With approval of consumption lounges, state ushers in next expansion of cannabis industry
After a tumultuous round of dispensary licensing in 2018 brought uncertainty and infighting to the state’s nascent cannabis industry, the Cannabis Compliance Board (CCB) assumed the marijuana regulatory reins in 2020, cracking down on bad actors and providing specialized regulation that brought stability to the industry ahead of the 2021 legislative session.
From that baseline, lawmakers took a major step this session to expand and diversify the industry’s disproportionately white and male ownership and also provide tourists with a place to legally consume marijuana by creating a new license type for cannabis consumption lounges. They also approved a slew of other changes — including allowing permanent curbside pickup, revising how law enforcement determines whether someone is driving under the influence of marijuana and changing product labeling — built from lessons learned in the eight years since the state first authorized marijuana dispensaries.
“It's been a long journey from where we started, really, in the 2013 session and then launching dispensaries, so it's really nice to see how the industry has matured,” said Assemblyman Steve Yeager (D-Las Vegas). “The legislation that we see this session is really in recognition that we've primarily done things right and to try to take that next step.”
After the compliance board began its work governing the state’s marijuana industry in July 2020, the 2021 legislative session presented the agency with an important opportunity to hold conversations with lawmakers, said Tyler Klimas, the board’s executive director.
“We’re very pleased with how the CCB came out in this session … So much of this particular legislative session was about education for the CCB,” Klimas said. “In 2021, this was really our first chance to come back in front of the Legislature and update them on the progress of the CCB … I think the Legislature was very receptive to our message.”
The session saw a wide variety of cannabis-related legislation passed that Yeager emphasized was largely aimed at implementing best practices and making selective tweaks to existing regulations. He also noted that many of those changes came as the pandemic saw more people get comfortable with marijuana use.
“I think the stigma is definitely going to lessen. I think it did during the pandemic … I think we have a lot of new customers in the cannabis industry because of the pandemic,” Yeager said. “The more we sort of move forward as an industry, consumers will become more comfortable with it.”
Here’s a look at the bills that passed during the session related to the state’s marijuana industry and the work of the CCB, all of which have been signed into law by Gov. Steve Sisolak:
AB341: Authorizing cannabis consumption lounges
The biggest change for the marijuana industry from the 2021 legislative session comes by way of AB341, a bill that provides for the licensing and regulation of cannabis consumption lounges by the CCB.
The measure, introduced by Yeager, has been heralded as a major step by many in and around the industry as a way to increase diversity in the state’s disproportionately white group of cannabis business owners. Throughout the session, the Las Vegas-based assemblyman also described the consumption lounges as a way for the state to solve tourists’ dilemma of having no legal place to consume cannabis.
“I see that only as a plus from the tourism aspect,” Yeager told The Nevada Independent in an interview. “But then on the local side, right, being able to bring in new players into the business, having that create jobs — that's really important coming out of the pandemic.”
Though a cannabis consumption lounge does already exist near Las Vegas in the form of NuWu Cannabis Marketplace, which sits on the land of the Las Vegas Paiute Tribe, Yeager’s bill allows for the first state-licensed and regulated locations where Nevadans will be able to consume cannabis outside of their homes — and where tourists will be able to legally use marijuana products.
Lounges will be restricted to people 21 and over, and venues will be able sell ready-to-consume or single-use products, although not in quantities that would make them de facto retail cannabis dispensaries.
Scot Rutledge, a lobbyist who serves on the advisory board of the Chamber of Cannabis, a nonprofit organization whose members include individuals and businesses within the marijuana industry, said that many members have expressed enthusiasm about the lounges.
“There’s a tremendous amount of excitement because this is the first time in Nevada we're providing for a new license type,” Rutledge said. “The intent is to allow folks who aren’t in the industry to have as much of a chance, if not more, to participate.”
