New pot rules protect kids; legal clash won’t stop Saturday sales

Scott Sonner / AP

RENO — A lengthy legal battle over the alcohol industry's exclusive rights to distribute marijuana in Nevada won't affect the state's plans to begin recreational pot sales at medical dispensaries on Saturday, state officials said.

The Nevada Tax Commission also approved emergency regulations Monday with stricter labeling and packaging requirements aimed at protecting children. Among other things, the rules prohibit edible pot products modeled after products marketed primarily to children or bearing likenesses of animals, fruit or cartoon characters.

The marijuana industry is eager for the fast-approaching July 1 kickoff of recreational sales in Nevada, where demand from tourists is expected to eventually make the state's market bigger than other states where it's legal, including Colorado, Oregon and Washington.

The state intends to appeal a Carson City judge's order that only alcohol wholesalers can obtain pot distribution licenses, Stephanie Klapstein, Taxation Department spokeswoman, confirmed Monday.

It won't happen on an emergency basis, and it won't affect retail sales starting Saturday, Klapstein said.

State regulators argued they have the authority to issue distributor licenses to existing medical dispensaries if there aren't enough applicants from the alcohol industry to meet demand. Judge James Wilson disagreed.

"Nobody said they are going to just roll over and accept the court's finding. It's a fairly big issue," said Michael Willden, chief of staff to Gov. Brian Sandoval.

But that fight is for another day, he said, because Sandoval has decided they don't want to pursue that matter through an emergency regulation.

In the meantime, properly licensed medical dispensaries can sell off their stockpiles for recreational use and expect to have enough supply to meet demand for three weeks or longer. The state anticipates at least some alcohol wholesalers will be licensed to distribute pot by then.

"I get the sense that most, if not all, dispensaries will have sufficient inventory to serve retail customers until distributors are up and running," Nevada Dispensary Association President Andrew Jolley said Monday.

Nevada officials estimate 63 percent of recreational pot sales will go to tourists. More than 40 million tourists visited Las Vegas last year.

"I think it is going to be the largest cannabis market in the country until California gets its sales going," said Nancy Whiteman, co-owner of Colorado-based Wana Brands. The firm sells edible marijuana products through a Nevada affiliate to about half of the Silver State's 60 licensed medical marijuana dispensaries.

California law prohibits recreational sales until at least Jan. 1, 2018, and industry experts anticipate Californians will be among those travelling to neighboring Nevada to take advantage of recreational sales starting Saturday.

"I think there will be long lines," Whiteman said. "I think because of the sheer historical precedent and the novelty of it that people will want to be a part of that first day."

Medical dispensaries licensed to sell recreational pot must comply with the new regulations regarding children, including labels that state, "THIS IS A MARIJUANA PRODUCT," and "Keep out of reach of children."

Whiteman said her company has about 15 edible labels it must redesign before those products can be sold in Nevada, primarily gummies.

"We are frantically having our graphic people rework those as we speak," she said.

Clint Cates, director of compliance for Mainstream Partners and Kynd Cannabis Co., said his company is changing molds used to produce chocolates infused with marijuana to comply with the new rules.

That adds to the firms' wholesale costs, "but we knew that was coming because we are the strictest regulated industry in the country," Cates said. "This is the 'big boy' state. If you are the 'who's who' of the cannabis industry, you are in Nevada because of our tourism."