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Legal Marijuana in Nevada

If there’s anywhere in America where recreational marijuana was going to be legalized, it would be Nevada. The state behind Sin City is already well-known for its regulated prostitution and gambling; for many, adding cannabis to the mix was just a matter of time. Nevada’s hotly debated journey to legal weed is an example of how, even as America shifts toward a greater acceptance of casual drug use, concerns abound as to the extent and consequences of this freedom.

Nevada’s Question 2

The Nevada Marijuana Legalization Initiative (also known as Question 2) was put in front of voters as part of the November 8, 2016 ballot, and it was approved by 8 percentage points. It went into effect on January 1, 2017, and sales of legal marijuana began on July 1. Only 11 days later, Governor Brian Sandoval declared a state of emergency; the state’s Department of Taxation reported that sales were exceeding expectations to such an alarming degree that stores were exhausting their supplies, and there was a legitimate fear that “the nascent market” would come to an abrupt stop only a week after it opened its doors for business.1

nevada marijuana legalization

The problem arose because nobody had been licensed to transport recreational marijuana to Nevada’s dispensaries. The other states that have legalized the sale of recreational marijuana (Colorado, Washington, Alaska, and Oregon) all allow dispensaries to transport their cannabis supplies themselves. In Nevada, however, while the legalization referendum was being debated, the powerful alcohol lobby (beverage sales on the Las Vegas Strip alone amounted to $1.2 billion in 2015) expressed concern that legal cannabis sales would cut into liquor sales.2 So, as a compromise, the ballot measure granted that for the first 18 months of marijuana sales, only wholesale alcohol distributors would be allowed to transport the drug from cultivation facilities to dispensaries.

When weed stores opened their doors for business on July 1, around 50 dispensaries (all already selling medical marijuana) were authorized to sell the recreational drug, but no alcohol distributors had yet received permission to start transporting the marijuana. The Department of Taxation had received a number of applications, but none had met the state’s licensing requirements. This left the dispensaries in the position of having to rely on the marijuana they already had in stock, which lasted for a little more than a week. Indeed, the journey from voting to pot sales was done “in record time,” according to The Daily Beast; the eight month period between Question 2 going on the ballot, and the first recreational sales being made, astonished even cannabis advocates. Of all the states to have made such a decision, Nevada’s turnaround period was the fastest.3

The rapidity of the implementation caught the state’s infrastructure off guard. The declaration of a statewide emergency allowed for the Nevada legislature to make quick changes in their marijuana regulations, such as awarding distribution licenses to medical marijuana dispensaries if the Department of Taxation was satisfied that by not doing so, the dispensaries would be unable to continue selling marijuana.4

The chairman of the Nevada Tax Commission (which unanimously approved the emergency regulations) told the Los Angeles Times that Nevada was trying to find its place “in the still-evolving world of legal marijuana sales.” But technical difficulties aside, there is no turning back: “This is such an important time in the state of Nevada’s existence,” he said.5


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Legalizing Marijuana in Nevada

Until 2016, there was no concept of “legal marijuana” in Nevada. Before Question 2, the possession or consumption of marijuana without a medical exception was illegal (and the federal government itself considered the use of any kind of marijuana illegal), but the Department of Justice under President Barack Obama did not prioritize prosecuting (most) individuals who used marijuana recreationally.

question2-allows

Question 2 made some form of recreational marijuana use legal under Nevada law; residents over the age of 21 were allowed to buy, own, consume up to one ounce of marijuana, or one-eighth or less of an ounce of concentrated marijuana. Adults are also permitted to grow up to six marijuana plants for their own use, provided that the cultivation takes place in an enclosed, locked area. Question 2 also created a 15 percent excise tax, the revenue of which would go to enforcing the measure and to the state’s education system. Question 2 further authorized and regulated Nevada’s marijuana retail stores, growth facilities, manufacturing centers, and distributors.

The Dos and Don’ts

As for distributors, Question 2 prohibited them from setting up shop within 1,000 feet of a school or 300 feet of a community facility. The bill also limited how many retail marijuana stores could open in each of Nevada’s 16 counties, based on a county’s individual population size.

