Tensions over 2018 marijuana licensing resurface with bill that would give losing companies chance to expand
An acrimonious battle over the distribution of coveted marijuana dispensary licenses in 2018 spilled over into the Legislature on Thursday, with sharp opposition to a measure that would allow applicants who lost out on the licenses another chance to open new stores.
SB235, sponsored by Sen. Dallas Harris (D-Las Vegas), includes a provision giving “social equity” applicants who have been adversely affected by the War on Drugs a leg up when applying for a Nevada marijuana license. The bill’s most controversial element by far would create a new path for additional dispensaries in the dog-eat-dog cannabis market.
“First, it will allow better access for patients to obtain their medicine. Second, it will address the major flaws in the last licensing process. Third, it will give local Nevada cannabis businesses the opportunity to help Nevada get back on its feet,” said supporter John Ritter, who is affiliated with the marijuana company The Grove and has long been fighting the licensing procedures from 2018.
Unlike most other business types, retail cannabis stores are capped in number by government. A 2018 round of licensing doled out 61 dispensary licenses to 17 different companies even though 127 businesses applied. That drew almost immediate backlash from those who didn’t win; they argued the state’s process was riddled with problems.
After lengthy and complex litigation, Judge Elizabeth Gonzalez concluded last year that certain actions by the Nevada Department of Taxation, the state agency that issued the licenses, created “an uneven playing field because of the unequal information available to potential applicants.” But she said neither monetary relief nor new licenses should be doled out as a result.
A proposed amendment to SB235 allows applicants unsuccessful in 2018 a route to finally getting permission to expand by allowing those dispensaries, if they have both retail and medical licenses, to spin off the medical marijuana license into a completely new license and double their number of stores.
Cannabis Compliance Board Executive Director Tyler Klimas said the bill could potentially yield new dispensaries for the 110 businesses that didn’t get a license in 2018. But attorney Mark Fiorentino, representing the Grove, a company that missed out on licenses in 2018, said the number of new dispensaries that might result from the bill was probably closer to 20 because of requirements such as dispensaries having local approvals.
There are currently 81 dispensaries open statewide, and another 50 are expected to open by a February 2022 deadline.
Proponents commissioned an analysis from RGC Economics that projected the state could support up to 1,283 additional dispensaries. Nevada’s marijuana market grossed nearly $700 million last fiscal year and is on track to break that record this fiscal year.
But opponents cited another study from a different Nevada-based analyst, Jeremy Aguero of Applied Analysis, that concluded adding more licensees would dilute revenue for existing stores. They also say it would go against a settlement with the Cannabis Compliance Board that called for a study on whether new licenses are needed to serve Nevada.
They say licenses should be doled out in a competitive, merit-based process, arguing that inferior applicants are looking for a back door to get a license, and that bill proponents should go through proper channels when a future application window opens up.
“SB235 is clearly an end run around Judge Gonzalez’s decision in an attempt to award licenses to those that were unsuccessful, both in 2018 in obtaining licenses as well as unsuccessful in the litigation,” said attorney Rusty Graf, who represented Clear River LLC, which won three licenses in 2018.
The hearing, in the Senate Revenue and Economic Development Committee, also exposed an internecine conflict that has riven the industry. Nevada Dispensary Association (NDA) Executive Director Layke Martin indicated that an unnamed board member went behind the backs of association leaders, neglecting to give them a heads up about the provisions of the bill before it was introduced.
“There’s a reason for that,” she said, pointing to a portion of the amendment that creates a new pathway for unsuccessful applicants to expand. “The award of licenses as set forth in section 2 of the amendment threatens the strength and integrity of the industry at large, and it's not something that the NDA would ever support.”
Bill co-presenter David Goldwater, a board member of the dispensary association, said the five-member board is stacked against smaller operators who didn’t win a license in 2018, such as his business, Inyo Fine Cannabis Dispensary.
“This is a unique situation where the association took a position on a bill that the members had a differing of opinion,” he said. “I look forward to working with the sponsor on seeing if we can improve this bill.”