Las Vegas Sun

September 15, 2019

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Testimony in cannabis licensing case turns to application wording

marijuana

Richard Vogel / AP

A Nevada regulator said Wednesday it would have been a mistake if the state failed to properly instill a voter mandate into a licensing process for retail marijuana businesses. 

Department of Taxation employee Kara Cronkhite said differences between a state statute based off Question 2 — the legalization of recreational marijuana that voters affirmed in 2016 — and an administrative code based off the statute might have caused confusion for license applicants.

Her testimony is part of an ongoing hearing over the grievances of dozens of companies that were rejected for permits to open retail pot stores. Several lawsuits contend the licensing process wasn't transparent and the state picked favored winners. Some maintain the process was unconstitutional, others seek financial damages. Some seek a do-over.

“If the application says what the statute says, but is different than what the code said, would you agree that someone made a mistake?” attorney Theodore Parker asked. 

The code — which was finalized in early 2018 — is what was crafted by the Department of Taxation to put forth retail marijuana regulations based off state law.

“If there was a differentiation, then there could be a possible error,” Cronkhite said.

But Cronkhite said many of the decisions made about the licensure process were above her pay grade as she dealt more with public health issues relating to dispensaries and the training of temporary workers who scored applications.

Lawyers for a group of plaintiffs filed an injunction last month with hopes of bringing the state’s recreational cannabis licensing process to a halt. Last year, the state approved about five-dozen conditional retail cannabis licenses out of a pool of 461.

During day 12 of the hearing on Wednesday, attorneys for the plaintiffs questioned Cronkhite on a set of topics familiar to previous days of testimony.

The topics included whether an applicant should have listed a physical address for a future dispensary, a possible perception of favoritism, and apparent confusion over just who was to be considered an owner of a dispensary. 

At one point, Clark County District Judge Elizabeth Gonzalez agreed with Parker when he suggested that it seemed the Nevada Administrative Code regulations seemed to “fall from the sky.”

Cronkhite, as a number of her colleagues had before her, testified that it was their understanding all along that the department was given leeway in creating the code used to regulate the cannabis industry. 

“Question 2 led to NRS 453D, which is the statute,” Cronkhite testified. “The statute gives the department the authority to create the application for a marijuana facility. (The code) was drafted based on the ballot initiative and the statutes.”

Throughout the 12-day hearing, plaintiff lawyers have questioned whether the department went out of its bounds when engineering the competitive scoring process for 2018 cannabis licenses. 

Questions of possible favoritism from Cronkhite were silenced when she testified that her brother works for a Nevada marijuana business that was denied licensure last year.

Gonzalez appeared annoyed at one point when asking attorneys about how much more time they would need to make their respective cases.

The sides are battling over a lot of money as, from July through March, recreational and medical marijuana sales in Nevada totaled $464 million. For March alone, $59.7 million in marijuana sales were recorded, according to the state.

The hearing is scheduled to resume Thursday and Friday at the Regional Justice Center.

Sun publisher Brian Greenspun was part owner of Essence, one of the defendants in this case.