Because having zero licensed distributors could kill the industry's high projections.
Here’s a weed problem: If Train A, carrying 47 Nevada pot dispensaries, and Train B, carrying zero distributors, leave the station at the same time, when will they reach a distributor-to-dispensary ratio that keeps the $30 million sales projections for the state’s brand new marijuana industry intact?
That’s what Nevada’s Tax Commission will be figuring out during a hearing on Thursday at 1 p.m. PT, just 12 days after recreational marijuana became legal in the state. At stake will be alcohol wholesalers’ monopoly on eligibility to transport marijuana from growers to dispensaries, an issue that’s so far stymied sales of pot in the state.
The Nevada Tax Commission said only a handful of alcohol distributors had applied by the deadline and that to satisfy what was expected to be strong demand, they must open distributor eligibility to other entities. When the state’s alcohol wholesalers heard that, they sued. Their argument was that they would be irreparably harmed if they were shut out of the business.
A judge ruled in favor of the liquor distributors, but dispensaries are really feeling the post-legalization rush with no way to restock.
The hearing will hinge on one question: Since 47 dispensaries and no distributors obviously won’t work, what is an ideal ratio? Some liquor distributors have claimed just one licensed alcohol distributor could serve the entire market, but government officials weren’t convinced.
Best case scenario for tomorrow is that the commission decides to adopt new rules allowing other entities to apply for distribution licenses, said Neal Gidvani, senior counsel in financial services and cannabis law at Greenspoon Marder.
“I think the department of taxation understands that now there’s a national spotlight associated with the meeting,” he said. “The fact that we’re already recreational and it’s been rolled out for 12 days and now dispensaries are saying they’re going to run out of product because of bureaucratic missteps is not what Nevada wants.”
But the red tape could hold up the process for much longer. If things are to change, the state must appeal the earlier ruling, which stops the agency from allowing non-alcohol wholesales from becoming distributors.
Nevada’s Supreme Court will accept briefs for the case for a 50 day period. That’s much longer than most dispensaries anticipated having to wait between deliveries.
“We spent a ton of money on marijuana [prior to July 1],” said Nick Shook, who runs operations at The Apothecary Shoppe in Las Vegas.
He hopes this will be enough to keep selling until the next chance to restock, but holding a 30 or 40 day supply puts dispensaries in a vulnerable position — it’s public knowledge that they’re storing hundreds of thousands of dollars of inventory while they wait for a resolution.
“People within the industry understand that the rollout is going to be absolutely critical, ”Gidvani said. While 61% of Americans support legalizing cannabis and 85% favor medical marijuana use, others — notably Attorney General Jeff Sessions — are skeptical at best and vehemently opposed at worst.
It’s worth noting the government isn’t entirely without support for the push to legalize marijuana. A group of representations from California, Alaska, Oregon and Colorado launched the Congressional Cannabis Caucus earlier this year.
“It definitely still worries me at night that we’re doing something our Department of Justice and our Attorney General says is illegal,” Shook said. “I lose sleep over it.”
Both Gidvani and Shook hope that Nevada’s model — once the state picks out the seeds and stems — will be one that other legislatures can look to as additional states pass bills to legalize recreational marijuana.