limited in the past. A demographic report on the state’s cannabis industry released by the CCB in February showed that marijuana business owners and board members in Nevada are disproportionately white and male, compared to the industry workforce, which is made up of a greater proportion of people of color.

The bill explicitly prioritizes expanding diversity within the industry by requiring at least 10 of the first 20 independent lounge licenses to be issued to social equity applicants.

“Those 10 licenses are reserved for social equity applicants, and if there aren't any, they stay there until there is. They don't get redistributed among other people,” Yeager said. “We're purposely holding some back, which I'm hoping is going to help us achieve the purpose.”

However, the definition of a social equity applicant is left up to the discretion of the CCB. Klimas said that definition will be established with the help of an equity, inclusion and diversity subcommittee formed under the Cannabis Advisory Commission.

“We'll need to define what a social equity applicant is. That's really the start of it,” Klimas said. “What does it mean to be an individual that has been harmed by the War on Drugs and how can we help get those individuals into this industry.”

The measure also allows the CCB to give more financial leeway to social equity applicants. An application for a retail consumption lounge costs $100,000, but an application for an independent consumption lounge costs $10,000, and the license issuance and renewal fees are each $10,000 for both types of lounges. But the bill also allows the board to reduce all fees by up to 75 percent for a social equity applicant.

Outside of social equity, the bill leaves much of the regulatory work to the board, with the ability for local governments to provide additional regulations through ordinances.

“We just didn't believe that 120 days was really enough time to sort of figure out some of the details around how these venues might be operated or all of the things that need to be considered in licensing those businesses,” Rutledge said. “So I think we did it the right way by deferring a lot of those decisions to the CCB.”

Klimas said that prior to the licensing of lounges, the board will spend the next several months developing the regulations for the new cannabis establishments, through workshops, board meetings and advisory commission meetings.

The 2018 licensing round, conducted by the Department of Taxation, was marred by accusations that state officials played favorites and unevenly distributed key information about application scoring.

“Given some of the past licensing processes, this process is going to be about openness and transparency and thoroughness to ensure everybody's on the same page and the board is very public in how we're going to do things,” Klimas said.

Even though the CCB will complete most of the regulatory work, Rutledge emphasized that there is a certain framework he and other cannabis advocates hope to establish for the lounges. One aspect of that came from law enforcement, which did not want to see marijuana and alcohol sold in the same place. Another is focused on ensuring that businesses have more freedom in operating their lounges, because the bring-your-own-marijuana model has been ineffective for such businesses outside of Nevada.

“We also understood that what they had done in Denver originally … that didn't allow these lounges to sell cannabis — it was a bring your own cannabis model — and those did not work very well, either.” Rutledge said. “The idea of having just a place where patrons who purchase cannabis of your dispensary could walk in and consume and leave with really no entertainment or food or beverage. That wasn't what we wanted to get to.”

Layke Martin, executive director of the Nevada Dispensary Association, said both the retail and independent lounges could foster new ideas within the industry.

“I think there's a lot of opportunity for creativity and entrepreneurship,” Martin said. “I think a lot of these can become a destination, in and of themselves. And so it could be a video game thing where you can also consume cannabis. Or it could be like a tasting room situation where you can also consume cannabis, and you have the opportunity to get educated and try new products, kind of like a tasting room in a winery.”

Martin also noted that several existing dispensaries, including Planet 13 and The Apothecary Shoppe, have been planning for the possibility of lounges since the idea was brought forward and then axed during previous legislative sessions. She said that “some already have the space ready to go.”

Dispensary with casinos in background
Planet 13 Cannabis Dispensary located near the Las Vegas Strip is seen Friday, Dec. 6, 2019. (Jeff Scheid/The Nevada Independent)

While Klimas said that it likely won’t be until the beginning of next year or even mid-2022 when the new licenses “come on board,” Yeager sees the lounges as a way to help boost the return of the state’s economy.

“I can tell you without a doubt that Vegas is back in a really big way, and I think the addition of consumption lounges is only going to add to that,” Yeager said. “I actually think it's going to put Las Vegas on the map, to the extent that it isn't already, to be the cannabis destination, especially if we're able to open up some really interesting, innovative concepts.”

The Assembly and Senate approved the bill 29-12 and 17-3, respectively, with the Senate passing the bill on the last day of the session, as Sens. Dina Neal (D-Las Vegas) and Fabian Doñate (D-Las Vegas) were the only members of their party to oppose the measure.

Customers gather inside NuWu Cannabis Marketplace at 1235 Paiute Circle on Thursday, March 14, 2019. The dispensary is owned by the Las Vegas Paiute Tribe. (Jeff Scheid/The Nevada Independent)

AB149: Increasing transparency of cannabis testing

This bill, sponsored by Assemblywoman Sarah Peters (D-Reno), requires the board to develop, implement and maintain an online database where the public can find information about cannabis products tested by laboratories in the state.

The CCB still needs to receive approval from the Legislature’s Interim Finance Committee in order to fund the database, which is projected to cost nearly $250,000 over the next two years, but Klimas expressed enthusiasm about offering the feature to consumers.

“It's just another level of transparency that we can bring out. I would do it tomorrow if I had the capacity to do it,” he said. “This data should be available for everybody to use. Right now, you can go to a dispensary, and if you purchase a product, you can ask for the certificate of analysis. So you can see that kind of information, [but] some people don't know they can ask for it.”

Some of the state’s independent labs have in the past voiced concerns about transparency. In 2019, an association of four marijuana testing labs rebuked certain unidentified labs over allegations that the labs were inflating THC content readings and giving fewer samples a failing grade in an attempt to attract more business.

The measure builds off of existing law that requires the CCB to establish standards for independent cannabis testing labs, which test cannabis and cannabis products for a variety of factors, including for microbial substances (bacteria, molds, and yeasts), potency of the product (cannabinoid and terpenoid profiling), heavy metals and pesticides.

The information available online will be based off of the seed-to-sale tracking that the board uses to track cannabis products as they are grown and sold throughout the state, and the database also will be required to contain the final results of all testing performed on cannabis products by an independent lab.

The Assembly and Senate approved the bill with no opposition. Sen. James Ohrenschall (D-Las Vegas) did not vote on the measure because his wife, Riana Durrett, is a member of the CCB.

A cannabis bud in a gloved hand
Priscilla Vilchis, CEO of Premium Produce, inspects a cannabis bud at her grow facility in Las Vegas on Tuesday, Dec. 4, 2018. (Jeff Scheid/The Nevada Independent)

SB168: Curbside pickup for cannabis products

Sponsored by Sen. Roberta Lange (D-Las Vegas), this bill authorizes and allows dispensaries to offer curbside pickup in accordance with regulations adopted by the CCB. The measure legalizes a practice first allowed last year when the state was still in a coronavirus-related stay-at-home order.

Some of the present-day features of curbside pickup include designated parking spaces for pickup, security cameras with a direct line of sight to those spaces and a prohibition on people less than 21 years of age being in the vehicle. 

Proponents of the measure have touted the service as beneficial to businesses and a way for customers to more conveniently obtain their products.

“Customers really liked it, actually,” Martin said. “If you go through reviews of dispensaries, you'll often see curbside pickup positively viewed as a feature.”

The measure additionally allows local governments to adopt ordinances regulating curbside pickup beyond the rules adopted by the board.

The bill was approved in a 35-6 vote in the Assembly and a 19-1 vote in the Senate, and the governor signed the measure on May 27.

Parking space marked for Thrive Dispensary
A parking space outside the future Thrive dispensary in Reno on Sept. 27, 2019. Photo by David Calvert.

SB122: Extra health and safety training for cannabis employees

This bill, sponsored by Sen. Chris Brooks (D-Las Vegas), requires employees of cannabis establishments, including cultivation and production facilities and dispensaries, to complete a health and safety course developed by the federal Occupational Safety and Health Administration (OSHA) within one year of being hired.