The bill allows for the initial licensing of up to 20 independent consumption lounges and 20 retail consumption lounges that will be attached to existing dispensaries, with the possibility of additional independent licenses if the CCB approves more than 20 retail lounge licenses before June 30, 2022.
Those new licenses open up the possibility of expanding diversity within the ownership of the industry, which has been limited in the past. A demographic report on the state’s cannabis industry released by the CCB in February showed that marijuana business owners and board members in Nevada are disproportionately white and male, compared to the industry workforce, which is made up of a greater proportion of people of color.
The bill explicitly prioritizes expanding diversity within the industry by requiring at least 10 of the first 20 independent lounge licenses to be issued to social equity applicants.
“Those 10 licenses are reserved for social equity applicants, and if there aren't any, they stay there until there is. They don't get redistributed among other people,” Yeager said. “We're purposely holding some back, which I'm hoping is going to help us achieve the purpose.”
However, the definition of a social equity applicant is left up to the discretion of the CCB. Klimas said that definition will be established with the help of an equity, inclusion and diversity subcommittee formed under the Cannabis Advisory Commission.
“We'll need to define what a social equity applicant is. That's really the start of it,” Klimas said. “What does it mean to be an individual that has been harmed by the War on Drugs and how can we help get those individuals into this industry.”
The measure also allows the CCB to give more financial leeway to social equity applicants. An application for a retail consumption lounge costs $100,000, but an application for an independent consumption lounge costs $10,000, and the license issuance and renewal fees are each $10,000 for both types of lounges. But the bill also allows the board to reduce all fees by up to 75 percent for a social equity applicant.
Outside of social equity, the bill leaves much of the regulatory work to the board, with the ability for local governments to provide additional regulations through ordinances.
“We just didn't believe that 120 days was really enough time to sort of figure out some of the details around how these venues might be operated or all of the things that need to be considered in licensing those businesses,” Rutledge said. “So I think we did it the right way by deferring a lot of those decisions to the CCB.”
Klimas said that prior to the licensing of lounges, the board will spend the next several months developing the regulations for the new cannabis establishments, through workshops, board meetings and advisory commission meetings.
The 2018 licensing round, conducted by the Department of Taxation, was marred by accusations that state officials played favorites and unevenly distributed key information about application scoring.
“Given some of the past licensing processes, this process is going to be about openness and transparency and thoroughness to ensure everybody's on the same page and the board is very public in how we're going to do things,” Klimas said.
Even though the CCB will complete most of the regulatory work, Rutledge emphasized that there is a certain framework he and other cannabis advocates hope to establish for the lounges. One aspect of that came from law enforcement, which did not want to see marijuana and alcohol sold in the same place. Another is focused on ensuring that businesses have more freedom in operating their lounges, because the bring-your-own-marijuana model has been ineffective for such businesses outside of Nevada.
“We also understood that what they had done in Denver originally … that didn't allow these lounges to sell cannabis — it was a bring your own cannabis model — and those did not work very well, either.” Rutledge said. “The idea of having just a place where patrons who purchase cannabis of your dispensary could walk in and consume and leave with really no entertainment or food or beverage. That wasn't what we wanted to get to.”
Layke Martin, executive director of the Nevada Dispensary Association, said both the retail and independent lounges could foster new ideas within the industry.
“I think there's a lot of opportunity for creativity and entrepreneurship,” Martin said. “I think a lot of these can become a destination, in and of themselves. And so it could be a video game thing where you can also consume cannabis. Or it could be like a tasting room situation where you can also consume cannabis, and you have the opportunity to get educated and try new products, kind of like a tasting room in a winery.”
Martin also noted that several existing dispensaries, including Planet 13 and The Apothecary Shoppe, have been planning for the possibility of lounges since the idea was brought forward and then axed during previous legislative sessions. She said that “some already have the space ready to go.”
While Klimas said that it likely won’t be until the beginning of next year or even mid-2022 when the new licenses “come on board,” Yeager sees the lounges as a way to help boost the return of the state’s economy.
