OOZE, GAMBLING, STRIPPERS, buffets… Las Vegas is famous for indulgence on the grand scale. Go big or go home. So it should come as no surprise that denizens went all out for legal cannabis, to the point of smoking up the city’s supply and leaving retailers in a quandary.
Nevada made international headlines in July when Governor Brian Sandoval declared a state of emergency due to weed shortages. The shortage was the result of massive demand during the first weekend of sales, which commenced on July 1. Tax officials estimate that the 47 licensed weed shops did over 40,000 transactions, generating $3 million in sales revenue. In Vegas, lines of revelers stretched around blocks, with retailers reporting that sales were double the number they’d hoped for. But supplies quickly dwindled, causing panic.
Crop failure was not the issue. The glitch was Nevada’s supply chain. While writing the Nevada Marijuana Legalization Initiative (otherwise known as Question 2), cannabis advocates threw a bone to the liquor industry. In addition to fairly typical regulations regarding the legalization of recreational cannabis, the act gave liquor distributors the sole right to distribute recreational product—meaning that liquor distributors would be responsible for transporting the weed from the grower to the dispensary.
If you look at a list of corporations and industry groups that oppose legalization across the U.S., you’ll find it dominated by booze and casino interests. Given that liquor and gambling put Vegas on the map, it’s no surprise that cannabis advocates were particularly keen to placate the industry giants. But they didn’t foresee that the liquor distributors would drag their feet about applying for cannabis distribution licenses.
By the May 31 deadline, only four liquor distributors had applied for recreational cannabis distribution licenses, and evidently they didn’t do a great job with the applications. The tax department noted that these distributors were not granted licenses due to “various reasons, including local government issues, lack of completed applications and zoning review…”
By June, the distribution issue still wasn’t settled, but medical dispensaries with retail licenses would soon be able to sell their stock as recreational…until it ran out.
(After July 1, dispensaries would be able to restock their medical supplies but would no longer be able to restock weed that would be sold as recreational.) Dispensary owners stocked up on medical cannabis and hoped for the best—eyeing their stuffed storerooms and wondering just how fast Nevadans can smoke. Industry insiders initially estimated they had enough weed to serve the recreational market for a month or two, but consumers proved them wrong.
In declaring a state of emergency, the governor’s concern was not jonesing stoners but rather the new state budget, which is heavily reliant on the taxation of recreational cannabis. Over the next two years, Nevada tax officials expect to collect $100 million from the cannabis industry. “Without the retail sale of marijuana, the state will not realize the revenue on which the state budget relies,” the emergency statement read, also noting that empty stores would be forced to close, resulting in employees losing their jobs and causing “this nascent industry to grind to a halt.”
The state of emergency was issued by the Nevada Department of Taxation, and endorsed by the governor as part of an ongoing battle between liquor interests and tax collectors. Earlier in the year, the tax bureaucrats had proven themselves unlikely allies to cannabis enthusiasts. Question 2 mandated that recreational sales commence in 2018, but the tax commission clearly did the math on potential tax revenue and pushed for an earlier sales date. In May, the Department of Taxation approved regulations that allowed sales to begin on July 1, 2017. Stoners rejoiced. The new regulations would have allowed medical facilities to deliver to recreational retailers, neatly solving the distribution problem. But the booze industry reared its head and tried to vanquish its age-old enemies— the revenuers. Members of the Independent Alcohol Distributors of Nevada sued and won sole distribution rights for recreational cannabis. Then, through incompetence or trickiness, they didn’t utilize the rights, resulting in empty stockrooms across the state.
The trusty tax commission retaliated by declaring a state of emergency and using it as grounds to change the rule. After a contentious open hearing that erupted into an argument between dispensary owners and irate liquor distributors, the commission voted unanimously to approve a loosening of regulations that would open doors to new distributors, and allow some retailers to transport cannabis from farms to stores.
But it didn’t end there. The liquor distributors fought back, claiming, “…the department itself is at fault for creating the situation that it now claims is an emergency, it cannot use that as a basis to short-circuit the rule making process.” Their case was heard by Carson City District Judge James Todd Russell, who had initially expressed skepticism about the need to declare a state of emergency. But after a 90-minute hearing, Russel denied the liquor distributors’ request.
In mid-July, the state began issuing licenses to distributors, and retailers and consumers exhaled in relief, saved from a dry spell by unlikely bureaucratic allies.