Question 2 mandates that the annual licensing fees for cultivation facilities ranged from $3,300 to $30,000, based on the nature of the license. The measure stipulated that the 15 percent excise tax, as well as the license fees and any incurred penalties, would first go to the Department of Taxation and then to local governments to cover related costs.

One of the biggest concerns about legalizing marijuana in Nevada would be that drivers would get behind the wheels of their car while under the influence. Question 2 addresses this by allowing the state government to implement and enforce policies that prohibit a person from driving or operating a vehicle after using marijuana. The bill also criminalizes selling or giving marijuana to an underage person, as well as having or using marijuana within schools and prisons. Workplaces are also allowed to ban the use of marijuana on their properties by their employees. Question 2 also introduced new penalties for growing cannabis plants in public view and smoking marijuana in a public place.
question2_donts

Celebrating Legal Weed

For many of Nevada’s citizens, the rules and penalties came a distant second to the fact that they could now buy and smoke marijuana legally. When the state’s pot dispensaries opened their doors, people lined up “by the hundreds,” some waiting for hours, to be among the first to indulge. Some even chartered limousines and buses, according to the Las Vegas Review-Journal. Police on hand reported no public safety issues with the crowds waiting in line to buy a federally controlled substance.6

The revelry (and resulting emergency) came after two decades of trying to make marijuana legal in Nevada. After voters legalized medical marijuana in 1998, they set their sights on recreational use, but one of the architects of Question 2’s success admitted to the Review-Journalthat the idea of celebrating legal weed sales would have been preposterous even a decade ago.

Such has been the scope of the change that one of the first people to buy legal weed in Nevada was State Senator Tick Segerblom who championed both the establishment of medical marijuana dispensaries and their subsequent approval to sell recreational marijuana. Segerblom’s purchase was a marijuana strain named after him: “Segerblom Haze.”7

Opposition and Support

Not everyone was celebrating on July 1, and those who refrained from lining up for hours represented the challenges that legal marijuana faced in its journey. The co-chairman of Citizens Against Legalizing Marijuana in Southern California pointed to the dangers the drug posed to children and young adults. There are other forms of pleasure that are not public health hazards, he said, cautioning that drug-affected mental states and recreation are not (and should not be) synonymous. Similarly, Ira Hansen, a Nevada Assemblyman, said that the voters’ decision to legalize marijuana was “a huge mistake all the way around.” In a state that is the fourth highest in the country for drug overdose deaths, allowing the public sale and private use of marijuana does nothing to help matters: “the last thing we need is more impaired people here,” said Hansen.8

Making weed legal could roll back the “enormous social inequities and public costs” of going after low-priority marijuana users.
For the time being, however, the momentum is with those who voted “yes” on Question 2. Even among those in public health, like the director for health policy research at the University of Nevada School of Medicine, who is also the president of the Nevada Tobacco Prevention Coalition, making weed legal could roll back the “enormous social inequities and public costs” of going after low-priority marijuana users.9

But for most people, such heady concepts can wait. When dispensaries reopened on the Saturday morning following the Friday night festivities, people still waited by the hundreds in temperatures that reached over 100 degrees for their first taste of legal weed.


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Nevada’s History of Regulating Vice

regulating viceConsumers aren’t the only ones celebrating. The Department of Taxation estimates that the 15 percent excise tax will contribute as much as $70 million in the next two years to the Nevada State Distributive School Account. The medical marijuana program is taxed much lower, keeping costs reasonable for sick people who have prescriptions.

There is an overwhelming sense of confidence that the state that has long prided itself on how it regulates gambling and prostitution knows what it’s doing when it comes to marijuana. A cannabis-industry financial advisor, who also raised money to get Question 2 on the ballot, told Rolling Stone that Nevada’s path to regulation would be much less bumpy than what Oregon, Washington, and Colorado experienced when they went down the same path. “Nevada has been regulating things that other people don’t know how to regulate for decades,” he said, specifically mentioning that Oregon’s fast track regulation and Washington’s adult use problems would be non-issues in Nevada.10 A veteran cannabis grower told The Daily Beastthat “nobody does privileged licensing better than Nevada,” specifically praising how well the state has set up the infrastructure for the industry to take off. Two decades ago, a person could have been arrested for having nothing more than a cannabis seed; today, he says, Nevada’s legal weed program could well be one of the best in the country.

