Recreational Cannabis Hits Las Vegas

Lukas Barfield

July 13th, 2017


Perhaps foreshadowing the glitz and glimmer of the Vegas strip, the Nevada Constitution was the most expensive document ever sent by telegraph at the time it was sent on October 31, 1864. Its arrival made Nevada the 36th state, and assured its votes would be counted in the 1864 election. Since it became a state, Nevada’s history has been a cycle of booms and busts. Starting with the silver boom of the 1860’s, it has always been on the frontier of American opportunity. Now, in 2017, still feeling the historic bust of 2008, Nevadans hope the legalization of adult use recreational cannabis will bring the next boom to the silver state.

The initiative legalizing recreational cannabis, known as Question 2, passed with a comfortable 54% of the vote on November 8, 2016. However, this wasn’t Nevadan’s FIRST TIME VOTING FOR A CANANBIS INITIATIVE. They previously showed their support for cannabis when they passed medical cannabis initiatives in 1998 and 2001. Despite Nevadan medical cannabis patients being able to grow twelve plants since then, it took fifteen years for the first medical cannabis dispensary to open last year. The long awaited dispensaries opened just in time for recreational cannabis, and they paved the way for Question 2 passing. Question 2 went into effect on January 1, 2017, and immediately removed criminal penalties for possession of up to one ounce of cannabis for adults over 21.  With the lofty hopes recreational cannabis would go on sale on July 1st, the governor had signed three cannabis bills by June. The regulations outlined a 10% retail tax and a 15% wholesale tax, categorize recreational and medical cannabis as the same products to streamline distribution, and clarify labeling concerns around youth access. Unfortunately, despite recreational cannabis going on sale on July 1st at 47 licensed retail cannabis shops in the state, the hastily written regulations have led to a major hiccup in the new system.

In the initiative passed in November, liquor distributors were promised they would get first pick of the recreational cannabis distribution licenses. These are the people who transfer cannabis from production and processing facilities to retail stores. This roll was previously done by the medical cannabis dispensaries themselves. According to the initiative, the distribution grace period would last 18 months. Defying language in the initiative, citing insufficient numbers of licenses from the alcohol wholesalers, the Nevada Department of Taxation opened distribution licenses to non- liquor distributors in May. Shortly thereafter, the Independent Alcohol Distributors of Nevada (IADN) filed a lawsuit seeking to block the tax agencies’ move to open licenses to businesses other than liquor distributors. A Carson City judge agreed with the IADN, and issued an immediate restraining order on the tax agency from issuing any distribution licenses. Currently, there is no one in Nevada licensed to transport cannabis to the retail shops. However, this didn’t stop the agency from issuing recreational retail licenses. Recreational cannabis did go on sale on July 1st as planned. As the courts work to sort out the legality of the distribution licenses, cannabis is on sale in Nevada, but retailers aren’t quite sure where their next supply will come from once the current stock runs out.

On July 1st, lines stretched out the door at many Las Vegas retail cannabis shops. Customers were greeted by live bands, valet parking and giveaways. Loud cheers went up when the doors opened. There were 40,000 retail receipts the first week the shops were open, far exceeding estimates. The larger than expected turn out prompted the Governor to reverse his stance and ask the legislature to pass emergency distribution rules to resolve the IADN lawsuit to assure recreational shops don’t run out of cannabis in the coming days. The Nevada market is expected to grow from here. After California, the $70 million a year recreational cannabis market in Nevada is expected to be the 2nd largest in the country, with every 2 out of 3 purchases coming from tourists. It’s illegal to consume cannabis on the strip, in hotels or casinos, so many believe cannabis consumption clubs will be needed in Nevada to serve their large tourist base. The shaky start has prompted some investors to wonder if Nevada’s market will cool down cannabis stocks, but most think Nevada’s market will be completely up and running soon.

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