Employers are required to cover the cost of the training and are required to fire an employee who has not completed the training within one year. Employees hired before July 1, 2021 are required to complete the OHSA training program by July 1, 2022, and certain employees not involved in the day-to-day operations of an establishment, as well as communications and legal employees, are excluded from the requirement.

The required training includes a 30-hour course for supervisory employees and a 10-hour course for other employees, which must be conducted by an authorized outreach trainer and may be online or in person.

Though there are other training requirements already in place for employees of cannabis businesses, Martin emphasized the importance of such training.

“It's a highly regulated industry. Safety and security [are] paramount,” she said.

The bill passed 31-11 in the Assembly and 14-7 in the Senate, with some Republican lawmakers voting against the measure. During a committee vote on the bill in March, a few Republican senators expressed concerns that the bill would be onerous and unnecessary for retail employees in the industry.

Criminal justice changes

AB400: Marijuana DUIs

This Yeager-sponsored measure, which went into effect on July 1, removes specific “per se” limits for cannabis metabolites that if found in a person’s blood would trigger a DUI — except for in cases where the DUI is punishable as a felony, including those that caused someone’s death or substantial bodily harm. Cannabis metabolites are the substances that form when THC is broken down in the body.

Under this law, drivers generally will be considered to be under the influence of marijuana if the substance has impaired their ability to safely operate their vehicle, instead of having impairment determined by a test for a specific amount of marijuana in their blood or urine.

“There's no scientific basis toward ‘per se’ limits,” Rutledge said. “That's problematic for anyone who consumes cannabis, certainly. It's especially cruel to patients who theoretically consume larger amounts of THC than the average recreational consumer and may not actually be under the influence while operating a vehicle.”

Yeager explained that the science has shown for years that the “per se” limits are not an accurate reflection of impairment because cannabis is metabolized differently in different people’s bodies.

“I was up at the session in 2013 and 2015 as a lobbyist,” he said. “And I remember talking back then to folks in the Legislature about the DUI laws because cannabis is this weird ... space because it's federally illegal but legal in the state. And our state laws around DUI really contemplate its federal illegality, and we're almost zero tolerance.”

Yeager said that it took a long time for other people to get comfortable with the idea behind the bill and realize that impairment for cannabis cannot be treated the same as alcohol, which ultimately led to his measure passing during the 2021 session.

The bill was passed along party lines in the Assembly with Republicans opposed and passed out of the Senate on a 15-6 vote, with some Republican senators opposed.

AB158: Lessening penalties for minors possessing marijuana

This bill from Assemblywoman Daniele Monroe-Moreno (D-North Las Vegas) significantly lightens penalties for minors who purchase or possess alcohol or cannabis, including prohibiting jail time and fees for first and second offenses.

In an interview with The Nevada Independent, Monroe-Moreno framed the measure as a way of being constructive with children who make mistakes, rather than strictly punitive. Proponents of the measure have described the bill as another way to help the communities most negatively affected by the War on Drugs.

For people under the age of 21 who are found guilty of a misdemeanor for possessing, consuming or purchasing alcohol or possessing less than one ounce of cannabis, the bill replaces misdemeanor penalties of up to six months jail time and up to a $1,000 fine with penalties of up to 24 hours of community service and a requirement to attend a meeting of a panel of victims injured by a person who was driving under the influence of alcohol or a controlled substance.

The bill also revises the penalties for a second violation to require up to 100 hours of counseling or participation in an educational program, support group or treatment program.

The measure was approved unanimously in the Assembly and Senate and was signed into law by the governor on May 28.

AB326: Cracking down on the illicit market

Sponsored by Assemblyman Tom Roberts (R-Las Vegas), who previously worked for the Las Vegas Metropolitan Police Department, this bill aims to curb the state’s illegal cannabis market by authorizing a district or city attorney to bring a civil action — with a penalty of up to $50,000 — against any person who engages in a cannabis business activity, including cultivating and selling cannabis, without a license. Someone who commits such a violation could still be subject to a criminal prosecution.

The bill also seeks to bring more transparency to existing businesses, while restricting illegal marijuana delivery services, by requiring all advertising for a cannabis establishment to contain the establishment’s name and license number.

“It's really intended to keep the black market, the illicit market, from operating within the shadow of the legal market,” Martin said.

The bill received no opposition in votes in the Assembly and Senate, with Ohrenschall recusing himself from the vote when it passed out of the Senate on May 21.

Regulatory changes

SB168: Granting the CCB regulatory power over packaging and labeling

In addition to making curbside pickup a permanent feature for cannabis businesses, this measure authorizes the board to adopt regulations for the packaging and labeling of cannabis and cannabis products.

“We have really extensive packaging and labeling regulations on the books right now,” Klimas said. “What this bill allows and recognizes is that this is an ever-evolving industry, so let's make sure the board has the power to … host workshops and get stakeholder feedback both from the public and the industry. And if we need to make changes on packaging and labeling, then we can do that and we don't have to wait every two years.”

Klimas added that the board will regularly host workshops focused on labeling and packaging, so that the agency can “constantly stay ahead” on regulations.

The bill was approved in a 35-6 vote in the Assembly and a 19-1 vote in the Senate.

A customer and retailer exchanging money at a cannabis retailer
A medical marijuana patient, right, pays for cannabis at Reef Dispensaries at 3400 Western Ave. on Wednesday, Feb. 15, 2017. (Jeff Scheid/The Nevada Independent)

SB49: Changes to CCB disciplinary hearings

This bill, brought forward on behalf of the CCB, makes a number of changes to disciplinary hearings conducted by the board — including authorizing the CCB to employ support staff for conducting such hearings, authorizing the chair of the board to grant extensions to the 45-day requirement within which hearings must be held and removing an authorization for the board to take the testimony of a witness by deposition because of the intensive time and resources typically required for depositions.

The measure also removes a barrier for minor stakeholders in cannabis businesses, allowing the board to adopt policies for waiving the registration requirements for people who have an ownership interest of less than 5 percent in the establishment. That provision is meant to lighten the burden for publicly traded companies.

David Staley, an audit investigator for the board, said during a February hearing for the bill that the background check and registration requirements can be restrictive for publicly traded companies with thousands of shareholders that have shares traded on a daily basis.

Under this bill, the labeling of cannabis products offered for sale is required to include the words “THIS PRODUCT CONTAINS CANNABIS,” rather than “THIS IS A MEDICAL CANNABIS PRODUCT” or “THIS IS A CANNABIS PRODUCT.”

No lawmakers voted against this bill; the measure passed 41-0 and 20-0 in the Assembly and Senate, respectively.

SB278: Clarifies the cannabis wholesale tax

Sponsored by Sen. James Settelmeyer (R-Minden), this bill clarifies the definition of “wholesale sale” for the purpose of the marijuana excise tax.

“It just clarifies [that] facilities that are owned by the same individuals can move product back and forth if one facility is more capable of performing a function than the other one,” Klimas said. “That just clarifies … when that is actually taxed.”

The bill passed through both chambers with no opposition and was approved by the governor on June 3.

SB404: Authorizes regulations for cannabis weighing and measuring equipment

Brought forward on behalf of the Governor’s Office of Finance, this bill authorizes the State Sealer of Consumer Equitability to adopt regulations for cannabis weighing and measuring equipment. The bill is meant to update existing law, which did not previously include references to cannabis-specific equipment.

The measure passed 20-0 out of the Senate, while members of the Assembly voted to pass the bill 33-8, with some Republican lawmakers opposed.

Cannabis on display at Reef Dispensaries, 3400 Western Ave., on Wednesday, Feb. 15, 2017. Photo by Jeff Scheid.

Other bills

AB101: Authorizes veterinarians to administer CBD products to animals

This measure, sponsored by Yeager, authorizes licensed veterinarians to administer products containing CBD or hemp in the treatment of an animal and to recommend use of such products to pet owners. It also prohibits the state Board of Veterinary Medical Examiners from taking disciplinary action against veterinarians who administer or use such products.