Tourism and Legal Marijuana

But Nevada’s path to legalizing marijuana is a bit more complicated than some advocates acknowledge. Nevada is home to some of the most famous and opulent casinos and hotels in the world, but lighting up in one of them would still break the law. A bill that would have regulated such consumption did not make it past Nevada’s 2017 legislative session, but advocates are optimistic that in the same way alcohol became part of Nevada’s fabric, cannabis will soon follow. With 42 million tourists visiting every year, and some tourists specifically coming to Nevada to partake in legal weed, pot activists say that the ban on smoking in establishments cannot last. One person said that the fact that Nevada has legal, regulated brothels is an indication enough that so-called “consumption clubs” could open before the end of the year.11

Tourism is an untouchable thread in Nevada’s fabric. Vegas is estimated to be the “most-tourism dependent city in the United States,” with the 42 million people who visited in 2014 raising $45 billion for the city in that year alone.12, 13 So dominant is the tourism factor in Nevada’s economics, culture, and politics, that lawmakers are optimistic, even positive, that legalizing recreational weed in the state will bring even more visitors.

Many in the marijuana industry (even outside Nevada) placed their bets on the way that bars and casinos in Las Vegas influenced a statewide business model as an example that cannabis could find a path of its own. Leafly magazine had predicted that Nevada would legalize recreational marijuana, saying that of all the states that were considering such a ballot, Nevada’s was a “sure bet.” There was good reason for the optimism; Nevada’s campaign was not only the first to get the required number of signatures to place the issue on the state’s 2016 ballot (110,000 signatures), it far exceeded the minimum (170,000 signatures) and did so two years ahead of schedule.14

The Story of Medical Marijuana in Nevada

marijuana ad restrictionsNevada is a state that prides itself on how it regulates vice, but that regulation can be steep. Even though medical marijuana was legalized by voters as far back as 1998, marketing rules made it almost impossible for one medical dispensary to simply advertise its location. Las Vegas rules prohibit the business from listing its name on the billboard of the strip mall where it is located. International Business Times noted that the other establishments on the same strip mall (a convenience store, a massage parlor, and a nail salon) had their names displayed.

There were so many other such rules that the co-owner of the dispensary quipped to IBTimes that the lack of crowds meant that “we’ve been able to keep the store really clean.” Some of those rules included limits on the amount of shelf space the dispensary could give for cannabis-consumption products (pipes and rolling papers) and accessories. The store was also  prohibited from selling clothes with the brand’s name, and restricted in the format and scope of the advertising it could do. IBTimes said that Las Vegas laws on medical marijuana dispensaries were some of the most rigid in the country. Even after Question 2 was passed, dispensaries are not allowed to advertise on the radio, television, or any other medium where at least 30 percent of the audience will likely be under the age of 21.15

Further away from the Strip, however, medical marijuana stores find life much easier. In unincorporated Clark County, a local dispensary has what it calls “the biggest cannabis sign in the world.” In Sparks, not far from the border with California, city government “basically rubber-stamped everything” for its own store.16

Zero Pushback

Nevada voters opted to legalize medical marijuana in 1998, but it took a very long time for the ball to start rolling – 15 years, in fact, because the law at the time did not establish a way for the drug to be sold or distributed. Nevada’s Medical Marijuana Act won by 20 percentage points in 1998, but it was only in 2013 that residents could buy their doctor-approved weed locally.17 Before that happened, people with a medical marijuana license had to grow their own weed or get it in another way.

It usually takes up to 18 months for a state to open medical marijuana stores following legislative approval

A marijuana analyst for the National Conference of State Legislatures told the Las Vegas Sun that it usually takes up to 18 months for a state to open medical marijuana stores following legislative approval. “By two years, there’s usually something,” she said. But a lack of communication between state and county governments paralyzed the issuance of dispensary licenses, a gridlock that took over a decade to clear. Senator Tick Segerblom, who long waved the flag for marijuana legislation in Nevada, accused politicians of not having “the will to do what the people wanted.”

