On July 1, Nevada locals and tourists visiting from out of state waited hours in line in triple-digit temperatures to become the first in the state to purchase legal recreational marijuana. Less than two weeks later, the 47 retailers licensed to sell the drug are running out of supply.
The Nevada Tax Commission, a subsidiary of the state Department of Taxation, has passed a new regulation to address the shortage in a unanimous vote.
The commission found that the current pool of stores licensed to distribute marijuana is insufficient to support the market. It will reopen applications and allow dispensaries previously operating in the medical marijuana program to vie for a spot in the recreational market.
The regulation come as a response to a "statement of emergency" issued by the department and endorsed by Governor Brian Sandoval late last week.
The governor did not declare a "state of emergency," which is typically used in times of natural disaster when local government requires the help of state agencies. Rather, a statement of emergency allows for swift changes in regulations during temporary scenarios, said Mari St. Martin, communications director of the Office of Governor Brian Sandoval, in a statement.
Nearly 50 dispensaries in the Las Vegas area have licenses to sell marijuana for recreational use. When sales got underway on July 1, those retailers could sell their inventory to anyone over the age of 21 with a valid ID. But those same stores cannot legally restock their supply.
Alcohol wholesalers have the exclusive rights to move marijuana from growers to retailers in Nevada, as part of a temporary court order that was extended in June. The rule aims to "promote the goal of regulating marijuana similar to alcohol" — and protect liquor stores from losing business as the demand for recreational marijuana rises.
Nevada is the only state with legal marijuana that has such an arrangement. The state intends to appeal the order, so that its medical pot shops can obtain distribution licenses.
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Deonne Contine, executive director of the state Department of Taxation, warned regulators that a marijuana shortage could create a budget shortfall in Nevada. A 15% tax on the plant's cultivation generates revenue that the state spends on public education.
The industry could bring the state more than $1.1 billion in tax revenue over the next eight years, according to a study by Las Vegas-based RCG Economics.
Neal Gidvani, senior counsel with Greenspoon Marder's Cannabis Law practice in Las Vegas, called the commission's decision "a step in the right direction for the cannabis marketplace."
"It is imperative that all those involved with the industry work together to ensure consumers have adequate access to the product and can purchase marijuana in a safe environment," Gidvani said.
Regulators pried open a channel for distribution in the hours before the commission meeting. The state awarded its first distribution license to Crooked Wine Company, which has partnered with a medical marijuana logistics company to transport recreational weed from farm to store.
There are approximately 70 licensed alcohol wholesalers in the state, but only seven applied for marijuana distribution licenses as of Thursday. Contine said the department has issued two total licenses to alcohol wholesalers, but the other five submitted incomplete applications.
Several dispensaries told state officials they expected to run out of product within the week.
The first four days of legal sales resulted in over 40,000 retail transactions and generated $3 million in sales, according to the Taxation Department and the Nevada Dispensary Association.
