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The booze industry is messing up Nevada’s legal weed supply chain

As of July 3, there weren't any licensed marijuana distributors in the state.

by Josh Marcus
Jul 5 2017, 4:16pm

Green fireworks lit up the sky above Las Vegas over the weekend to celebrate two occasions: the Fourth of July and the start of recreational marijuana sales in Nevada.

The new law took effect at midnight July 1 after Nevada voters had legalized recreational weed via a ballot initiative last November. Long lines formed at dispensaries across the state, and retailers were well stocked to meet the demand, thanks to concerns about an ongoing court battle over who has the right to transport legal weed from growers to stores. Depending on the outcome, Nevada dispensaries could run out of recreational weed right after selling it for the first time.

“We’ve had to acquire a tremendous amount of product and store it at our facility before July 1 because we don’t know when this issue will be resolved,” said Armen Yemenidjian, owner and CEO of Vegas-based Essence Cannabis Dispensary.

At the end of June, dispensaries started stockpiling product in preparation for weeks or even months without new deliveries. They were given one-time permission to take their stores of medical marijuana and sell them for recreational use. Now that the state has hit its July 1 opening date, however, dispensaries will need to replenish their supplies using a licensed distributor of recreational cannabis. And as of now, according to industry sources, there weren’t any operating in the state. The Nevada Department of Taxation, which oversees the licensing, did not respond to a request for comment.

After legalization, Nevada state regulators wanted to treat pot like alcohol and decided that for the first 18 months of sales, only licensed liquor distributors could transport recreational pot from cultivators to dispensaries.

But the Department of Taxation soon saw there wasn’t enough interest among liquor companies, so the agency opened up the application process to other types of businesses. After that, the Independent Alcohol Distributors of Nevada, the industry group for liquor distributors, sued in state court, arguing that this move violated the state’s original policy.

At the end of May, a judge in Carson City ruled on behalf of the liquor distributors, allowing them to maintain their transport monopoly, at least for now. Questions remain about the specifics of licensing, and the tax department plans to challenge the decision at a later date, although when hasn’t been announced.

Andrew Jolley, president of the Nevada Dispensary Association and CEO of The Source dispensary, said a number of legal questions still remain about involving liquor distributors, such as how moving marijuana could affect their federal liquor license. But he remains optimistic that a number of distributors are on the cusp of getting licensed.

In the meantime, Nevada’s legal, recreational weed is selling for around $80 per “eighth” (3.5 grams) — more than four times the price in other states.

Resolving these supply-chain issues is a big state priority: Nevada’s recreational marijuana industry is expected to generate $60 million in annual tax revenue over the next two years.

“This is the new Amsterdam,” Nevada Democrat Sen. Tick Segerblom told the Las Vegas Review-Journal. “This is the new Denver.”

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