Assembly Speaker Steve Yeager (D-Las Vegas) says lawmakers were mistaken in thinking that widely legalizing cannabis in Nevada would make the unregulated market disappear, and he wants the state’s Cannabis Compliance Board (CCB) to start prosecuting illegal operations in addition to regulating legal ones.

Yeager said that he was disappointed that the board’s budget proposal, presented Wednesday, did not include actions to secure “large civil penalties” and prosecutions for unregulated cannabis operations. But Tyler Klimas, executive director of the CCB, said the agency needs more direction on how to approach the unregulated market, which he said includes operations allegedly tied to drug cartels in the commercial and unregulated cannabis markets.

“​​Boots on the ground [law] enforcement, I think, will be very important,” Klimas told lawmakers at a joint Senate-Assembly budget committee meeting. “But also a clear directive on what we do when we find [something]. We're not talking about small-time dealers … We're talking about illegal, large-scale operations, cartel-led operations.”

During a legislative hearing in early February, while seeking to expand the CCB’s investigative unit, Klimas told lawmakers that the “health” of the market struggles with significant compliance issues and that the commercial cannabis industry “functions as a smoke screen” and makes it difficult for law enforcement to understand the “breadth and scope” of unlicensed operators.

Klimas said that with inflation and consumers having fewer discretionary dollars following the COVID-19 pandemic, the commercial cannabis industry has seen a 4 percent decrease in profits last year, and the unregulated market is its biggest competitor.

Yeager said when the CCB was created by a bill he backed in 2019 he thought the agency would not have to “contend with the black market,” but now he wants the agency to lead an investigative pursuit that could pay for itself with a “couple of prosecutions.” He said the time has come for local and state law enforcement, and the CCB, to go after unregulated markets. 

‘Equitable’ cannabis licenses

Advocates for equity in the cannabis market believe opening the market to smaller business models could curb illicit operations and increase tax revenue in the state while providing a more diverse group of people access to entrepreneurship in the cannabis marketplace.

Assemblyman C.H. Miller (D-North Las Vegas) and lobbyist A’Esha Goins presented AB253 on behalf of the Cannabis Equity and Inclusion Community (CEIC) on Wednesday to the Assembly Judiciary Committee. The bill would create a “mobile cannabis concierge license,” authorizing a vendor to buy products from retail dispensaries and resell them at temporary cannabis events in confined spaces where they are consumed. 

Goins said the license prioritizes social equity applicants, or people who have been disenfranchised by failed drug policies that are being reversed across the nation. The bill is similar to one introduced last session that did not become law.

“By offering priority to social equity applicants we will help to promote diversity and inclusivity within the cannabis industry,” said Goins. “By encouraging a more diverse range of business owners, Nevada can foster innovation and creativity.”

Each event would need a 21 and older age restriction, approval of the CCB and approval from leaders of the jurisdiction where it’s located. Lawmakers would leave the license fees and specific protocols, such as ones governing the handling of leftover product, to the CCB.

Representatives for Planet 13 and Jardin Premium Cannabis Dispensary pushed back against the concierge license, saying it would add another party into cannabis event productions. 

“The proposed structure would create obstacles for event companies and for cannabis licensees to build successful experiences,” said Esther Badiata of Sala Consulting, which represents the dispensaries, “forcing a third-party cannabis event organizer licensee into our business arrangements.”

Sala Consulting had presented a cannabis event pilot proposal to the CCB in July 2022 on behalf of RNBW Cannabis that would exclude small-scale events and limit licensing to cannabis dispensaries. Under that proposal, which the CCB diverted to an advisory board, dispensaries could hold outdoor cannabis events that have a required minimum attendance of 25,000 people or more to receive a permit. Applicants would also need to have at least $250,000 in liquid assets. 

Miller said the bill was constructed with the intent for “Nevada to get it right” by ensuring individuals most affected by discriminatory drug policies have an opportunity to build wealth in a “blossoming industry.” Last year, the Nevada cannabis industry reined in $965 million in sales, down from $1 billion in the previous year. 

“Yes, there will be fees and startup costs,” Miller said about the new business model. “But due to the temporary nature of events, that will be much lower than standing up a brick-and-mortar lounge, or having … a million dollars just to even talk about any other part of our industry right now.”