LAS VEGAS (KTNV) — A Las Vegas judge has temporary stopped the permit process for marijuana licenses for recreational shops and is now raising questions about how one state agency conducted business.

The decision handed down in Clark County District Court stems from a case filed earlier this year that accused state regulators of conducting a permit vetting process that was filled with backroom deals, cover-ups, mistakes and bias.

"You're looking at an industry where a license obtained the next day is worth $10 million on the street," said former Nevada State Senator Patricia Farley.

"Why people didn't step back and realize this was going to become a nightmare if it wasn't done extremely we, and extremely transparent," added Farley.

Farley had a front row seat as one of the architects of Nevada's marijuana law, but now state regulators are implicated in violating it and the Nevada Constitution.

"The optics are horrible, it's not the government's job to pick winners and losers," said Farley, who has been following the case.

In court, organizations that were decided the permits claim state regulators did just that.

The Nevada Department of Taxation received 462 applications but the court found the agency made no effort to determine if the applications were complete or in compliance.

The court also found background checks were not conducted on every owner which is a violation of the Nevada Constitution and the voter-passed initiative.

"The Department of Taxation decided they were going to do background checks on someone that had 5% ownership or more," said Attorney Dominic Gentile.

Gentile is representing the organizations suing state regulators.

Gentile said the background checks were meant to keep the criminal element out of the Nevada industry.

"We have the gold standard in the world for gaming, we need to have it in marijuana as well," added Gentile.

The district court has effectively frozen all permits for now and instructed the state to conduct an investigation.

13 Investigates contacted the Department of Taxation but a request for comment was not immediately returned.