As Yeager notes, this bill — nicknamed the “pot for pets” bill — does not actually deal with marijuana, as do several other measures he sponsored. Cannabis contains more THC and less CBD, while hemp products (authorized for use by this bill), contain more CBD and less THC. The two compounds are both found in plants of the Cannabis genus.

“It was surprisingly easy to get through, this time,” Yeager said of the measure, which has been considered but rejected in past legislative sessions. “And maybe that's just the comfort level that we have, Nevadans have, not just with the cannabis industry but certainly with CBD. I think a lot of people have experience with CBD at this point.”

The bill was approved 40-0 in the Assembly and 20-0 in the Senate, before being signed into law by the governor on May 28.

SB58: Investigations into cannabis offenses

Brought forward on behalf of the Investigation Division of the Department of Public Safety, this measure is aimed at improving coordination between state agencies during cannabis-related investigations by requiring the division to provide investigative services to help carry out criminal investigations relating to cannabis when requested by the CCB, Department of Taxation or Division of Public and Behavioral Health.

This legislation passed with no opposition in the Assembly or Senate.

Failed licensing efforts

While lawmakers authorized the licensure of 40-plus new cannabis establishments through consumption lounges, discussions of adding other new license types stalled during the session.

SB235: Dual licensing

This measure, sponsored by Sen. Dallas Harris (D-Las Vegas), would have allowed the CCB to issue cannabis establishment licenses in excess of the caps set by the state when the licensing of adult-use cannabis dispensaries began. The new licensing procedure, intended to prioritize social equity applicants and increase the number of new licenses, would be determined by a study conducted by the board every two years.

However, the bill was met with significant backlash, even sparking internal conflict within the Nevada Dispensary Association that resulted in some members leaving the group. Some smaller operators within the association favored an amendment that sought to give those who lost out during a 2018 round of licensing a chance to receive a license.

The amendment, which would have established a path for adding a significant number of new licenses for those who lost out in 2018, reignited arguments from a yearslong legal battle over the previous licensing round and disputes about whether the market can support a large number of new marijuana stores.

As of June, there were 85 active dispensaries licensed by the CCB, with the possibility for roughly 40 more dispensaries approved during the 2018 licensing process. Unlike other business types, the number of retail cannabis stores in the state is strictly capped. 

Nevada law allows counties to have a certain number of dispensary licenses based on population, with current numbers allowing for up to 80 licenses in Clark County, 20 licenses in Washoe County, four licenses in Carson City and Lyon County, and two licenses in all other counties. However, local regulations can further restrict the number of licenses allowed in a county.

Though Yeager never heard the measure in the committee he chaired, he said there was a lot of controversy surrounding the idea. 

“The industry itself was so conflicted on that concept, and it just kind of blew up,” he said.

The legislation never received a vote on the Senate floor.

Medical marijuana and retail customers stand in line to check out at The+Source dispensary in Henderson on Thursday, November 9, 2017. (Jeff Scheid/The Nevada Independent)

AB322: Licensing cannabis events

Sponsored by Assemblyman C.H. Miller (D-North Las Vegas), this bill aimed to establish a form of “micro-licensing” by allowing the CCB to issue a new license type for cannabis events where products could be sold and consumed. Events could be similar to food festivals, for example, where different vendors sell marijuana products at the event and attendees are able to consume the products at the event.

With a financial impact estimated to be in the millions by the CCB, the measure never received a hearing in the Assembly’s money committee but was touted as a positive next step by proponents of other cannabis legislation.

“I think it's a good concept,” Yeager said. “I think we were just very wary of doing too much at one time, given how long it's taken us to get cannabis lounges up … Probably, [the] next step is cannabis events and licensing of larger events because the truth is people are consuming those events anyway. We know that, so we probably should regulate it in some fashion.”

Even though the CCB will only have two new types of licenses to work on over the next two years with the addition of retail and independent consumption lounges, Klimas said the board is still thinking about future rounds of licensing.

“Obviously lounges will be a licensing round, but when we're talking about the traditional establishments, like cultivation, production and retail, we're going to open up those licensing rounds at some point,” Klimas said. “But we want to make sure that those decisions on how many to award, how many to open up are driven by data.”

Though an effort to establish a cannabis market study failed with SB235, Klimas said that the board is still planning to perform a comprehensive study of the industry, likely conducted by a third party that Klimas hopes will provide an unbiased look at the market.

“We want to know what is the health of the market in the state of Nevada, what's our supply, what's our demand, what are our needs,” Klimas said. “That's going to be something exciting over the next year or two to get those results and see where this industry needs to continue to mature towards and how the CCB is going to facilitate that. That'll likely end up and result in new legislation that we’ll bring forth in the 2023 legislative session.”

Confronting a rise in youth vaping, experts strategize on actions for prevention

Man vaping

Public health officials have set their sights on raising the minimum legal sale age of tobacco products to 21, providing clearer labeling for cannabis products, improving youth education on cannabis and vaping and gathering more data on cannabis use. 

The strategies emerged from the Nevada Public Health Cannabis and Vaping Summit, a three-day virtual gathering of research and regulatory experts, policy makers, and others convened by the attorney general’s office and state health officials. The summit has come at a pivotal moment in the state’s public health efforts, with youth vaping on a significant rise and the Cannabis Compliance Board established less than eight months ago to improve regulation of marijuana.

The approximately 200 strategies crafted by the expert speakers and summit participants will form the foundation of an action plan that will be submitted to the Division of Public and Behavioral Health (DPBH) on Feb. 15 and will not include specific goals, but instead, will provide a set of tactics segmented by the five main tracks of the summit, which focused on cannabis prevention, tobacco products, cannabis and vaping regulation, law enforcement, and special populations. 

“This is intended to be a menu for you and for all of the stakeholder groups, so that you can identify needs and opportunities and use the action plan in whatever way serves you or your organization,” said Kelly Marschall, president of Social Entrepreneurs, Inc., who served as the primary moderator during the summit.

The action plan could potentially help get Nevada back on track with some of its efforts to curb youth vaping, as the state had been focused on combating the increasing uses of e-vapor products prior to the pandemic. That included joining an investigation into vape-maker JUUL over whether the company targeted youth.

Many of the strategies identified as higher priorities during the summit were focused on helping youth, including providing more mental health support for youth as a way to prevent and combat use of cannabis and vaping. 

Education also remained a popular strategy for prevention of cannabis use. Some popular education strategies included improving the perception of cannabis as a harmful substance, particularly among youth, and creating clearer product labeling so that consumers can better understand dosage and potency.

With all of those strategies in mind, Marschall hopes the action plan created from the summit will provide similar changes to the ones launched out of the statewide opioid summit in 2016.

“Once we had developed that action plan, even though it was a broad set of strategies and didn't specifically have goals per se, the state was able to use that,” said Marschall. “For example, the Southern Nevada opioid advisory committee actually emerged out of that opioid summit and then took some of the action plan items in that action plan and ran with them.”

Marschall also acknowledged the level of collaboration throughout the summit and said that it should create a better product with the final action plan.

Attorney General Aaron Ford opened the summit Tuesday by calling for a strategic plan to address problems emerging from the new legal cannabis industry and vaping, which has grown in popularity in recent years.

“Nevada, along with other states across the nation, is seeing troubling trends in morbidity associated with the use of e-cigarettes, vape juice, e-liquids, such as liquid nicotine, additives, and cannabis,” said Ford. “Together we’re going to identify priorities and strategies related to legal adult use, public safety, regulation, prevention, treatment, and oversight of cannabis and vaping products in Nevada.”

Data and trends

Across multiple measures, the survey data presented at the summit showed significant increases in vaping and cannabis use among Nevada high school and middle school students.

