Can Nevada’s Recreational Marijuana Supply Keep up With Demand?

It’s been less than a week since recreational marijuana sales began in Nevada, and business is booming.  With sales even higher than expected, combined with an ongoing legal battle with alcohol distributors, supply issues could soon cause a buzz kill.

Early recreational marijuana sales began at several dozen medical marijuana dispensaries statewide on Saturday at midnight, with many dispensaries seeing long lines all weekend long as tourists and locals alike wait up to 45 minutes to purchase marijuana legally.

Dispensaries, such as Releaf in Las Vegas, have seen sales skyrocket from about 150 medical patients per day to over 1,000 customers per day all weekend long.  Euphoria Wellness, also in Las Vegas, also estimates serving 1,000 patients each day over the holiday weekend.

On average, dispensary operators say most customers buy around a quarter ounce of pot, and maybe an edible or two.

“I’m a very happy with the way sales have gone and continue to go, especially when you consider that the word didn’t really get out ahead of time.” said Andrew Jolley, president of the Nevada Dispensary Association told the Associated Press. “The public really only had a couple of weeks’ notice, whereas Colorado had a full year to prepare.”

The Nevada Dispensary Association estimates retail marijuana sales were approximately $3 to $5 million statewide over the weekend.

Recreational marijuana in Nevada is taxed 10% at the point of sale, and is expected to generate approximately $30 million in tax revenue this year.

While business may be booming and tax coffers increasing, higher than expected sales from the start brings about a real possibility of rising prices and short supply in coming weeks.

The price of wholesale marijuana in Nevada has risen to around $2,600 per pound, up $1,000 on average from just a month ago, as dispensaries stocked up in preparation for what was, at the time, an on-again, off-again, on-again July 1st start date.

But now, even the most prepared dispensaries could soon see a shortage of pot as a legal challenge between state regulators and alcohol distributors plays out.

Under Nevada’s recreational marijuana law, alcohol distributors were given the exclusive rights to transport recreational marijuana from growers and processors to dispensaries for the first 18 months of recreational sales, which were originally expected to begin in early 2018.

But because of the early start to recreational sales, with the state granting permission to medical marijuana dispensaries to sell to anyone 21 or older, none of the state’s alcohol distributors have been issued licenses to transport cannabis.

State regulators from the Department of Taxation say they had reached out to alcohol distributors in November, but received “insufficient interest” in the recreational cannabis industry.

The department said it only a handful of liquor dealers showed minor interest, but no concrete business plans were submitted for how those companies would distribute marijuana.

“While some were ‘interested,’ none followed up to indicate that they had a plan going forward to be ready to serve the market or that they had sorted out issues with respect to their federal liquor license,” the department said in March.  Cannabis distribution licenses cost $15,000 under the temporary regulations that go into effect with the state’s early start program.

Because liquor distributors are licensed on the federal level, where cannabis remains illegal, acting as a distributor of marijuana in Nevada could put those licenses at risk.

In March, the department decided that it would open the applications for distribution licenses beyond alcohol distributors, because the cannabis industry would not be able to operate.

But then came a legal challenge from the Independent Alcohol Distributors of Nevada, and a district judge in Carson City ruled in favor of the liquor distributors, giving them the exclusive right to transport recreational marijuana to dispensaries.

As a result of the judge’s ruling, marijuana retailers will only be able to sell their existing inventory.

The tax department is appealing the decision, but hope to begin issuing distribution licences to alcohol distributors soon.

“We expect to have some distributors licensed within the next three weeks or so,” Stephanie Klapstein, a spokesperson for the Nevada Department of Taxation, told CNN.

Most dispensaries say they have enough stock on hand to last several weeks, even with the increased sales from recreational customers, as long as the kinks in distribution are worked out soon.

“If this goes on for months, we’re screwed,” said one dispensary manager, who asked not to be identified.  “But for now, we’re good.”

Until then, stock up while you can, because as inventory starts to run low, expect prices to rise.

That’s the surest bet in Vegas.

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