“I can tell you without a doubt that Vegas is back in a really big way, and I think the addition of consumption lounges is only going to add to that,” Yeager said. “I actually think it's going to put Las Vegas on the map, to the extent that it isn't already, to be the cannabis destination, especially if we're able to open up some really interesting, innovative concepts.”
The Assembly and Senate approved the bill 29-12 and 17-3, respectively, with the Senate passing the bill on the last day of the session, as Sens. Dina Neal (D-Las Vegas) and Fabian Doñate (D-Las Vegas) were the only members of their party to oppose the measure.
AB149: Increasing transparency of cannabis testing
This bill, sponsored by Assemblywoman Sarah Peters (D-Reno), requires the board to develop, implement and maintain an online database where the public can find information about cannabis products tested by laboratories in the state.
The CCB still needs to receive approval from the Legislature’s Interim Finance Committee in order to fund the database, which is projected to cost nearly $250,000 over the next two years, but Klimas expressed enthusiasm about offering the feature to consumers.
“It's just another level of transparency that we can bring out. I would do it tomorrow if I had the capacity to do it,” he said. “This data should be available for everybody to use. Right now, you can go to a dispensary, and if you purchase a product, you can ask for the certificate of analysis. So you can see that kind of information, [but] some people don't know they can ask for it.”
Some of the state’s independent labs have in the past voiced concerns about transparency. In 2019, an association of four marijuana testing labs rebuked certain unidentified labs over allegations that the labs were inflating THC content readings and giving fewer samples a failing grade in an attempt to attract more business.
The measure builds off of existing law that requires the CCB to establish standards for independent cannabis testing labs, which test cannabis and cannabis products for a variety of factors, including for microbial substances (bacteria, molds, and yeasts), potency of the product (cannabinoid and terpenoid profiling), heavy metals and pesticides.
The information available online will be based off of the seed-to-sale tracking that the board uses to track cannabis products as they are grown and sold throughout the state, and the database also will be required to contain the final results of all testing performed on cannabis products by an independent lab.
The Assembly and Senate approved the bill with no opposition. Sen. James Ohrenschall (D-Las Vegas) did not vote on the measure because his wife, Riana Durrett, is a member of the CCB.
SB168: Curbside pickup for cannabis products
Sponsored by Sen. Roberta Lange (D-Las Vegas), this bill authorizes and allows dispensaries to offer curbside pickup in accordance with regulations adopted by the CCB. The measure legalizes a practice first allowed last year when the state was still in a coronavirus-related stay-at-home order.
Some of the present-day features of curbside pickup include designated parking spaces for pickup, security cameras with a direct line of sight to those spaces and a prohibition on people less than 21 years of age being in the vehicle.
Proponents of the measure have touted the service as beneficial to businesses and a way for customers to more conveniently obtain their products.
“Customers really liked it, actually,” Martin said. “If you go through reviews of dispensaries, you'll often see curbside pickup positively viewed as a feature.”
The measure additionally allows local governments to adopt ordinances regulating curbside pickup beyond the rules adopted by the board.
The bill was approved in a 35-6 vote in the Assembly and a 19-1 vote in the Senate, and the governor signed the measure on May 27.
SB122: Extra health and safety training for cannabis employees
This bill, sponsored by Sen. Chris Brooks (D-Las Vegas), requires employees of cannabis establishments, including cultivation and production facilities and dispensaries, to complete a health and safety course developed by the federal Occupational Safety and Health Administration (OSHA) within one year of being hired.
Employers are required to cover the cost of the training and are required to fire an employee who has not completed the training within one year. Employees hired before July 1, 2021 are required to complete the OHSA training program by July 1, 2022, and certain employees not involved in the day-to-day operations of an establishment, as well as communications and legal employees, are excluded from the requirement.
The required training includes a 30-hour course for supervisory employees and a 10-hour course for other employees, which must be conducted by an authorized outreach trainer and may be online or in person.