From 2017 to 2019, the percentage of high school students who used e-vapor products at least once in the past 30 days increased from 15 to 22.5 percent. For middle school students, that number increased from 6.7 to 12 percent over the two year span.

The survey data from 2019 also revealed that Nevada eighth grade students were far more likely to have used cannabis at least once in their life compared to those at the national level, with more than 22 percent of Nevada eighth grade students reporting some lifetime cannabis use compared to only 15 percent of eighth grade students nationwide.

Data that focused on special populations revealed that high school and middle school students who had depressive symptoms or identified as lesbian, gay, or bisexual were significantly more likely to have used cannabis across all surveyed measures, including past 30-day use and frequent use.

In 2019, 6.7 percent of Nevada high school students who identified as lesbian, gay, or bisexual reported having used cannabis at least 20 times in the past 30 days, compared to only 3.5 percent of those who identified as heterosexual.

Jennifer Pearson, an assistant professor at the University of Nevada Reno, also brought up the stark differences between urban and rural students in daily use of e-vapor products.

“We also see that living in rural Nevada is related to risk of being a daily vaper in middle school and high school students,” said Pearson. “So for example, 2.4 percent of urban high school students in Nevada are daily vapers and that's compared to 8.7 percent of rural high school students.”

The data and trends presented primarily came from the 2017 and 2019 Youth Risk Behavior Surveys (YRBS), which used data collected by the Centers for Disease Control and UNR from a random sample of high schools and middle schools across the state. The data was also weighted at the state and regional levels based on sex, race and ethnicity, and grade level.

Despite the emphasis on the data already being used, strategies also emphasized a need to collect more data. Many summit participants voted for and discussed strategies that focused on completing more research and making more decisions based on available data.

The state is already taking steps in this direction. During the opening session of the summit, Ford announced that Nevada now has a cannabis epidemiologist to assist in collecting data. Ford also said this data collection would focus on the trends such as an increase in lung injuries linked with the use of nicotine and cannabis products.

Regulation

Speakers at the virtual summit also discussed the current regulations and the future goals and challenges for vaping products. In the 2021 legislative session, advocates are looking to propose raising the minimum legal sale age of tobacco products from 18 to 21. 

Public health experts also aim to protect the gains achieved in 2019, particularly to defeat the effort to repeal how vapor products are taxed as “other tobacco products” and preserve vaping prevention and control funding. 

“Buckle up, it’s going to be a little bit of a wild ride,” said Democratic state Sen. Julia Ratti, chair of the state Senate Health and Human Services Committee. “Because there's just an awful lot of uncertainty and fluidity when it comes to this budget and we're going to have to start the process by making the cuts and assuming that we're not going to have the revenue of a recovering economy.” 

The Cannabis Compliance Board (CCB) also faces some uncertainty in the face of some of the statewide budget cuts.

During the summit, CCB board member Riana Durrett said the agency is currently preparing a report on approaches to handling the illegal market. Durrett thinks the report could prompt legislative action during the upcoming session. 

Although budget cuts could restrain any new action taken to regulate the illegal cannabis market in Nevada, there were strategies introduced at the summit to improve regulation of the legal cannabis market.

One was to ensure clearer product labeling. Many experts at the summit emphasized that there is a general lack of perception about the harmful effects of cannabis, and some said that creating more consistent product labeling and including more product warnings could help raise awareness.

The CCB already has a number of regulations in place aimed at product marketing and packaging, and many of these regulations are intended to prevent youth use of cannabis products.

Under existing rules, advertising may not be false or misleading, depict actual consumption or depict someone who appears to be under 21 or be placed near a school, playground, or sporting event. Pictures of toys, cartoons, mascots or anything appealing to children is also not allowed. 

Packaging must be childproof and may not be packaged or marketed as candy. 

Aside from advertising regulation, the CCB also extensively monitors product quality from “seed to sale,” as explained in the summit. The board examines and tracks the growth of the cannabis plant and the pesticides used to treat the plant. It also reviews all the ingredients and verifies that everything is safe for ingestion. 

Even with this strict regulation in place, there is still an extensive illegal cannabis market in Nevada, and youth cannabis use is on the rise.

After the summit’s action plan is submitted to the DPBH in February, the Legislature and other stakeholders from the event will have an opportunity to act on the recommended strategies.

Sisolak names former marijuana trade group leader, Reno doctor to Cannabis Compliance Board

A cannabis bud in a gloved hand

The former head of the most prominent marijuana trade association in Nevada is one of the final two members named to the board regulating the state’s legal marijuana industry.

Gov. Steve Sisolak announced on Monday that he had appointed Riana Durrett, the recently departed executive director of the Nevada Dispensary Association, to the Cannabis Compliance Board. He also named Dr. Bryan Young, a Reno physician, to the five-person panel.

“These final appointments to the CCB each bring their own unique expertise and insight to the table,” Sisolak said in a tweet. “I am confident their contributions to this board will only amplify the sound judgment and strong regulation carried out by the CCB.”

Durrett had been executive director of the dispensary association since 2015 until the group announced late last month that Layke Martin, a lawyer and the wife of state Treasurer Zach Conine, would take over. Durrett has a law degree from UNLV’s Boyd School of Law and is pursuing a master’s degree in gaming law and regulation.

She represented the industry as a lobbyist through major shifts, starting when the first medical marijuana dispensaries were opening in Nevada in 2015, to the legalization of recreational marijuana in 2016 and numerous changes to law and regulation since. She is married to Democratic state Sen. James Ohrenschall.

Young worked as a physician in Las Vegas and has spent the last 12 years practicing in the Reno area. He has his medical degree from the University of Nevada School of Medicine.

Other members of the board include former Gaming Control Board chair Dennis Neilander and Las Vegas banker Jerrie Merritt. The board is chaired by former Nevada Supreme Court Chief Justice Michael Douglas.

The bill authorizing the board requires that the panel include a cannabis industry expert, an attorney, a doctor, a finance expert and someone with law enforcement or investigation training.

The board took over cannabis industry regulation duties from the Nevada Department of Taxation on July 1 with a vision of bringing Nevada’s “gold standard” gaming regulation protocols to the marijuana industry. In its first few months of operation, the board has adopted new regulations on the industry, lifted a freeze on license transfers, and levied complaints and record-setting fines against companies accused of violating state rules.

Board members, who are appointed by the governor, work part-time and are paid annual salaries ranging from $20,000 to $27,500. 

Nevada Interrupted: Budtenders hit the road as legal marijuana goes delivery-only

Wysouri "Z" Smith, a budtender at Las Vegas’ Curaleaf dispensary for a little more than a year, said he came to love the experience of talking with customers about their day, helping them find the right cannabis product and eventually knowing their names and favorite orders by heart.

But a statewide shutdown order for nonessential businesses, which directed cannabis businesses to do delivery only and will extend well past marijuana’s famed 4/20 “holiday,” has turned his day-to-day on its head. He now spends his shifts driving orders around town, donning a pair of gloves and a face mask before exchanging cannabis for cash, and keeping the chit chat to a minimum to maintain social distance.

“We try to make the transaction pretty quick, as quick as possible, get it in, get it out,” said Smith, 28. “We don't really want to have a full conversation.” 

Wysouri "Z" Smith is a budtender at Curaleaf dispensary in Las Vegas who has transitioned to doing delivery-only. Photo courtesy Curaleaf.

He’s one of five or six Curaleaf employees who have transitioned to delivery drivers after the state’s announcement. In the highly regulated world of the legal cannabis industry, the approval involves a state inspection of a delivery vehicle — something that regulators are now doing virtually, by examining emailed photos and videos of specific employee and vehicle documents and the vehicle itself.

After a little back and forth with the state about the images that were submitted, Smith got the green light and has been up and running.

Amid the great uncertainty of the pandemic, Smith said many customers are stocking up on cannabis because they don’t know if conditions might change and whether they’ll have access to the dispensary and its products going forward. Most are ordering flower — a half an ounce, if not the full ounce that’s the upper limit of marijuana a person can buy in a single transaction.

