Gov. Steve Sisolak (D-Nev.) signed into law on May 10 to open the books naming the companies awarded licenses in 2018 to sell recreational cannabis in Nevada. It was revealed through the records of the state tax department that just 16 applicants received all 61 new dispensary licenses. The governor stated that the measure would usher in a “new era of transparency that will benefit the industry and the public alike.” The new law makes the names of cannabis license applicants public as well as the method used to score and rank bids.
Nevada dispensaries reported almost $425 million in recreational cannabis sales in 2017 after adult-use retail was legalized in July 2017. Medicinal cannabis sales documented another $105 million in profits in 2017. Medicinal and recreational cannabis sales totaled $884 million in the last six months of 2018. Currently, there are 65 licensed dispensaries in Nevada.
State lawmakers are also considering other measures to regulate the cannabis industry. One law would create a pilot “closed-loop” payment system to give cannabis businesses a safe way to pay taxes and reduce the risk of transporting large amounts of cash. Since the federal government still classifies cannabis as a Schedule 1 narcotic, which makes it illegal, many banks insured by the FDIC (Federal Deposit Insurance Corporation) are reluctant to offer services to the cannabis industry.
Several lawsuits have been filed accusing the state of unconstitutionally picking winners and losers for the cannabis licenses. Complaints include not clearly defining what criteria are used to award licenses.
Taxation chief Melanie Young has stated that state law doesn’t allow permits to go to low-scoring bidders. Young reported 127 applicants averaged three bids each, totaling 462 applications for 64 available licenses to sell recreational cannabis in Nevada. According to Young, bidders were scored on financial resources, organizational structure, community impact, building plans, quality assurance and taxes, and financial contributions.
A department official reported that three licenses weren’t awarded because there were no bidders in three of Nevada’s 17 counties. The department also stated that over half of the successful bidders received its first license, and nearly three in five showed diversity in ownership, officers or board members.
Records reflect that 21 new licenses were awarded in Las Vegas, Henderson, and North Las Vegas in Southern Nevada and seven in Reno and Sparks in Northern Nevada.
However, attorneys Will Kemp and Vincent Savarese, representing some of the companies in the pending lawsuits, stated on May 10 that they expect the release by the state of names and scores given will bolster their clients’ cases. Kemp said he found bias in favor of certain winning applicants.
The governor wants to transfer the regulation of cannabis businesses from the state’s taxation department to a governor-appointed, five-member Cannabis Compliance Board under a bill filed in the Legislature. The governor’s office introduced the measure to create a regulatory system modeled after the state’s Gaming Control Board. The House Judiciary Committee will vote on the measure, which will require a two-thirds majority vote to pass.
The board would be then be the entity to decide whether to issue cannabis consumption lounge licenses, establish requirements for cannabis delivery services, adopt hemp regulations, and revise regulations regarding cannabis inventory control systems.
“Nevada’s gaming industry is seen as the international gold standard, and there is no reason we cannot take steps to ensure our marijuana industry is viewed the same way,” Sisolak stated in January after he issued an executive order establishing an advisory panel to create a cannabis board.
A law firm representing the 11 dispensaries in the lawsuit has asked the courts to place a freeze on licensing and also order that the licenses awarded in 2018 be placed on hold until litigation is resolved. The judge is expected to make a ruling May 24.