Las Vegas, NV – Ever since recreational cannabis was legalized for retail sale a few weeks ago, dispensaries have had difficulty maintaining their stock and say they will run out if the broken supply chain is not fixed.
“We didn’t know the demand would be this intense,” Al Fasano, co-founder of Las Vegas ReLeaf, told the Los Angeles Times. “All of a sudden you have like a thousand people at the door… We have to tell people we’re limited in our products.”
TFTP spoke to a dispensary owner in Nevada who explained that there is plenty of cannabis to go around. However, thanks to the alcohol distributors — who aren’t distributing the cannabis — the dispensaries have no product.
With roughly 100 grow operations across the state of Nevada there is no lack of wholesale cannabis, however. The burgeoning retail pot shortage stems from state rules regarding who is allowed to transport marijuana from the growers to the retail outlets.
After recreational marijuana was overwhelmingly approved in a referendum, the state’s powerful alcohol lobby – fearing that legalized weed would cut into liquor sales – forced a stipulation on the ballot measure mandating that for the first 18 months of cannabis sales, only distributors of alcohol would be allowed to transport the product from grow facilities to retail dispensaries.
According to a report by the Los Angeles Times:
“When legalization took effect July 1, nearly 50 dispensaries — all of them already in the medical marijuana business — had been licensed to sell recreational pot. But no alcohol distributors had been approved to transport it.
The state Department of Taxation, which regulates legal marijuana, said it had received about half a dozen applications from alcohol distributors but that none had so far met the state licensing requirements, which include background checks and security protocols.
As a result, the dispensaries have had to rely on marijuana already in stock…
To mitigate this growing crisis declaring a state of emergency late last week, the state Department of Taxation warned that “this nascent industry could grind to a halt.
As bad as that would be for marijuana consumers and the pot shops, the state has another concern: tax revenue. A 10% tax on sales of recreational pot — along with a 15% tax on growers — is expected to generate tens of millions of dollars a year for schools and the state’s general fund reserves.”
In anticipation of the problems stemming from the lack of alcohol distributors approved to transport cannabis, the Department of Taxation attempted to loosen the regulations surrounding transport to allow dispensaries to transport their own marijuana in June.
The alcohol industry coalition immediately challenged the move to loosen the regulations in District Court, with the judge siding with the alcohol lobby, and arguing that the state needed to go through a regulatory process to determine the number of distributors necessary. The state subsequently appealed the District Court decision to the Nevada Supreme Court.
Prior to that case being heard by the Nevada Supreme Court, the Department of Taxation proposed emergency regulations to expand the pool of potential distributors.
Gov. Brian Sandoval, who was against legalization, authorized state officials to hold a hearing to establish emergency reforms, including speeding up the review process for transport licenses and allowing cannabis companies to move pot if they meet certain requirements. Before the new rules were approved on July 13, Gov. Brian Sandoval signed an emergency statement saying,
“Without the retail sale of marijuana, the state will not realize the revenue on which the state budget relies.”
The state dispensary association estimated that in the first four days of legalization customers bought between $3 million and $5 million worth of pot, according to the Los Angeles Times.
Deonne E. Contine, executive director of the Department of Taxation, wrote in the emergency declaration that the legal marijuana industry would be unable to function “unless the issue with distributor licensing is resolved quickly.”
In all the other states in the U.S. where recreational cannabis is legal — Colorado, Oregon, Washington and Alaska — dispensaries are allowed to transport pot, without any special privileges bequeathed upon the alcohol industry.
“It is important that the distribution issue gets resolved, because if it is not sales will be halted completely,” said Riana Durrett, executive director of the Nevada Dispensary Assn., a nonprofit that advocates on behalf of the retail cannabis industry.
A Nevada judge denied a subsequent request from the alcohol distributors coalition to stop the recently approved emergency regulations that allow the state to license some retailers to transport marijuana from growers to storefronts.
Carson City District Judge James Todd Russell heard arguments before citing the state’s position that the rules are protecting state tax revenue, the Las Vegas Review-Journal reported.
Attorney Kevin Benson, who represents the alcohol distributors coalition, said there is no emergency that requires rules to allow anyone other than the alcohol wholesalers to distribute pot.
“Because the department itself is at fault for creating the situation that it now claims is an emergency, it cannot use that as a basis to short-circuit the rule making process,” Benson said in his filing.
The alcohol distributors group will now attempt to convince regulators that there is no shortage of liquor distributors interested in moving marijuana and the industry should keep the exclusive distribution rights for the next 18 months, Benson said.
To put things in perspective, the powerful alcohol lobby forced its way into having control of the wholesale distribution of cannabis from growers to retail shops. Once in a position of power, they have essentially used their position to slowly choke the life out of the legal recreational cannabis industry by failing to do what they have exclusive rights to do – transport cannabis from growers to retail stores.
Make no mistake that big alcohol is attempting to run a racket to marginalize their competition, and using their influence within the halls of government to secure their product’s position and marginalize the viability of recreational cannabis in Nevada.