Nevada Judge Halts Early Start to Recreational Marijuana Sales

CARSON CITY, NV — Nevada’s anticipated July 1 start to recreational marijuana sales could be delayed following a judge’s ruling earlier this week on a complaint from the alcohol industry.

A district judge issued an order Tuesday banning the state’s Department of Taxation from enforcing a May 31 application deadline for medical marijuana dispensaries applying to take part in the early recreational cannabis sales slated to start July 1, indicating possible delays.

Voters approved Question 2 in November, legalizing marijuana possession in Nevada starting January 1 of this year.  Under the measure passed by voters, state regulators were given until the end of this year to establish rules and regulations to govern the cultivation, production, testing, and sale of marijuana, with retail sales expected to begin January 1, 2018.

After state lawmakers expressed interest in allowing early retail marijuana sales at medical marijuana dispensaries, which had been successful in Oregon after voters approved a similar measure in 2014, state regulators pushed for an early start to retail sales in Nevada.

Last month, the Nevada Tax Commission voted 6 to 1 to allow medical marijuana businesses in good standing to apply for “early start” licenses.

But that decision has been met with resistance from The Independent Alcohol Distributors of Nevada, who filed a legal complaint arguing that Question 2 gives liquor wholesalers exclusive rights to marijuana distribution licenses for the first 18 months of cannabis sales in the state.

On Tuesday, a district judge in Carson City agreed, issuing a temporary restraining order, putting the application process on hold.

“The statute clearly gives a priority and exclusive license to alcohol distributors, in order to promote the goal of regulating marijuana similar to alcohol,” the judge ruled.

Tuesdays’ court order means the state cannot issue cannabis distribution licenses to anyone except licensed liquor wholesalers.  A hearing on the temporary restraining order is expected within the next couple of weeks.

Until then, the extent of the impacts and potential delays to the early start program remains unclear.

An attorney representing the Independent Alcohol Distributors of Nevada, Sam McMullen, told the Las Vegas Review Journal that the group’s intent was not to delay retail marijuana sales.

“We just want our rightful place. We don’t want to slow this down inordinately,” McMullen said.

According to a spokesperson for the Department of Taxation, however, only one licensed alcohol wholesaler has applied for a marijuana distribution license.

Distribution licenses cost $15,000 under the temporary regulations that go into effect with the state’s early start program.  Distributors are responsible for transporting marijuana and marijuana products from cultivation and production facilities to dispensaries.

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.

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.

Some existing medical marijuana providers in Nevada, however, question why distributors are even needed, with many dispensaries operating cultivation facilities within or near their retail operations.

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