Despite the stall, pot activists and state and local governments eventually worked their way onto the same page. One point of agreement was to place dispensary locations in industrial areas, away from homes, churches, or parks. The owner of a dispensary said that his store has had “zero pushback” from concerned citizens, and the clientele has been “normal people who use pot as medicine,” like a young army veteran who uses marijuana to help with his post-traumatic stress disorder.18

Notwithstanding the logistical difficulties, Nevada’s medical marijuana stores were the first in the country to honor medical marijuana cards issued by other states. Combined with Nevada’s record-breaking tourism, there is the possibility that the medical marijuana market in Las Vegas alone could turn an annual profit of $1.5 billion every year (or, as The Verge put it, “the Disneyland of Weed”).19

The Liquor Lobby

Given Nevada’s long history of vice, there is an expectation that the state’s legal marijuana industry will be the biggest in the country until California becomes the eighth state to regulate recreational weed, which will happen in January 2018. But there are still battles to be fought in the future; some alcohol manufacturers objected to the Department of Taxation’s decision to allow medical marijuana dispensaries to transport cannabis supplies to recreational stores, insisting that they receive exclusive transportation rights across the entire state.20 This stance puts Nevada’s sizeable alcohol lobby against the tax department, which retains the right to decide who gets how many licenses necessary to ensure that the marijuana market runs smoothly. The senior counsel in financial services and cannabis law at a local legal firm speculated that “alcohol distributors will challenge the [Department of Taxation’s] decision,” because they do not simply want to compete in an open marketplace. For a generation, the liquor lobby enjoyed an exclusive seat at the table, and they will only reluctantly make room for the cannabis industry to join them.

Because Nevada desperately needs the projected $70 million for its underfunded public education system, Fortune magazine suggests that the government will do whatever it takes to ensure that the state’s recreational dispensaries stay in business.21


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Legal Marijuana and the Black Market

black market vs storesReason magazine is skeptical that retailers “only” made $3 million in sales from the first four days of legal cannabis transactions, and that Nevada government itself pocketed just $500,000 from all the business. With a 10 percent retail excise tax on recreational sales, a sales tax anywhere between 7 percent and 8 percent, “the total tax take [might] be about 32 percent of legal recreational marijuana sales,” a figure that is exorbitantly high in a market that was vibrant, illegal, “and entirely untaxed” just weeks before July 1, 2017.22

While there was a novelty to standing in line for hours to legally buy weed (especially in time for the Fourth of July holiday weekend), Reason wonders if consumers will eventually call up their old dealers who won’t be constrained by the alcohol lobby’s desire for a monopoly and who won’t impose taxes that are so high as to be extortionate. The Tax Foundation pointed out that both Colorado and Washington “initially levied tax rates of over 30 percent, and struggled to reduce the size of the [respective] black markets.”23 For example, nine months after Colorado legalized recreational marijuana sales, black market weed remained much cheaper than what consumers could buy in stores, and licensing regulations made it excessively difficult for an above-board dispensary to open its doors and stay profitable.24 The same problem was found in Washington state, which imposed a 37 percent excise tax on legal pot sales as well as restrictions on production and sales. Local news commented that “four years after legal weed, Seattle’s black market still thrives.”25

The Black Market vs. the Green Market

Nevada’s pride on its long history of regulating vice means precious little if it doesn’t learn from the mistakes of the states that legalized marijuana before it, says Reason magazine. If taxes were lower, more reasonable, and more easily implemented, the simplicity of the process could encourage consumers to comply with the legal standards instead of feeling justified to continue dabbling with the illegal drug trade. One problem is that lawmakers in Colorado and Washington responded to the continuing presence of the illegal drug trade by hiking up taxes and increasing restrictions on the legal weed industry, leading a former state senator from Denver to comment that “it seems kind of odd” that state governments seem intent on “driving more people to the black and gray markets.”26

The result, concludes Reason, is that until Nevada gets smarter about how it regulates marijuana, legal dealers will be forced into a losing competition with underground.


