Las Vegas Sun

June 16, 2019

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Ruling on Nevada recreational pot extends clash of liquor lobby, medical dealers

Gustavson

Scott Sonner / AP

Nevada state Sen. Don Gustavson, R-Sparks, smells a sample of marijuana, Friday, March 24, 2017, as Christopher Price, a ”budtender” at the Blum medical marijuana dispensary, describes the operation during a brief tour a the store on Virginia Street, about a mile south of the main casino district, in Reno.

Updated Tuesday, June 13, 2017 | 7 p.m.

If Nevada officials have their way, tourists and residents will be able to buy pot legally ahead of Independence Day.

But before recreational marijuana launches in the state best known for slot machines and showgirls, a judge must decide who has the right to distribute Nevada's newest cash crop.

The powerful liquor lobby and state-regulated medical marijuana dealers are fighting over who should be licensed to do that. Nevada is the only legal pot state where alcohol distributors were given the first shot at distribution licenses under the law that voters approved in November.

However, Nevada's Department of Taxation said in a draft regulation in March it had determined interest wasn't high enough among alcohol distributors, so it has the authority to allow existing medical marijuana shops to provide pot to retailers already qualified to sell it. The system would be used until permanent regulations are put in place on Jan. 1, 2018.

The department revised its final regulation in May to reflect it had not yet formally determined there was "insufficient" interest among existing holders of alcohol distribution licenses. But the alcohol distributors said the writing already was on the wall and filed suit, arguing they get first dibs.

On Tuesday, Carson City District Judge James Wilson rejected the state's request to throw out the lawsuit. He said he'll hold a daylong hearing Monday intended to resolve the dispute that could throw a wrench into plans to launch Nevada's first sales of pot for recreational use on July 1 at existing medical dispensaries.

In the meantime, Wilson left in place a temporary restraining order he issued May 30 prohibiting the issuance of any marijuana distribution licenses.

The judge stopped short of saying he intends to issue a permanent ruling from the bench on Monday, but when the possibility of a continuation was raised, he said the important issue needs to be resolved quickly.

Kevin Benson, a lawyer for the Independent Alcohol Distributors of Nevada, said the tax department exceeded its authority when it decided there was insufficient interest among alcohol distributors based an undisclosed methodology.

He said the state's action "illustrates the fact that the entire process was rushed to the point that it was intentionally designed to prevent alcohol distributors from having a fair opportunity to apply and qualify for an exclusive license."

Chief Deputy Attorney General William McKean countered, "There's nothing the Department of Taxation has done to stop them from applying" for marijuana distribution licenses.

Las Vegas dispensary owners called the judge's decision “expected,” adding that while they’re against the ruling, the hearing next Monday on whether the alcohol distributors will receive a preliminary injunction will be more telling.

"Of course it would have made us happy if the judge dismissed the lawsuit today, but nobody really expected that,” said Nevada Dispensary Association President Andrew Jolley. “It would have been a pretty heavy-handed thing to throw that out.”

Jolley and Essence Cannabis dispensary President Armen Yemenidjian said they felt confident that next week’s hearing on whether to issue an injunction will ultimately work in favor of marijuana companies wishing to distribute their own weed. Liquor distributors in Nevada, whose licenses are issued federally through the U.S. Alcohol and Tobacco Tax and Trade Bureau, have proposed establishing separate business entities for marijuana distribution to avoid jeopardizing their federal alcohol distribution licenses.

“I don’t really think they have a case here," Yemenidjian said. “No one is really panicking."

The dispensary owners agreed that if the liquor companies are in fact issued the injunction next week, the scheduled July 1 start date for recreational marijuana sales would likely be delayed.

The Nevada Cannabis Coalition said alcohol distributors are complaining that they are not being guaranteed a monopoly over marijuana distribution. It says any delay in licensing could cost the state millions of dollars a month in tax revenue earmarked for schools.

The taxes signed into law this month are projected to raise $120 million in revenue over two years.

Colorado, another legal pot state, bars people from holding alcohol and marijuana licenses.

Washington didn't have a medical pot program before legalizing recreational marijuana and now requires all pot business to be licensed by its state Liquor Control Board.

Sun reporter Chris Kudialis contributed to this report.