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May 18, 2021

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Nevada judge rules state marijuana licensing process can go ahead


John Locher / AP

This April 16, 2018, photo shows the Essence cannabis dispensary in Las Vegas. A Nevada judge ruled Thursday, Sept. 3, 2020 that some new retail marijuana stores can open, some applications for licenses can be reviewed again by state officials and some companies that were denied licenses in December 2018 still won’t get a permit.

Updated Thursday, Sept. 3, 2020 | 11 p.m.

A Nevada judge ruled Thursday the state's marijuana licensing process can resume, with some new retail marijuana stores allowed to open, some applications for licenses reviewed again by state officials and some companies still denied the licenses they didn't get in December 2018.

The 30-page ruling in what Gov. Steve Sisolak characterized as “a very difficult, complex case” is almost certain not to have settled the contentious two-year legal fight involving dozens of parties over who can open pot shops in the lucrative Nevada market.

Judge Elizabeth Gonzalez acknowledged several times during the litigation — including more than a month of recent hearings conducted with attorneys widely spaced in an expansive Las Vegas Convention Center meeting hall to avoid spreading the coronavirus — that she expected her decision will be appealed to the state Supreme Court.

But state Attorney General Aaron Ford interpreted her ruling as a victory because it didn’t order a do-over of the licensing process begun when 462 applicants sought 64 new licenses in September 2018.

State taxation officials awarded 61 licenses, subject to local zoning conditions, bringing to 125 the number of recreational marijuana dispensaries allowed statewide. No applications were sought in three rural counties.

“This decision upholds the results of that competition,” Ford said. “It will enable retail marijuana stores to open and generate much-needed tax revenue and employment for Nevadans in this unprecedented time.”

Attorneys for several plaintiffs, defendants and involved parties did not immediately respond to requests for comment.

Officials with the new state Cannabis Compliance Board acknowledged the ruling with a statement saying the panel would review it.

Some winning applicants with plans to reopen will remain on hold pending background checks of officers, under Gonzalez’s ruling.

The judge did not say laws were broken, despite allegations by attorneys for some companies, and she did not specify who should now get a license or not.

Gonzalez did fault Jorge Pupo, former Department of Taxation deputy director and the official who headed marijuana licensing at the time, for deleting text messages and being unable to provide his cellphone for examination for evidence at trial.

Other evidence showed that evaluation rules were changed after Pupo met with an industry lobbyist, and that some applicants were notified of changes, but not others.

“The degree of direct personal contact ... provided unequal, advantageous and supplemental information to some applicants and is evidence of a lack of a fair process," Gonzalez concluded.

However, her order did not put anyone on the hook to pay damages to anyone, “given the speculative nature of the potential loss of market share.”

The judge’s order echoed her preliminary findings a year ago in a ruling that prevented all but a handful of new marijuana dispensaries from opening.

She declared the state Department of Taxation acted “arbitrarily and capriciously” and went “beyond its scope of authority” to change evaluation rules by lifting a requirement that every prospective dispensary owner, officer and board member undergo a background check.

The initiative that Nevada voters passed in November 2016 to legalize recreational marijuana sales to adults 21 and older explicitly required such a screening.

Medical marijuana use had been legalized by ballot initiative in 2000.

Tax data show the 71 medical and recreational dispensaries currently operating statewide reported nearly $685 million in taxable sales and Nevada reaped more than $105 million in marijuana taxes in the fiscal year ending June 30.

The appointed Cannabis Compliance Board began work July 1 overseeing, regulating and administering the state’s booming pot sales market. It is headed by former Nevada Supreme Court Chief Justice Michael Douglas.