Though there are other training requirements already in place for employees of cannabis businesses, Martin emphasized the importance of such training.
“It's a highly regulated industry. Safety and security [are] paramount,” she said.
The bill passed 31-11 in the Assembly and 14-7 in the Senate, with some Republican lawmakers voting against the measure. During a committee vote on the bill in March, a few Republican senators expressed concerns that the bill would be onerous and unnecessary for retail employees in the industry.
Criminal justice changes
AB400: Marijuana DUIs
This Yeager-sponsored measure, which went into effect on July 1, removes specific “per se” limits for cannabis metabolites that if found in a person’s blood would trigger a DUI — except for in cases where the DUI is punishable as a felony, including those that caused someone’s death or substantial bodily harm. Cannabis metabolites are the substances that form when THC is broken down in the body.
Under this law, drivers generally will be considered to be under the influence of marijuana if the substance has impaired their ability to safely operate their vehicle, instead of having impairment determined by a test for a specific amount of marijuana in their blood or urine.
“There's no scientific basis toward ‘per se’ limits,” Rutledge said. “That's problematic for anyone who consumes cannabis, certainly. It's especially cruel to patients who theoretically consume larger amounts of THC than the average recreational consumer and may not actually be under the influence while operating a vehicle.”
Yeager explained that the science has shown for years that the “per se” limits are not an accurate reflection of impairment because cannabis is metabolized differently in different people’s bodies.
“I was up at the session in 2013 and 2015 as a lobbyist,” he said. “And I remember talking back then to folks in the Legislature about the DUI laws because cannabis is this weird ... space because it's federally illegal but legal in the state. And our state laws around DUI really contemplate its federal illegality, and we're almost zero tolerance.”
Yeager said that it took a long time for other people to get comfortable with the idea behind the bill and realize that impairment for cannabis cannot be treated the same as alcohol, which ultimately led to his measure passing during the 2021 session.
The bill was passed along party lines in the Assembly with Republicans opposed and passed out of the Senate on a 15-6 vote, with some Republican senators opposed.
AB158: Lessening penalties for minors possessing marijuana
This bill from Assemblywoman Daniele Monroe-Moreno (D-North Las Vegas) significantly lightens penalties for minors who purchase or possess alcohol or cannabis, including prohibiting jail time and fees for first and second offenses.
In an interview with The Nevada Independent, Monroe-Moreno framed the measure as a way of being constructive with children who make mistakes, rather than strictly punitive. Proponents of the measure have described the bill as another way to help the communities most negatively affected by the War on Drugs.
For people under the age of 21 who are found guilty of a misdemeanor for possessing, consuming or purchasing alcohol or possessing less than one ounce of cannabis, the bill replaces misdemeanor penalties of up to six months jail time and up to a $1,000 fine with penalties of up to 24 hours of community service and a requirement to attend a meeting of a panel of victims injured by a person who was driving under the influence of alcohol or a controlled substance.
The bill also revises the penalties for a second violation to require up to 100 hours of counseling or participation in an educational program, support group or treatment program.
The measure was approved unanimously in the Assembly and Senate and was signed into law by the governor on May 28.
AB326: Cracking down on the illicit market
Sponsored by Assemblyman Tom Roberts (R-Las Vegas), who previously worked for the Las Vegas Metropolitan Police Department, this bill aims to curb the state’s illegal cannabis market by authorizing a district or city attorney to bring a civil action — with a penalty of up to $50,000 — against any person who engages in a cannabis business activity, including cultivating and selling cannabis, without a license. Someone who commits such a violation could still be subject to a criminal prosecution.
The bill also seeks to bring more transparency to existing businesses, while restricting illegal marijuana delivery services, by requiring all advertising for a cannabis establishment to contain the establishment’s name and license number.
“It's really intended to keep the black market, the illicit market, from operating within the shadow of the legal market,” Martin said.
The bill received no opposition in votes in the Assembly and Senate, with Ohrenschall recusing himself from the vote when it passed out of the Senate on May 21.
