The marijuana shortage which befell Nevada’s dispensaries after they sold over $3 million worth of marijuana in the first weekend of sales will be eased by a measure passed by the state’s tax commission Thursday to increase the number of entities who can distribute weed, Grace Donnelly of Fortune reports.
After hearing arguments from dispensary owners and alcohol wholesalers concerning whether the alcohol industry was equipped to handle the distribution of marijuana, the commission voted unanimously to pass legislation that will permit businesses outside of the liquor industry to apply for distribution licenses. Presumably, the state’s former medical marijuana distributors, some of whom have been operating for upwards of a decade, will be the first to apply.
But Neal Gidvani, who works in finance and cannabis law at Greenspoon Marder, a law firm that handles marijuana related cases, warns that the legal battles between the alcohol industry and the cannabis industry are just beginning.
“Early indications are that alcohol distributors will challenge the decision,” Gidvani told Fortune. The alcohol distributors really want exclusive rights, not just the ability to apply and compete in an open marketplace.”
Whatever they may want, though, alcohol companies must prove they are capable of delivering a massive supply of marijuana to dispensaries striving to fill an even more massive demand. The first weekend of pot sales in Nevada saw 40,000 retail transactions, Donnelly says. That means over 850 deals took place at each of the state’s 47 dispensaries, on average. In other words, a lot of Nevadans want to exercise their newly-gained legal right to purchase and use marijuana.
But at the moment, only two alcohol companies in Nevada are licensed to distribute weed. One of them, Crooked Wine Co., has contracted day-to-day distribution operations out to Blackbird, a company that distributed medical marijuana before the recreational legislation transferred all distribution responsibilities—medical and recreational—to the alcohol sellers.
Rebel One, a wholesale liquor distributor based in Las Vegas, received the second license. The company has made no public comment as to how it intends to perform distribution, but it would do well to emulate Crooked Wine and hand the duties over to a former medical marijuana distributor.
Most alcohol distributors, it seems, are uninterested in distributing marijuana. The Nevada Tax Commission garnered only “lukewarm interest” when it began inquiring as to whether alcohol distributors would be willing and able to distribute weed, Colton Lochhead of the Las Vegas Review Journal reports. On May 31, the original deadline by which distributors were expected to apply, Nevada Tax commission spokeswoman Stephanie Klapstein told Lockheed just one alcohol company had sought for a marijuana distribution license.
Lochhead points out that alcohol distributors are “licensed on the federal level, where marijuana remains illegal,” and that by engaging in the distribution of weed, the alcohol companies might jeopardize their alcohol distribution licenses. Nevada Attorney General Jeff Sessions’ opposition to marijuana legalization—despite overwhelming support for both recreational and medicinal marijuana use amongst his state’s voters—does not help anybody’s confidence.
“It definitely still worries me at night that we’re doing something our Department of Justice and our Attorney General says is illegal,” Nick Shook, who runs a dispensary in Las Vegas, told Donnelly. “I lose sleep over it.”
And with the dispensary shelves drying up, anxious marijuana sellers like Shook cannot afford to dip into their own product to alleviate the worries.
Still, there is plenty of support for Shook’s business within the Nevada government. Governor Brian Sandoval, who declared a state of emergency to help open legislative pathways toward increased marijuana supply, has budgeted $70 million in anticipated tax revenue from marijuana sales to the state’s public school system.
“It’s our responsibility to make sure that we’ve licensed enough people in our market, that’s what we have to do. Our job is to license folks and to bring in the tax dollars,” Klapstein told Jenny Kane of The Reno-Gazette Journal.