A court has issued a temporary restraining order preventing the Nevada Department of Taxation from enforcing a May 31 deadline for submitting recreational marijuana license applications, potentially delaying sales that were supposed to start July 1.
The order signed Tuesday and issued from the First Judicial District Court in Carson City comes after the Independent Alcohol Distributors of Nevada had challenged a set of temporary regulations approved earlier this month. The group said a ballot measure approved in November that legalized recreational marijuana carved out a special preference for them in applying for marijuana distribution licenses.
"It definitely is another wrinkle," said Democratic Sen. Tick Segerblom, who's led the charge on marijuana legislation. "We thought it might happen. It did happen. One more problem. If it were easy, everyone would do it."
Tax commissioners approved regulations for an “early start” marijuana program in spite of concerns that the rules wouldn’t give liquor distributors sufficient opportunity to claim first dibs, and allowed marijuana companies to become too vertically integrated, unlike the liquor regulation system that involves three independent tiers.
Tax department officials noted at the time the early start regulations were approved that about $70 million in recreational marijuana revenue that's included in the governor's proposed budget assumes sales will start before the mandated date of Jan. 1, 2018.
As of Wednesday, one liquor licensee had applied for a marijuana distribution license, state officials said. The distribution license allows a company to transport marijuana from business to business.
The judge indicated the liquor distributors could suffer irreparable harm being shut out of the marijuana industry if the deadline were to be enforced. The order, first reported by the Las Vegas Review-Journal, restrains the agency from enforcing the deadline, issuing distributor licenses to companies other than liquor distributors or making any determination about whether a sufficient number of liquor distributors have applied and whether the distribution license could be opened up to marijuana businesses.
Sam McMullen, a lobbyist representing IADON, said he was happy with the decision and has ideas on how recreational marijuana sales could still start by July 1 in spite of the court order.
Segerblom said a path forward isn't clear, but he thinks there might be away to put distribution licenses on hold without affecting other businesses in the industry.
Taxation department spokeswoman Stephanie Klapstein said her agency stands by its rules. She said she expects a hearing on the matter in the next few weeks.
"The Department is reviewing the TRO and talking to our legal counsel," she said. "We do intend to defend our regulations to the fullest extent of the law."
Updated at 2:25 p.m. on Wednesday to include comment from the Nevada Department of Taxation and Democratic Sen. Tick Segerblom.