But he said he’s noticed a drop in overall volume as jittery customers hold tightly to their money and don’t have as much discretionary income to spend at a dispensary.

Nevada Dispensary Association Executive Director Riana Durrett said while delivery has kept many marijuana businesses going, most are doing just a fraction of the sales they were before and some are not participating at all because the process is “too difficult and inefficient.”

“The illegal market has a stronghold on delivery in southern Nevada,” Durrett said. “To get involved, you’re not only competing with the legal market but a pretty well-oiled illegal market.”

It also requires meticulous recordkeeping. Drivers may not carry more than five ounces of cannabis in a trip, and must file a trip plan, fill out a manifest and log all transactions into a seed-to-sale tracking system called METRC.

Delivery was a small side service for many Nevada dispensaries before, so even the large jump in delivery capacity is not making up for the losses, she said. It’s been a blow for marijuana businesses that are already looking at a tough road ahead because — as part of a federally illegal industry — they can’t deduct business expenses on their taxes and don’t qualify for the Small Business Administration loans that many other businesses are looking to carry them through the challenges of the pandemic.

On a more personal level, what Smith misses is the personalized interaction with the budtender and customer deciding together what product is the best fit.

“When it's over the phone or through a delivery system, I feel like they're just kind of picking up what they could get in the moment,” he said.

Still, he said he’s happy just to have a job during the economic turmoil, and to continue providing a product that people value perhaps even more during uncertain times.

“Some people find cannabis helps them relax or gives a distraction from the stressful situation,” he said. “And for medical patients, they rely on it, so being able to provide access to them is crucial.”

Sisolak issues guidance on 'non-essential' business shutdown amid questions, confusion from local governments and industry

Gov. Steve Sisolak’s request Tuesday night for all nonessential businesses in the state, including casinos, to close their doors for 30 days in order to avoid further spread of the novel coronavirus has been met with some confusion over what is and isn’t an “essential” business.

Businesses of all stripes began to grapple with Sisolak’s unprecedented announcement last night asking most businesses in the state to close, with some beginning to shut their doors around noon while others either continued operating in an unclear environment — workers at the Tesla Gigafactory outside of Reno reported to work on Wednesday, while construction at Allegiant Stadium continues to go forward and several marijuana dispensaries in Las Vegas said were operating.

On Wednesday afternoon, Sisolak’s office released a five-page “Risk Mitigation Initiative” giving more details on the statewide shutdown, including what constitutes an essential and nonessential business.

The guidance lists 20 essential services and sectors, several of which were not mentioned by the governor Tuesday night. Some examples include trash collection, veterinarian services and pet stores, laundromats and dry cleaners, and auto repair services. It also makes an exception for “essential stays” in places such as hotels, commercial lodging, dormitories, shelters and homeless encampments.

The document, however, notes that the essential services may not necessarily be limited to the ones listed. 

The list on nonessential services and sectors was also updated, and includes the following businesses:

  • Strip clubs and brothels
  • Casinos
  • Concert venues, arenas, auditoriums and stadiums
  • Large conference rooms, meeting halls and cafeterias
  • Recreation and athletic facilities, including community and recreation centers, gyms, health clubs, fitness centers, yoga, barre and spin facilities 
  • Beauty and personal care facilities, including barber shops, beauty, tanning, waxing, hair and nail salons and spas
  • Retail facilities, including shopping malls with the exemption of pharmacy or other health care facilities

The guidance also reiterates the temporary ban on dine-in facilities for restaurants and bars, but allows for continued carry-out, delivery and drive-through services while following social distancing protocols.

“No dine-in at food establishments should be allowed until further notice,” it states. “This also includes food courts, coffee shops, catered events, clubs, bowling alleys, and other similar venues in which people congregate for the consumption of food.”

The guidance also sheds some light on the fate of the marijuana industry, stating that all licensed cannabis stores and medical dispensaries may remain open, as long as they adhere to social distancing requirements for customers and employees. The state encourages consumers to use delivery services and to not congregate in stores. 

For those with lingering questions, the guidance essentially asks people and businesses to use common sense. 

“The goal of this initiative is to protect the health and safety of Nevadans by preventing people coming together unnecessarily, where people who have the infection can easily spread it to others,” the document states. “Ask yourself this question: ‘Where do people get within 6 feet of other individuals for an extended period of time?’ — then avoid those areas.”

The federal Centers for Disease Control and Prevention and public health agencies around the state have strongly recommended that all individuals work or engage in schooling from home if possible, avoid social gathering in groups of 10 or more people, avoid discretionary travel and to avoid eating or drinking in restaurants, bars and food courts. Health authorities also recommend avoiding close contact (within 6 feet) of any other person, as the virus is transferred through respiratory droplets that can easily spread between people in close proximity.

Local governments around the state took different approaches to the governor’s remarks and guidance — City of Las Vegas Mayor Carolyn Goodman pushed back on the order and said she would ask Sisolak to shorten the length of the shutdown, while officials in Washoe County gathered Wednesday to reiterate the governor’s message and urge closure of “non-essential” businesses. 

On the other end of the spectrum, Reno officials sent out a notice late Wednesday saying they have authority to enforce the moratorium through fines of up to $1,000 a day, suspension or revocation of a business license, or a misdemeanor citation.

"The City of Reno is requesting and hoping that this current crisis can be addressed in collaboration with all our residents and business owners," officials said in a statement. "The City of Reno has no desire to take enforcement action on businesses."

Outside of licensed gambling entities — which under an order from the state’s Gaming Control Board were required to shut down all operations at midnight on Tuesday — all of Sisolak’s comments on business closures were prefaced by the word “should” and not a clear and direct mandate to close down. 

Still, uncertainty exists. Washoe County Commission Chair Bob Lucey said prior to the release of the guidance that some “professional services” would be allowed to continue operating and that the governor’s order was directed as businesses where large numbers of people congregate, such as bars, nightclubs and restaurants. But he said that more specifics would need to come from the governor’s office.

“Until we have that distinctive understanding from his office, we can’t really answer that specifically,” he said.

Businesses mentioned by the governor as “non-essential” include restaurants, bars, pubs, wineries, breweries, coffee shops, gyms, shopping malls and salons, though restaurants will still be able to offer drive-through, curbside takeout and delivery services to their customers. 

Essential businesses mentioned by the governor that can remain open include grocery stores, pharmacies, drug and convenience stores, banks and financial institutions, hardware stores, truck stops and truck service centers, daycares, businesses that provide services to disadvantaged populations and gas stations, as well as police, fire, transit and health care services.

A tweet by Reno City Councilman Devon Reese, now deleted, implied that the governor’s comments were meant to exclude professional offices, including lawyers, doctors, accountants and REALTORS, as long as their desks were arranged to ensure maximum safety to workers.

Other industries have relayed messages internally after speaking with the governor’s office. The Nevada Chapter of the Associated General Contractors said in an internal email that many construction industry stakeholders participated in a call with the governor’s office on Tuesday and that they would be “considered an essential industry and will continue with business as usual.”

A variety of Las Vegas restaurants were advertising modified policies on Instagram. Businesses including Daniel’s Coffee and More said it switched to a takeout model, while vegan restaurant Vegenation said it had narrowed its scope from two restaurants to just a downtown location and then, only for takeout and delivery.

Graffiti Bao was offering a 30 percent discount for service industry professionals while 595 Craft and Kitchen offered 50 percent off for people who were furloughed or laid off. Metro Pizza advertised “no contact” service that included online ordering and payment by card, with pizzas delivered outside the door and drivers washing hands before and after delivery.

Marijuana dispensaries said they were taking Sisolak’s order to heart but noted that in other states, such businesses are being allowed to stay open. Those jurisdictions include New York, Pennsylvania, New Jersey, Illinois, Michigan, Maryland, Washington, Oregon and various localities in California and Colorado. San Francisco had closed dispensaries but reversed that decision.  