Citations
  1. “Nevada Sold out of Legal Marijuana So Quickly That the Governor Endorsed a ‘Statement of Emergency’.” (July 2017). Business Insider. Accessed August 5, 2017.
  2. “Alcohol Distribution Rises along with an Economic Recovery.” (March 2016). Las Vegas Review Journal. Accessed August 5, 2017.
  3. “Nevada’s Green Rush: From Vote to Pot Sales in Record Time.” (May 2017). The Daily Beast. Accessed August 5, 2017.
  4.  “To Keep Pot Shops Stocked, Nevada Passes Emergency Regulations.” (July 2017). Governing. Accessed August 5, 2017.
  5. “Nevada Approves Emergency Regulation Aimed at Solving Marijuana Shortage.” (July 2017). Los Angeles Times. Accessed August 5, 2017.
  6. “Legal Marijuana Sales Begin in Nevada.” (June 2017). Las Vegas Review-Journal. Accessed August 5, 2017.
  7. “Meet the Nevada Democrat Ushering in a Wave of Marijuana Legalization.” (July 2016). Quartz. Accessed August 5, 2017.
  8. “Report: Nevada Fourth Highest for Drug Overdose Deaths.” (n.d.) LasVegasNow.com. Accessed August 5, 2017.
  9. Packham: What’s Missing from Marijuana Legalization? Oversight.” (March 2016). Reno Gazette-Journal. Accessed August 7, 2017.
  10. “Legalized It: Nevada’s First Night with Recreational Weed.” (July 2017). Rolling Stone. Accessed August 5, 2017.
  11. “Tourists, Locals Buy Nevada’s Legal Recreational Marijuana.” (July 2017). US News & World Report. Accessed August 7, 2017.
  12. Las Vegas May Be Most Tourism-Dependent City in US” (January 2010). Las Vegas Sun. Accessed August 7, 2017.
  13. Las Vegas Sets Record for Visitation: 41 Million Visitors in 2014.” (January 2015). Las Vegas Convention and Visitors Authority. Accessed August 7, 2017.
  14. Which States Are Most Likely to Legalize Cannabis in 2016?” (December 2015). Leafly. Accessed August 7, 2017.
  15. “Q&A: Marijuana Is Legal in Nevada but Not in Casinos or Bars.” (July 2017). US News & World Report. Accessed August 7, 2017.
  16. “Medical Marijuana Has Arrived in Las Vegas, but Will All the Rules Harsh Sin City’s Buzz?” (December 2015). International Business Times. Accessed August 7, 2017.
  17. “Nevada Medical Marijuana Act, Question 9 (1998).” (n.d). Accessed August 7, 2017.
  18. “First Legal Medical Pot Sold in Nevada 15 Years after Approval.” (July 2015). Las Vegas Sun. Accessed August 7, 2017.
  19. High Rollers: Las Vegas Is Poised to Become the Disneyland of Weed.” (April 2014). The Verge. Accessed August 7, 2017.
  20. “Here’s How Nevada Will Try to Solve Its Pot Shortage.” (July 2017). Fortune. Accessed August 7, 2017.
  21. “Nevada Marijuana Shortage Averted, but Legal Troubles Could Drag On.” (July 2017). Fortune. Accessed August 7, 2017.
  22. “Nevada’s Half-Hearted Marijuana Legalization Guarantees a Healthy Black Market.” (July 2017). Reason. Accessed August 8, 2017.
  23. “Lessons Learned? Nevada Tax Strategy for Recreational and Medical Marijuana.” (June 2017). Tax Foundation. Accessed August 8, 2017.
  24. “Pot Black Market Thrives after Colorado Legalization.” (September 2014). PBS Newshour. Accessed August 8, 2017.
  25. “Four Years after Legal Weed, Seattle’s Black Market Still Thrives.” (September 2016). Seattle Weekly. Accessed August 8, 2017.
  26. “Hickenlooper’s Plan to Raise Marijuana Tax to Fund Schools Draws Doubts.” (January 2017). The Gazette. Accessed August 8, 2017.