In the first three days after Nevada dispensaries began selling marijuana under the state’s new legislation permitting recreational use of the substance, the state’s 47 pot stores pulled in a combined $3 million dollars in revenue.
Nobody anticipated the demand. Now, just ten days after marijuana went on sale at midnight on July 1, the supply at the dispensaries is all but depleted, and at the urging of Nevada’s taxation department, Governor Brian Sandoval has called for a “state of emergency” which would ease regulations halting distribution.
In a concession to the liquor industry, which feared legal marijuana would hamper alcohol sales, legislators agreed to give alcohol wholesalers exclusive rights to distribute marijuana over the first eighteen months of legal sales. Only licensed distributors can “transport marijuana from cultivation and packaging facilities to the dispensaries.”
However, under state law, marijuana distributors must meet a number of regulative requirements. According to Stephanie Klapstein, a spokeswoman for Nevada’s Department of Taxation, “most [potential distributors] don’t yet meet the requirements that would allow us to license them.”
As a result, not a single distribution license has been issued.
The governor’s “state of emergency” measure would temporarily allow entities outside of the liquor industry to “distribute” marijuana. The Nevada Tax Commission will vote on it Thursday.
A host of businesses across the state have been transporting medicinal marijuana since it was introduced in Nevada in 2001. But, under the new recreational legislation requires dispensaries to get one hundred percent of their product—recreational as well as medicinal—from alcohol wholesalers.
Nevada Marijuana in Short Supply Just Ten Days After Legalization
Though it is unclear exactly how Sandoval’s “statement of emergency” will “expand the pool of potential distributors,” as Marketwatch’s Mike Murphy says it will, the most efficient approach may be to allow the businesses that handled the distribution of medical marijuana to become operational again.
That was, in fact, the original plan, before the alcohol industry won exclusive distribution rights in a last minute court scuffle.
The concerted effort the government is making to get pot back on the shelves may be hard to believe after decades in which politicians and law enforcement have done everything they could to keep marijuana out of people’s hands, but marijuana is fast becoming an indispensable source of revenue for the Nevada government.
A 25% tax on marijuana cultivation helps to fund Nevada’s school system, and an additional 10% sales tax goes directly to the government, with no hard and fast rules as to how it must be spent.
Of the $3 million in revenue Nevada’s marijuana industry generated over July 4th weekend, $1 million went to the government.
But Klapstein warns that the regulative bottleneck in the supply chain could have dire business consequences as well, perhaps extinguishing Nevada’s marijuana industry before it even gets smoking.
“The business owners in this industry have invested hundreds of millions of dollars in building facilities across the state. They have hired and trained thousands of additional employees to meet the demands of the market. Unless the issue with distributor licensing is resolved quickly, the inability to deliver product to retail stores will result in many of these people losing their jobs and will bring this nascent market to a grinding halt,” Klapstein says.
Even if the red tape is cut, the marijuana shortage in Nevada could persist in the short term. Many cultivators in the state are between harvest cycles. Until their plants begin yielding flowers again, they will be unable to resupply marijuana retailers, regardless of bureaucratic obstacles or lack thereof.
This November, four states—California, Massachusetts, Maine, and Nevada—voted to legalize recreational marijuana. All but Nevada chose to take a full year to decide how to best implement the voters’ wishes.
Nevada, on the other hand, hurried to complete marijuana legislation by the end of the 2017 legislative session. Now, consumers, businesses, and the government are all paying the price for the rush to get marijuana on the shelves.
Any stoner could have told the politicians not to move so quickly.