"The Nevada Dispensary Association and its members are working with regulators to implement any and all directives from the Cannabis Compliance Board and Governor Sisolak. Public safety and maximizing social distancing is the utmost priority,” said Riana Durrett, executive director of the Nevada Dispensary Association. “Many jurisdictions in the United States are allowing dispensaries to remain open given their role in providing medicine.”

The Las Vegas Chamber saw an uptick in calls from business owners starting Monday, and that trend only intensified after the governor’s announcement Tuesday night, said Cara Clarke, the organization’s vice president for communications.

The business organization is awaiting more clarity from the governor’s office about its definition of an essential business. In other words, “What are the types of businesses, processes, things that we need to make sure that we can keep the essential services running?” she said during an interview Wednesday morning.

Still, Clarke said the Vegas Chamber thinks the governor made “quite clear” that businesses such as casinos, theaters, gyms and malls should not be open. She hopes other businesses pondering what to do carefully consider whether they would be helping or hurting the community by remaining open.

“What we’re trying to do is prevent large groups that don’t necessarily need to be doing that,” she said. “I think that’s the intention and the spirit of this.”

The Vegas Chamber also held a teleconference Tuesday with U.S. Small Business Administration District Director Joseph Amato about disaster-assistance loans for businesses and nonprofits. 

Jacob Solis contributed to this report. Updated at 1:24 p.m. to add additional details. Updated at 5 p.m. to add statement from city of Reno.

NV Health Response COVID19 (1) by Riley Snyder on Scribd

As industry faces more scrutiny, one-third of positions within Marijuana Enforcement Division remain unfilled

Marijuana in containers

Amid calls for state regulators to crack down on bad actors in the marijuana business, regulators are dealing with their own hurdles — a staff shortage.

Information provided to The Nevada Independent by the Nevada Department of Taxation on Tuesday shows about one-third of the positions within the state’s Marijuana Enforcement Division — 17 out of 52 roles — are vacant. That includes four vacancies among five Level 2 Compliance/Audit Investigator positions, and six vacancies in the role of Level 2 Marijuana Program Inspector, out of 10 possible positions.

Will Adler, executive director of the marijuana testing lab association Scientists for Consumer Safety, called last week for action against labs that appear to be fudging results on the levels of THC within the products they test. When informed about the division’s staffing statistics, he called the situation “brutal” and said he doubted the agency could pull off the crackdown he envisioned in its current state.

“I don’t think it can, because it does need to staff up and it does need that for an effective unit,” he said. “The Marijuana Enforcement Division is facing extreme pressure on all fronts.”

State officials, however, said that much of the shortage can be chalked up to the fact that new positions started coming on the books in October — a division that included 44 positions earlier this year will have funding for 60 by January. And the state is in the final stages of hiring people for many of the new roles. 

"The Department continues to work towards the transition to the Cannabis Compliance Board including recruiting and onboarding over twenty new staff members to join the agency. The hiring process began in October and will continue through next year as authorized by the budget bill to support implementing AB 533," the department said in a statement late Tuesday, referring to the bill implementing the new board. "The Department looks forward to filling these positions with the most capable and qualified individuals to help usher in a new era of cannabis oversight in Nevada."

Marijuana enforcement officials are charged with checking each licensee in-person once a year, and there are currently more than 900 final and conditional licenses in the state.

Employee tasks also include vetting changes of ownership in an industry that is rapidly consolidating — there were 136 ownership change requests in fiscal year 2018, although Gov. Steve Sisolak recently called for a freeze on license transfers. 

They must do background checks on applicants for “agent cards” that authorize a person to work in the industry (there were nearly 12,000 active cards as of early this year, and all require annual renewal), and approve all proposed advertising designs for compliance with the law (there were more than 8,000 advertising and packaging designs up for review in fiscal year 2018).

On top of those routine tasks, the department is also responsible for investigating alleged misconduct. Concerns about the industry’s vulnerability to crime intensified this fall after an indictment accused businessmen with ties to Russia and Eastern Europe of making illegal campaign contributions in an attempt to manipulate the licensing process. 

And beyond that, the division faced a dozen or so lawsuits over its latest round of dispensary licensing, in which 61 businesses were given permission to open retail marijuana stores after more than 460 applications were submitted. Businesses that didn’t win the coveted licenses have alleged the state created an unfair playing field.

“They really did have, and still do have, a huge day-to-day, slug-it-through workload without any problems,” Adler said.

A copy of the Marijuana Enforcement Division's organizational chart from February 2019, before lawmakers authorized additional positions. The state did not provide a current organizational chart. Courtesy Nevada Department of Taxation.

The list of vacancies is as follows:

  • Three of eight “Auditor 2” positions are vacant. Auditors’ responsibilities include: 
    • Verifying agent cards for all owners, officers, board members and employees
    • Ensuring businesses have valid licensing
    • Reconciling inventory with data reported to state
    • Assuring proper sanitation
    • Ensuring employees are properly trained
    • Ensuring all taxes are paid
    • Checking security protocols
    • Assuring minors are kept away from the business
  • The only “Revenue Officer 2” position is vacant. That position is within the division’s fiscal unit.
  • The only “Management Analyst 1” position is vacant. That position is within the compliance and audit unit.
  • The only “IT Technician 4” position is vacant.
  • Six of 10 “Marijuana Program Inspector 2” positions are vacant. Those employees’ tasks include:
    • Inspecting grow facilities for disease, odor control efforts, visibility from outdoors, and proper sampling of product for lab testing
    • Inspecting production facilities in the same manner that local health departments check restaurant kitchens, including for sanitation and prevention of cross-contamination
    • Inspecting labs for methodologies, testing equipment and sample retention
    • Inspecting stores for state-approved packaging, consumer warnings, no public consumption, adherence to sell limits and age verification practices
  • Four of five “Compliance/Audit Investigator 2” positions are vacant. Investigators are assigned more complex, lengthier investigations into:
    • Employee theft
    • Manipulation of marijuana potency data
    • Sales to minors
    • Operating without a license
    • Illegal use of a pesticide
    • Buying or selling marijuana illegally from out-of-state
  • One of nine "Administrative Assistant 2" positions is vacant.

Industry representatives acknowledged that the whole system is in flux as it transitions from regulation by the taxation department to a forthcoming Cannabis Compliance Board. Funding is not kicking in fully until mid-2020.

“The entire program is in transition because oversight is being transferred to a new body, the Cannabis Compliance Board,” said Riana Durrett, executive director of the Nevada Dispensary Association. “For the industry’s part, they have been through two changes in regulatory bodies and know it requires a lot of cooperation and education on the intricacies of the cannabis industry.”

Adler said the division was doing "monumental" work considering its workload but said there may be troubles in getting the division the funds it needs fast enough.

“I do feel the more funding and support we can give those staff, the better,” he said. “We can see their need is great. What they need is more support.”

Growing Pains: Records paint a picture of unrest in Nevada marijuana industry

Customers at Nuwu Dispensary

In just two years, the narrative surrounding Nevada’s legal marijuana industry has shifted from praise for the improbably smooth and lucrative launch of recreational cannabis sales to an industry divided by legal wrangling and clouded by questions about the adequacy of state regulation.

Many questions remain unanswered: Who’s on a secretive new governor-convened task force focused on “rooting out potential corruption” in the marijuana realm? Was there corruption to begin with, either by the state or by businesses? Will anyone lose a license? 

Thanks to a bill signed into law this spring, there’s a bit more sunlight on a process that was once completely shrouded in secrecy because of taxpayer confidentiality laws.

Over the next few weeks, a series of stories called “The Cannabis Files” will explore the trends laid out in the data released from SB32 and analyzed by The Nevada Independent. The records not only reveal who has a stake in the business, but paint a picture of a rapidly changing industry that is becoming increasingly corporate, with ownership transfers so frequent that elected officials find it hard to keep up.