SB168: Granting the CCB regulatory power over packaging and labeling
In addition to making curbside pickup a permanent feature for cannabis businesses, this measure authorizes the board to adopt regulations for the packaging and labeling of cannabis and cannabis products.
“We have really extensive packaging and labeling regulations on the books right now,” Klimas said. “What this bill allows and recognizes is that this is an ever-evolving industry, so let's make sure the board has the power to … host workshops and get stakeholder feedback both from the public and the industry. And if we need to make changes on packaging and labeling, then we can do that and we don't have to wait every two years.”
Klimas added that the board will regularly host workshops focused on labeling and packaging, so that the agency can “constantly stay ahead” on regulations.
The bill was approved in a 35-6 vote in the Assembly and a 19-1 vote in the Senate.
SB49: Changes to CCB disciplinary hearings
This bill, brought forward on behalf of the CCB, makes a number of changes to disciplinary hearings conducted by the board — including authorizing the CCB to employ support staff for conducting such hearings, authorizing the chair of the board to grant extensions to the 45-day requirement within which hearings must be held and removing an authorization for the board to take the testimony of a witness by deposition because of the intensive time and resources typically required for depositions.
The measure also removes a barrier for minor stakeholders in cannabis businesses, allowing the board to adopt policies for waiving the registration requirements for people who have an ownership interest of less than 5 percent in the establishment. That provision is meant to lighten the burden for publicly traded companies.
David Staley, an audit investigator for the board, said during a February hearing for the bill that the background check and registration requirements can be restrictive for publicly traded companies with thousands of shareholders that have shares traded on a daily basis.
Under this bill, the labeling of cannabis products offered for sale is required to include the words “THIS PRODUCT CONTAINS CANNABIS,” rather than “THIS IS A MEDICAL CANNABIS PRODUCT” or “THIS IS A CANNABIS PRODUCT.”
No lawmakers voted against this bill; the measure passed 41-0 and 20-0 in the Assembly and Senate, respectively.
SB278: Clarifies the cannabis wholesale tax
Sponsored by Sen. James Settelmeyer (R-Minden), this bill clarifies the definition of “wholesale sale” for the purpose of the marijuana excise tax.
“It just clarifies [that] facilities that are owned by the same individuals can move product back and forth if one facility is more capable of performing a function than the other one,” Klimas said. “That just clarifies … when that is actually taxed.”
The bill passed through both chambers with no opposition and was approved by the governor on June 3.
SB404: Authorizes regulations for cannabis weighing and measuring equipment
Brought forward on behalf of the Governor’s Office of Finance, this bill authorizes the State Sealer of Consumer Equitability to adopt regulations for cannabis weighing and measuring equipment. The bill is meant to update existing law, which did not previously include references to cannabis-specific equipment.
The measure passed 20-0 out of the Senate, while members of the Assembly voted to pass the bill 33-8, with some Republican lawmakers opposed.
AB101: Authorizes veterinarians to administer CBD products to animals
This measure, sponsored by Yeager, authorizes licensed veterinarians to administer products containing CBD or hemp in the treatment of an animal and to recommend use of such products to pet owners. It also prohibits the state Board of Veterinary Medical Examiners from taking disciplinary action against veterinarians who administer or use such products.
As Yeager notes, this bill — nicknamed the “pot for pets” bill — does not actually deal with marijuana, as do several other measures he sponsored. Cannabis contains more THC and less CBD, while hemp products (authorized for use by this bill), contain more CBD and less THC. The two compounds are both found in plants of the Cannabis genus.
“It was surprisingly easy to get through, this time,” Yeager said of the measure, which has been considered but rejected in past legislative sessions. “And maybe that's just the comfort level that we have, Nevadans have, not just with the cannabis industry but certainly with CBD. I think a lot of people have experience with CBD at this point.”
The bill was approved 40-0 in the Assembly and 20-0 in the Senate, before being signed into law by the governor on May 28.
