New court order could stall recreational marijuana sales in Nevada

Jenny Kane , Jenny Kane | Reno Gazette Journal

Show Caption Hide Caption Watch: Do you know what an ounce of marijuana looks like? Since Nevada legalized recreational marijuana, anyone 21 and over can possess up to 1 ounce in-state. How many people actually could look at an ounce and identify it, though? We're here to help educate you.

Nevada may not get recreational marijuana sales in July as promised.

A group of alcohol distributors are demanding that they have exclusive rights to transport marijuana for the first 18 months of the industry. A district court judge in Carson City validated their concerns Tuesday evening, issuing an order that prevents the state from issuing any recreational marijuana distribution licenses before the matter is resolved.

Distribution licenses cost $15,000 under temporary regulations that go into effect with the state's early start program, expected to debut on July 1.

When Nevada voters legalized recreational marijuana in November, the ballot question said that only licensed wholesale alcohol distributors could be licensed to transport retail pot for the first year and a half.

The Department of Taxation, however, did a turnabout in March when it decided to open the application process up to medical marijuana businesses. The Department of Taxation said it had reached out to alcohol distributors in November and it cited "insufficient interest."

"While some were 'interested,' none followed up to indicate that they had a plan going forward to be ready to serve the market or that they had sorted out issues with respect to their federal liquor license," department officials wrote in a March letter.

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About 13 of the interested alcohol distributors banded together, unsuccessfully trying to persuade the department to boot medical marijuana businesses from the running for the licenses.

"The process — it was squeezing them off to the side," said Sam McMullen, an attorney who has been advising the alcohol distributors.

McMullen alleged that state officials lied about the lack of interest. According to the order, nearly three dozen of nearly 70 alcohol distributors in the state wanted in. Some of them serve more than 200 clients daily.

The order also stated that three alcohol distributors had pending license applications, but a Department of Taxation official had the applications withdrawn from the initial process since their federal alcohol licenses could be compromised since marijuana still is federally illegal.

"We found a way that people could have the same license fees and a separate company," McMullen said. "If (the feds come after them), they're not going to just shoot at alcohol, they're going to shoot at the whole system."

Distributors also complained that the department never provided any notice that it was determining the number of distributors needed, nor did it hold any kind of public hearing on the matter.

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The court order was the first sign of encouragement, McMullen said.

"The judge won't issue these unless the judge thinks there's a problem that has merit," McMullen said. "It's nice to have a judge tell you that you matter."

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Marijuana industry leaders are not thrilled about the alcohol industry's move.

"I don’t believe they have a valid point. They’re still allowed to apply," said Tim Conder, CEO of Blackbird, earlier this month. "What they were hoping for was that the state was going to create a monopoly for them."

Conder's company, the only company that transports medical marijuana statewide currently, will be one of the alcohol distributors' main competitors.

It is unclear how the court order will affect other recreational marijuana license applications.

Department of Taxation officials were not immediately available for comment.