Opening up the information “ushers in a new era of transparency that will benefit the industry and the public,” Gov. Steve Sisolak said when he signed the bill in May, and it offers a glimpse of the challenges that will lie ahead as Nevada once again overhauls its marijuana regulation next year and adopts a Cannabis Control Board oversight regime not unlike the one that reined casinos into a respected mainstream.

“I will say, overall, I think our industry is at a point that is not terribly different than gaming was,” said John Ritter, a board member with The Grove and the Nevada Dispensary Association. “I welcome the fact that the industry is treated seriously and being treated like gaming.”

Buyers outside marijuana dispensary

Hundreds of people line up to purchase recreational marijuana in Nevada at Reef Dispensaries on Saturday, July 1, 2017. Photo by Jeff Scheid.

A house divided 

Nevada’s launch of recreational marijuana sales in July 2017, six months ahead of schedule, was met with great fanfare, especially in light of troubles neighboring states encountered with their rollouts. 

But in spite of the high-flying revenue numbers — the state brought in $70 million in its first year, or 140 percent of what it had projected — critics now wonder whether corners were cut in the rush to unlock the recreational marijuana market, which dwarfs the size of the medical marijuana market. And they wonder whether the Department of Taxation that assumed responsibility of marijuana regulation in 2017 was prepared for a task that has since dominated its workload and that in the future will be assigned to a marijuana-specific board with more enforcement teeth. 

“This is another area where I think there was a rush to get revenue into state coffers,” Sisolak said on Thursday at the release of an audit of the state’s Marijuana Enforcement Division. “We’re doing everything we can to clean up those issues.”

Chief among those issues are questions about whether the state was unfair when it awarded 61 conditional dispensary licenses in late 2018, in response to more than 460 applications. While many dispensary owners agree the initial voter-approved dispensary cap is prudent to keep the quality of the stores high and avoid having one on every street corner, the concentration of those new licenses among just 17 businesses — including one business that captured a full 11 licenses — surprised and angered those who did not win. The state is involved in about a dozen lawsuits over the situation.

An audit launched in March and released last week concluded that the state’s licensing process was adequate, if not perfect. Auditors said more transparency about the scoring criteria and automation to reduce human errors while reviewing business applications would help, as well as redistributing licenses that can’t be used because they’re for jurisdictions that have a marijuana moratorium. 

The audit revealed no bombshells or conclusive evidence that the process was rigged. But the questions will be further litigated in court at trial, scheduled to begin this spring.

Court proceedings stemming from a lawsuit filed by dispensary owners who did not win additional licenses lasted for months this summer and led to a partial preliminary injunction in August that barred the state from granting some dispensaries final approval to open. Clark County District Court Judge Elizabeth Gonzalez agreed that there were flaws with the process, saying it “was impacted by personal relationships” and that a diversity category was “subject to manipulation by applicants,”  but did not toss the entire licensing round out of hand. 

Marijuana enforcement agency leader Jorge Pupo, whose dinners with certain applicants and apparent selective sharing of information about applications was a focal point of the court proceedings, left the post under circumstances that have not been fully explained. But one of the biggest consequences of the lawsuit and subsequent moratorium has been a split between the haves and have nots, with dispensary license winners blaming the losers for lawsuits that have jammed up their efforts to open the new stores.

“It’s created a giant schism with the industry,” said David Goldwater, a board member of the Nevada Dispensary Association and owner of Inyo Fine Cannabis Dispensary, which did not win additional licenses in the latest round.

Late last month, eight cases against the state were consolidated as they head for trial.

Employee at Acres Cannabis
Amber Jansen organizes marijuana merchandise inside the Underground, a cannabis farmers market inside Acres Cannabis in Las Vegas on Friday, April 20, 2018. Daniel Clark/The Nevada Independent

Foreign influence

On top of that dispute, a recent indictment alleges that two associates of former New York City Mayor Rudy Giuliani with ties to Eastern Europe conspired to get involved in the industry. Once they missed the deadline, they allegedly made illegal campaign donations to Republican gubernatorial hopeful Adam Laxalt and attorney general candidate Wes Duncan — financed by a foreign national — in hopes that they would sway well-positioned politicians to change the entire licensing scheme.

Though the two men were unsuccessful in obtaining a license, the revelation prompted Sisolak — a champion of the industry, if the marijuana world’s more than $700,000 in campaign donations in the 2018 cycle is any indication — to proclaim his outrage and order sweeping action.

Ask industry advocates, though, and they point to the haplessness of the conspirators: They appeared to hatch their plan in early September 2018, the same time as a deadline for a complicated application that some businesses had worked on filling out for months or years. They tried to woo a gubernatorial candidate who, in 2016, campaigned against legalizing marijuana and then lost the 2018 election.

“I think what happened with the Ukrainian thing was a Three Stooges thing,” said Clark County Commissioner Tick Segerblom, a champion of the industry now and in his former career as a state lawmaker.

Nevertheless, it’s prompted Sisolak to convene a secretive task force aimed at “rooting out potential corruption” in the industry. Sisolak has declined to so much as name the agencies that are part of the task force, saying he doesn’t want to compromise their investigations. While insiders say the force is comprised of law enforcement, Sisolak’s office said Friday it still needs time to answer a records request about the membership, three weeks after The Nevada Independent first submitted the inquiry.

In neighboring California, The Sacramento Bee found loopholes in the process of changing ownership on marijuana licenses that had allowed dispensary ownership to fall to a small number of people — including a Ukrainian-born businessman indicted on campaign finance charges — in spite of anti-monopoly rules. Sacramento is now considering a moratorium of its own on license transfers, and the FBI is investigating whether bribery of city officials played a role in the licensing process.

Still, Segerblom believes Sisolak’s response has cast too much suspicion on the system.

“I understood what [Sisolak] was saying but I think he tarnished the whole industry unnecessarily,” Segerblom said. “Does he know something I don't know? … While there could be a few problems here and there … it’s phenomenally successful.”

Senator Tick Segerblom standing in front of a cash register
Democratic Sen. Tick Segerblom makes the first marijuana purchase at The Source in Las Vegas on July 1, 2017. Photo by Joe Fury.

Moratorium on license transfers

Even more sweeping, state officials in mid-October called for an indefinite moratorium on transfers of licenses. Transfers are common, and can result from things like shareholders wanting to sell out or going through a divorce.

But critics say the process of transferring a license is too much easier than the initial application process, and could lead to unsavory characters getting a foothold in the industry. The Department of Taxation said it would not be processing new or existing applications as it tries to ensure “a more thorough and appropriate vetting process within the industry.”

The moratorium can also stall major mergers and buyouts, though, causing businesses to miss contractual deadlines and face fines. At an Oct. 23 Reno City Council meeting, officials with Deep Roots Harvest went so far as to say the hold is likely to scuttle New York City-based Acreage Holdings’ plans to acquire the company for $120 million.

“With everything that is going on at the state … there is a very low likelihood that that transaction will manifest,” Keith Capurro, part-owner of Deep Roots Harvest, which won five new dispensary licenses in the latest round.

“It’s definitely affecting folks,” Goldwater said. “We’re all trying to figure out the moratorium. It came as a surprise.”

Asked for details on the timeframe of the moratorium, Sisolak deferred to the leader of the Nevada Department of Taxation and his appointee to lead the forthcoming Cannabis Control Board: Tyler Klimas, a former lobbyist serving the governor’s office in Washington D.C. who was also previously a spokesperson for Gov. Brian Sandoval and the Silver State Health Insurance Exchange.

“No,” Sisolak said in a brief interview Thursday when asked if he knew when the moratorium would end. “I’ve got total confidence in [Taxation] Director [Melanie] Young and Tyler and they’re going to move forward.”

