Las Vegas Sun

March 28, 2024

Proposal could change fortunes for Nevada cannabis businesses

Nature's Chemistry Cannabis Cultivation Facility

Wade Vandervort

Jason Yazdanpanah, co-owner of Natures Chemistry, a cannabis cultivation facility, shows cannabis growth in the vegetation room during a tour Thursday, Dec. 1, 2022.

Nature's Chemistry Cannabis Cultivation Facility

Jason Yazdanpanah, co-owner of Natures Chemistry, a cannabis cultivation facility, shows cannabis growth in the flower room during a tour Thursday, Dec. 1, 2022. Launch slideshow »

When Steve Cantwell heard his ticket number read during Wednesday’s Cannabis Control Board meeting, it was as if the Pahrump-based business owner had won the lottery.

And he did, kind of. The co-owner of Green Life Productions, one of the state’s top marijuana cultivators, was awarded one of 10 licenses to open a cannabis lounge — a huge get for a company of about 40 people, he said.

Last week’s news was the silver lining of an otherwise crummy year, Cantwell said. Between inflation, rising costs and stiff competition from all sides, this has been the worst year for his margins since the business formed in 2014.

“I think the industry has seen the worst profit loss to date, without a doubt,” Cantwell said. “But from what we’re seeing, it’s going back up.”

That was before the cannabis consumption lounge was thrown into the mix. The license itself costs $10,000, and finding capital to actually fund a new brick-and-mortar building will pose its own challenge, Cantwell said.

To make matters even more difficult, it has to be done exclusively through cash transactions, as cannabis companies are barred from the U.S. banking system and have zero access to federal loan programs like those authorized by the Small Business Administration.

But late last month, U.S. Sen. Jacky Rosen, D-Nev., introduced the Fair Access for Cannabis Small Businesses Act, which would allow certain loan programs offered by the SBA to be made available to cannabis-related businesses and other entities that provide goods or services to cannabis companies.

The bill also features provisions that would give small cannabis businesses access to disaster loans serviced by the government, as well as allow venture capital firms and other small business investment companies to provide unsecured loans to the cannabis industry. Because marijuana is still prohibited federally, cannabis companies are widely barred from the U.S. banking system, and do not have access to any federal loan programs.

Rosen pointed out the barriers posed by the SBA, which forbids any loan used by companies that make direct or indirect products or services that aid in the use, growth or enhancement of cannabis from accessing programs such as PPP loans, which covered payroll for companies in the early stages of the coronavirus pandemic.

“The unfair barriers to basic federal support and resources have hurt our state’s legally operating cannabis small businesses,” Rosen said in a statement. “This legislation will level the playing field so that cannabis small business — including those owned by people of color, women and veterans — have access to the same federal resources and loans that other legal businesses are entitled to.”

That’s music to the ears of Andrew Hitchcock, a co-owner of the Las Vegas-based cannabis cultivator Nature’s Chemistry, as well as others who say if this comes to fruition it could provide critical relief.

“Safe banking will be crucial for us, an absolute game-changer,” Hitchcock said, adding that access to loans and venture capital could help expand Nature’s Chemistry beyond just cultivation. “We’ve attempted to buy a retail location, but the licensing is at such a price, to buy one would crush us because we would put every penny from our cultivation and our dispensary to our debts.”

Hitchcock said that to recreational and medicinal consumers alike, the industry here appears to be in great shape: prices are relatively low, and gone are the days of picking up dime bags from local dealers. Marijuana consumers by and large conduct most of their business nowadays at brick-and-mortar dispensaries — though it comes at the cost of state and local excise taxes.

But locally owned operations like those owned by Cantwell and Hitchcock are facing pressure from customers to keep up supply and keep costs low, while simultaneously facing competition from larger, out-of-state conglomerates that have made expanding business nearly impossible.

Compounded by burdensome regulations set by lawmakers in Carson City and at the county level, Hitchcock and Cantwell said it feels like their businesses are in a stranglehold. And that doesn’t even account for black market sales that skirt regulators and undercut the legal shops adhering to the rules, they said.

If something doesn’t give soon, Hitchcock says, he and his co-owners might be left with no other choice than to reduce staff hours or make layoffs.

“When we started, we wanted to make this what we wanted it to be,” said Hitchcock, who started Nature’s Chemistry in 2016 with three friends from high school. His facility in the northeast valley has cultivated thousands of plants. “Now, we’re being forced into a corner.”

Tina Ulman, president of the Chamber of Cannabis in Las Vegas, said her organization supports the legislation because it will continue to grow commerce and opportunities in the budding industry. More than 62 companies from across Nevada belong to the chamber, Ulman said, and she said many would stand to gain should Rosen’s bill become law.

“This bill would give small businesses access to capital that they otherwise wouldn’t have,” she said. “It will even the playing field to allow for a more diverse ownership base that is reflective of those who respect and use the plant. Traditional market operators will now have an opportunity to enter into the industry as well.”

The bill at least appears to have piqued the interest of other lawmakers. Tim Zink, press secretary for Sen. Ben Cardin, D-Md., who is chairman of the Small Business and Entrepreneurship Committee, told the Sun the senators are working together to pave a path for the bill.

“Sen. Rosen has been a leader on the issue this Congress,” Zink wrote in an email. “As chair of the Senate Small Business and Entrepreneurship Committee, Sen. Cardin has been working with Sen. Rosen and with caucus leadership to find an appropriate vehicle to move forward (with) these provisions.”

Rosen’s bill isn’t the only legislative action being taken to help modernize business practices in the cannabis sector, either. In October, Biden effectively decriminalized marijuana federally and issued pardons to anyone convicted of a federal simple marijuana possession.

When he made the announcement, Biden said he asked Attorney General Merrick Garland and Department of Health and Human Services Secretary Xavier Becerra to review marijuana’s designation as a Schedule I controlled substance, similar to heroin and LSD.

In April, the House passed the SAFE Banking Act of 2021, which would allow banks to provide services to cannabis businesses, with sweeping bipartisan support, clearing the House 321-101. That bill was introduced in the Senate in March, and was introduced to the Senate Committee on Banking, Housing and Urban Affairs in September.

Rosen’s office couldn’t say if her bill would be packaged with a similar measure, like the SAFE Banking Act. But even the possibility of the U.S. government voting on these bills shows how the cannabis industry has legitimized itself in recent years, Ulman said.

And, much like Hitchcock, she’s holding out hope that relief for businesses is in the not-too-distant future.

“This bill would be a game-changer for business models and impact growth,” Ulman said. “Innovative ideas die every day in cannabis because people lack capital to execute on them. This bill would further legitimize an industry that is contributing millions in tax revenue to its communities, employing hundreds of thousands nationwide and providing plant medicine to those in need.”