Nevada pot industry still hoping for July 1 recreational sales kickoff despite restraining order

An order issued by a Nevada court in Carson City to prevent the state’s new marijuana regulating body from moving forward with a July 1 start date for recreational weed sales has the industry holding its breath but determined to move forward on time.

But a Las Vegas marijuana attorney notes that the complexity of the case could make it difficult for the Nevada Department of Taxation to shake the May 30 order on time, granted to the Independent Alcohol Distributors of Nevada, without a settlement — something both marijuana and alcohol industry members said they have not agreed to.

“These are complicated factual and legal arguments,” said marijuana attorney Bruce L. Gale. “There’s a history to this, and it’s hard to say how it will play out.”

The rift comes from a disagreement over recently proposed policy by the Department of Taxation and previously outlined regulations in the voter-approved Ballot Question 2, which legalized the use and possession of recreational marijuana while leaving some framework in the hands of the taxation department and the Nevada Legislature. Ballot Question 2, which passed by nine points in November’s election, calls for a 15 percent tax on wholesale marijuana purchases, including those by a dispensary from a marijuana cultivation plant.

Under the current medical marijuana program in Nevada, managed by the Department of Behavioral and Public Health, state license holders can control and operate their own transportation of weed from one facility to another. But per Ballot Question 2, the Department of Taxation can only issue marijuana distributors’ licenses to wholesale liquor license holders, unless the department determines “an insufficient number of marijuana distributors would result from this limitation.”

Nevada Department of Taxation spokeswoman Stephanie Klapstein said only five licensed wholesale distributors had formally applied for a recreational marijuana wholesale license as of Thursday.

“The department reached out to wholesale liquor license holders in writing to determine whether there would be enough interest to serve the marijuana establishment market,” Klapstein wrote in a March letter to dispensary owners. “While some were 'interested,' none followed up to indicate that they had a plan going forward to be ready to serve the market.”

Klapstein’s note adds that as federally licensed permit holders under the U.S. Alcohol and Tobacco Tax and Trade Bureau, alcohol distributors licensed under Nevada’s recreational marijuana program would run into a conflict of interest that could result in the loss of their federal license.

Plaintiff Allan Nassau, who owns Red Rock Wines, disputed Klapstein’s claim, saying “at least half” of the state’s licensed liquor distributors were interested in applying for a marijuana liquor license. Nassau and IADN political strategist Sam McMullen said he “was confident” the industry could sidestep conflicts with their federal license.

Nassau said the department “hasn’t been responsive since Day 1,” accusing them of “purposefully leaving us out.” He argued that without liquor wholesale distributors in the mix, last year’s Ballot Question 2 campaign — built on the slogan “Regulate Marijuana Like Alcohol” — would instead be regulated “like medical marijuana.”

Alcohol distributors contributed over $87,000 during the election cycle in support of Ballot Question 2.

“(Alcohol wholesale distributors) were supposed to have exclusive licensing,” McMullen said. “And the Department of Taxation is treating us like it wasn’t in the initiative.”

State Sen. Tick Segerblom, D-Las Vegas, who has been a leader in sponsoring and pushing through pro-marijuana legislation in Nevada, said he’s “90 percent sure” the recreational marijuana program will begin as scheduled on July 1.

Sources in the industry, who spoke on condition of anonymity because the court papers hadn’t been filed as of Wednesday, said a filing to dismiss the case will be heard in Carson City on June 13. If Nevada’s First Judicial District Court does not dismiss the case that day, the court will determine during a June 19 hearing whether to issue a preliminary injunction.

“I don’t know how, but we will reach an agreement,” Segerblom said.