SB58: Investigations into cannabis offenses
Brought forward on behalf of the Investigation Division of the Department of Public Safety, this measure is aimed at improving coordination between state agencies during cannabis-related investigations by requiring the division to provide investigative services to help carry out criminal investigations relating to cannabis when requested by the CCB, Department of Taxation or Division of Public and Behavioral Health.
This legislation passed with no opposition in the Assembly or Senate.
Failed licensing efforts
While lawmakers authorized the licensure of 40-plus new cannabis establishments through consumption lounges, discussions of adding other new license types stalled during the session.
SB235: Dual licensing
This measure, sponsored by Sen. Dallas Harris (D-Las Vegas), would have allowed the CCB to issue cannabis establishment licenses in excess of the caps set by the state when the licensing of adult-use cannabis dispensaries began. The new licensing procedure, intended to prioritize social equity applicants and increase the number of new licenses, would be determined by a study conducted by the board every two years.
However, the bill was met with significant backlash, even sparking internal conflict within the Nevada Dispensary Association that resulted in some members leaving the group. Some smaller operators within the association favored an amendment that sought to give those who lost out during a 2018 round of licensing a chance to receive a license.
The amendment, which would have established a path for adding a significant number of new licenses for those who lost out in 2018, reignited arguments from a yearslong legal battle over the previous licensing round and disputes about whether the market can support a large number of new marijuana stores.
As of June, there were 85 active dispensaries licensed by the CCB, with the possibility for roughly 40 more dispensaries approved during the 2018 licensing process. Unlike other business types, the number of retail cannabis stores in the state is strictly capped.
Nevada law allows counties to have a certain number of dispensary licenses based on population, with current numbers allowing for up to 80 licenses in Clark County, 20 licenses in Washoe County, four licenses in Carson City and Lyon County, and two licenses in all other counties. However, local regulations can further restrict the number of licenses allowed in a county.
Though Yeager never heard the measure in the committee he chaired, he said there was a lot of controversy surrounding the idea.
“The industry itself was so conflicted on that concept, and it just kind of blew up,” he said.
The legislation never received a vote on the Senate floor.
AB322: Licensing cannabis events
Sponsored by Assemblyman C.H. Miller (D-North Las Vegas), this bill aimed to establish a form of “micro-licensing” by allowing the CCB to issue a new license type for cannabis events where products could be sold and consumed. Events could be similar to food festivals, for example, where different vendors sell marijuana products at the event and attendees are able to consume the products at the event.
With a financial impact estimated to be in the millions by the CCB, the measure never received a hearing in the Assembly’s money committee but was touted as a positive next step by proponents of other cannabis legislation.
“I think it's a good concept,” Yeager said. “I think we were just very wary of doing too much at one time, given how long it's taken us to get cannabis lounges up … Probably, [the] next step is cannabis events and licensing of larger events because the truth is people are consuming those events anyway. We know that, so we probably should regulate it in some fashion.”
Even though the CCB will only have two new types of licenses to work on over the next two years with the addition of retail and independent consumption lounges, Klimas said the board is still thinking about future rounds of licensing.
“Obviously lounges will be a licensing round, but when we're talking about the traditional establishments, like cultivation, production and retail, we're going to open up those licensing rounds at some point,” Klimas said. “But we want to make sure that those decisions on how many to award, how many to open up are driven by data.”
Though an effort to establish a cannabis market study failed with SB235, Klimas said that the board is still planning to perform a comprehensive study of the industry, likely conducted by a third party that Klimas hopes will provide an unbiased look at the market.
“We want to know what is the health of the market in the state of Nevada, what's our supply, what's our demand, what are our needs,” Klimas said. “That's going to be something exciting over the next year or two to get those results and see where this industry needs to continue to mature towards and how the CCB is going to facilitate that. That'll likely end up and result in new legislation that we’ll bring forth in the 2023 legislative session.”