Tryke Companies, which owns Reef Dispensaries and this fall announced plans to be acquired by Cresco Labs, is urging quick action. Late last month, the company completed a Hart-Scott-Rodino Act review, a detailed antitrust probe involving the U.S. Federal Trade Commission and Department of Justice.

“While we fully support the Governor’s efforts to ensure a strong and empowered regulatory framework for Nevada cannabis, we strongly urge a swift resolution to the moratorium,” said Brett Scolari, Tryke’s general counsel. “We look forward to working with state officials on a quick resolution of the approval process in the coming months as we take the final step in this highly regulated public transaction.”

Some in the industry say they support the moratorium, although they sympathize with companies hampered by it. It’s a step toward bolstering public confidence in the business of marijuana, they say.

“Look at how the public perceived gaming 50 years ago —  that was a huge sin and it was looked down upon,” Ritter said. “Because of what Nevada did to clean up the industry, get the mob out, we proved that can be done and now gaming has proliferated across the world. That’s why I think that in the long term, making sure that this industry is properly regulated, that the owners and managers are properly vetted — in the long term [that’s] good for our industry.”

A man, asking to be identified only as Junior, selects marijuana products inside Exhale Nevada dispensary in Las Vegas on Friday, April 20, 2018. Daniel Clark/The Nevada Independent

Consolidation

Data released by the state through SB32 illustrate the trend of businesses once led by prominent local names selling for sometimes hundreds of millions of dollars to major, multinational companies that seek to launch powerful chains. It has troubled some local government officials who envisioned a more home-grown, local industry and not a Wal-Mart for pot.

“I think the idea was to keep it local and home-grown and sadly I think it’s been lost,” Reno Mayor Hillary Schieve said in an interview. “How is someone from Canada going to care about the local environment? … Are they watching out for the community?”

Some companies have gone public on the Canadian Stock Exchange — a move that critics say is making it harder to tell who is in control, but that industry advocates say is a fact of life because marijuana remains illegal on the federal level and traditional banking and access to capital is out of reach in the U.S.

“You can’t go to a bank and borrow money to expand,” said Segerblom, who was previously on the board of a publicly traded Canadian marijuana company that purchased Greenmart of Nevada. “You have to get to a stock exchange somewhere.”

The data also show an industry where female owners are firmly in the minority, in spite of efforts to promote diversity. High barriers for entry, which included $250,000 in liquid capital, appear to be getting higher as the industry grows in sophistication.

The professionalization also shows in the Nevada Dispensary Association’s recent decision to create a PAC aimed at shaping more unified state marijuana policy going forward. The PAC, called the Nevada Can Committee, aims “to assist Nevada's legal cannabis industry in coalescing its political efforts and engagement, including providing education and support for candidates for elected office,” said NDA Executive Director Riana Durrett, and “will support candidates from all parties and a variety of backgrounds.”

While some lament that a substance that landed low-level dealers in jail even a few years ago has evolved into a multibillion-dollar industry that is the purview of the wealthy and sophisticated, others say the industry’s evolution into an increasingly corporate political and legal powerhouse is a sign of a healthy and maturing industry, and is ultimately a good thing for the state.

“Nevada marijuana excise taxes fund our states education program … Growth in the cannabis industry is not just good for jobs and redevelopment, it is good for education,” said Bob Groesbeck, an owner with Planet 13. “We cannot speak specifically to all mergers and acquisitions taking place in Nevada – but generally we view this as a positive sign of a healthy industry.”

Check back with The Nevada Independent in the coming days and weeks for more stories in the “Cannabis Files” series on the most notable names in the industry, diversity in the business, and the consolidations and transfers that are changing the face of the nascent marijuana business in Nevada.

Nevada cannabis industry breaks $100 million mark in annual tax payments

A cannabis bud in a gloved hand

Nevada’s cannabis industry has broken a record for tax contributions — more than $100 million in revenue has been collected from dispensaries, cultivators, laboratories and producers in the fiscal year that just ended. 

Marijuana tax contributions have increased by 33 percent year over year, from $74.7 million paid last fiscal year to $99.18 million in the 2019 fiscal year, with another $10 million fees on top of that. The Nevada Dispensary Association announced the milestone in a press release on Tuesday, along with a warning that the state should not take the strong collections for granted.

“Significant changes in the market or regulatory framework could impact tax collection,” said Riana Durrett, the group’s director. “The illegal market continues to deprive the state of funds that could be going to education.”

Divvying up marijuana revenue has been a hot topic for policymakers in recent years. The cannabis industry is subject to four types of taxes and fees — a 10 percent excise tax, a 15 percent wholesale tax, sales tax and licensing fees.

In fiscal year 2018, actual revenue of $69.8 million exceeded, by 40 percent, what the state had predicted for that fiscal year. And for the next two years, the state is projecting more than $100 million per year in marijuana tax collections.   

A major sticking point has been whether the revenue ends up in the state’s education account. Although the state collected nearly $70 million in excise and wholesale taxes in the first year recreational sales were legal, just over $27 million of revenue was deposited in the Distributive School Account, the state’s main education account. 

During the 2017 legislative session, decisions on an education funding model did not go as planned, leading lawmakers to shuffle marijuana excise tax revenue into the state’s Rainy Day Fund reserve account instead of directly to education. Schools did not lose money in the transaction because lawmakers backfilled the education money with general funds, but the diversion has been a source of confusion.

In May, the Legislature passed a bill that would somewhat rectify the 2017 diversion to the Rainy Day Fund by sending excise tax revenue directly to the Distributive School Account. That is expected to add $120 million to the education account over two years.

Amendment would make public the names of businesses that applied for marijuana licenses, scores

As the state faces criticism and lawsuits over its secretive process for licensing marijuana dispensaries, new legislation is calling for the disclosure of the names of business entities that applied and more details about scoring methodology.

Nevada Department of Taxation Director Melanie Young on Tuesday presented an amendment to SB32, which would expand transparency in the state’s marijuana regulation processes. Currently, the agency will not even release the business names of the 61 entities that in December won conditional licenses to open a dispensary, citing confidentiality provisions that date to an era when the state aimed to protect medical marijuana cardholder identities.

“This amendment is an important step in a multi-pronged approach to greater transparency in marijuana licensing under my administration,” Gov. Steve Sisolak said in a statement. “As our legal marijuana industry has evolved and flourished, it’s more important than ever that the industry and the public enjoy the benefits of a completely open and transparent process from licensing to operation so that our marijuana industry can become the gold standard in the nation."

The measure would be effective retroactively, so it would encompass all entities that have applied since May 1, 2017. It would also reveal the action taken with regard to those applications, the methodology used in scoring and ranking applicants, evidence showing how the methodology was applied, and the names of entities that were subject to disciplinary action.

It would exclude information compiled by investigative staff and law enforcement, blueprints and schematics related to the layout of a marijuana company building, information about security measures and other materials that might jeopardize public safety.

Also private would be “personal information,” trade secret information, and documents related to the finances, earnings and revenue of the applicant or individual people involved in the application. Young said in general, names of individual people who are part of an ownership group that applied will not be public, unless that person applied under their name as part of a sole proprietorship.

Applicants who did not win licenses in the most recent application round have filed lawsuits against the state over the process. One filed last week on behalf of 11 marijuana businesses argued that the level of secrecy on how the winners were determined has been so high that it’s creating an environment ripe for corruption.

Young, who took over the agency earlier this year, said she supported the proposal.

“I share Gov. Sisolak’s commitment to increasing transparency within the marijuana licensing process,” Young said in a statement. “I look forward to working alongside the governor’s office and the legislature to implement this and other needed reforms to shed more light on how marijuana licenses are issued.”

Nobody testified for or against the amendment, which was posted publicly shortly before the meeting, during a brief hearing in the Senate Revenue and Economic Development Committee. Riana Durrett of the Nevada Dispensary Association did not immediately have comment on the proposal.