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Gaming leaders call for bright line between marijuana and casinos

Michelle Rindels
Michelle Rindels

Some of the biggest names in Nevada gaming met briefly on Monday, concluding unanimously that there’s little room for overlap between the worlds of legal marijuana and legal gambling.

The Nevada Gaming Policy Committee, chaired by Gov. Brian Sandoval, adopted a resolution that broadly prohibits any collaboration between the two industries, including through business partnerships, landlord-tenant agreements or financial transactions. The resolution brings clarity to some of the open questions the committee was convened this fall to address, including whether casinos could maintain indirect ties with marijuana companies that are less overt than opening a dispensary on casino grounds or allowing consumption in hotel rooms.

"The gaming industry and the marijuana industry shall not meet,” summarized Nevada Gaming Commission Chairman Tony Alamo.

The one exception is that the resolution does allow gaming license holders to host conventions or meetings of marijuana industry players, provided there is no marijuana possessed or consumed on the casino property.

“None of those conventions have anything to do with consumption,” Sandoval told reporters after the meeting about large, popular conferences such as MJ Biz Con. “It’s about best practices associated with that business.”

The conservative approach to what has been something of a gray area for the state’s casinos comes as little surprise considering the doomsday tone of the committee’s first meeting in November. It also follows a 2014 directive from gaming regulators that advised licensees against participating in the nascent medical marijuana industry.

Gaming licenses are considered “privileged,” meaning they require a higher level of scrutiny, and holders must comply with state and federal laws. Because marijuana remains a Schedule 1 illegal substance under the Controlled Substances Act — on par with heroin as a drug with a “high potential for abuse and no currently accepted medical use” — it poses a conflict for casinos even in a state with legalized recreational pot.

The federal government has so far not pursued a widespread crackdown of marijuana industries, although since the committee last met, Attorney General Jeff Sessions rescinded the Obama-era Cole Memo that had given marijuana businesses some level of assurance that they wouldn’t be prosecuted. Now, individual U.S. attorneys — such as Nevada’s new U.S. Attorney Dayle Elieson — have latitude to prosecute even well-managed legal pot operations if they choose.

Testimony from the November hearing laid out myriad pitfalls for gaming operators should they get involved in marijuana.

Attorney Brian Barnes, who represented plaintiffs in federal RICO (Racketeer Influenced and Corrupt Organizations Act) lawsuits against state-legal marijuana businesses in Colorado, raised the specter that casinos could face the strong arm of civil litigation for even minor interactions with the marijuana industry.

Federal crimes include possessing any kind of equipment, chemical or material needed to produce or sell marijuana; using a phone or email to facilitate any operation of a marijuana business; leasing or otherwise controlling the property where marijuana is cultivated or sold; reinvesting the proceeds of a marijuana business into any other business, and any financial transaction at all that involves more than $10,000 in proceeds from a marijuana business.

Barnes described one case in which his firm sued a Colorado medical marijuana store and its business service providers, such as insurers and accountants, on behalf of a Holiday Inn franchisee that projected it would lose business because of the dispensary across the street. The marijuana store never opened because investors pulled out, and it had a chilling effect on the rest of the industry — insurers stopped writing surety bonds for marijuana businesses.

Casinos can also violate federal law in other ways. If they knowingly welcome patrons who derive their funds from selling marijuana, they could be prosecuted for a conspiracy to commit money laundering. The risk of money laundering prosecution is a major reason why most banks don’t provide services to marijuana-related businesses.

Bill Young, a former sheriff who is now a high-ranking compliance and security executive at Station Casinos, said at the November meeting that he didn’t think casinos would be opening themselves up to prosecution for hosting marijuana conventions where no marijuana or paraphernalia is sold. But he did say he’d advise casino employees at all levels to steer clear of investment or involvement in the marijuana industry, even in their free time.

The committee also heard from officials at Marijuana Business Daily who operate the MJ Biz Con trade show, which had about 18,000 attendees last fall. The convention doesn’t involve direct sales, but offers education and business-to-business networking.

Organizers described what they called a great relationship with their former host, the Rio casino owned by Caesars Entertainment, and said the reason they left for the Las Vegas Convention Center was because they needed more space and not because they were kicked out.

Committee member Scott Scherer concluded that it wasn’t time for Nevada to “take on” the federal government and flout its marijuana prohibition at casinos. The state has to care what the federal government says and thinks about marijuana, Scherer said at the November meeting, especially because many licensees also operate in states where recreational marijuana is not legal.

Sandoval said the value of Monday’s vote is the clarity it brings.

“It accomplishes a lot of things,” Sandoval said. “It makes the absolute distinction that none of our licensees can participate in the marijuana industry nor can they do business with anybody in the marijuana industry.”

Disclosure: Caesars Entertainment has donated to The Nevada Independent. You can see a full list of donors here.

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