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.