Nevada Up Close: State Opens Recreational Sales, Faces Cannabis Shortage

The past week alone has seen Governor Brian Sandoval signing emergency regulations to keep retail sales going, state officials declaring a State of Emergency as the supply threatened to run out and the first marijuana distributor finally licensed.

Melissa Schiller

July 17, 2017

It has been a tumultuous two weeks for Nevada’s newly legalized recreational market.

Governor Sandoval signed emergency regulations Friday, July 7, that would keep sales going despite the dispensaries quickly selling out of their existing supply due to the legal fight over distribution rights, according to the Las Vegas Review Journal. The regulations, approved by the Nevada Tax Commission on July 13, allow state officials to grant distribution licenses to other marijuana businesses and not exclusively to licensed liquor wholesalers, as mandated in the ballot question presented to Nevada voters when they legalized adult-use in November 2016.

Wednesday evening, July 12, Nevada’s marijuana industry had received long-awaited news that Blackbird had become the first licensed marijuana distributor since early recreational sales began, according to The Kansas City Star. The company was immediately permitted to begin transporting marijuana, easing the supply shortage for the nearly 50 dispensaries in the state.

Blackbird has been operating as a logistics and delivery company for medical marijuana, which has been legally sold in Nevada since 2014, reported CNN. The company obtained a liquor license in order to begin transporting legal recreational cannabis, as well, and their official licensing as a recreational distributor will help ease Nevada’s immediate shortage, although more licensed distributors are needed to supply the state’s large demand, per CNN.

Although only licensed wholesale alcohol distributors were eligible for licenses to transport recreational marijuana for the first 18 months of recreational sales, the Department of Taxation opened the application process up to medical marijuana businesses in March after reaching out to alcohol distributors in November and citing “insufficient interest” from them in terms of getting involved in the industry. A group of alcohol distributors then came forward, demanding their exclusive rights to distribution as promised, and Carson City District Judge James Wilson upheld their argument, issuing an order that prevented the state from granting any recreational distribution licenses until the conflict was resolved.

The emergency regulation Governor Brian Sandoval signed on June 22 gave medical marijuana dispensaries in the state the ability to sell their existing inventory in the recreational market starting July 1 in an early launch of the recreational program. The full program won't be rolled out until Jan. 1, 2018.

Forty-four dispensaries were authorized to begin selling recreational marijuana at 12:01 a.m. on July 1, and according to The Washington Times, hundreds of customers lined up outside the shops, including former mayor of Las Vegas Oscar Goodman and current State Senator Tick Segerblom, who were among the first to purchase legal cannabis at Las Vegas’ ReLeaf.

After Nevada issued the State of Emergency due to the supply shortage at dispensaries, Fox News reported that the state is continuing to work with the liquor distributors to get them licensed, but many of them simply do not meet the requirements necessary.

According to the Kansas City Star, seven liquor dealers have pending applications for a marijuana distributor license. But according to CNN, only one other alcohol distributor has been approved to distribute recreational cannabis (Rebel One), while a third license is pending.

In a statement to NBC, Senator Segerblom indicated that even though dispensaries are running out of product, no one has completely exhausted their supply yet, and sales are still taking place for the time being.

In the Department of Taxation’s official Statement of Emergency, the department's executive director, Deonne Contine, stated, “The business owners in this industry have invested hundreds of millions of dollars to build facilities across the state. They have hired and trained thousands of additional employees to meet the demands of the market. Unless the issue with distributor licensing is resolved quickly, the inability to deliver product to retail stores will result in many of these people losing their jobs and will bring this nascent market to a grinding halt.”

Nevada tax officials estimate adult-use sales in the state to generate $100 million in revenue over the next two years, according to NPR. In the Department of Taxation’s Statement of Emergency, Contine added that changes to the regulations are necessary in order to prevent marijuana customers from purchasing product from the illegal market and to support the new businesses that have been created around legal recreational sales.