Recreational Pot Comes to Nevada... But Why Are The Shelves Empty?
by Kate Lowenhar-Fisher, Jennifer Gaynor, Jeff Silver, and Greg Gemignani
On July 1, 2017, Nevada became the fifth state in the United
States to legalize the sale of recreational marijuana. The
epicenter of "what happens here, stays here" tourism just
added a new vice to its repertoire! So, what's the
problem?
Among other things, Nevada's recreational marijuana
dispensaries are facing the specter of empty shelves. Why? Because
a wrinkle in the ballot measure that legalized recreational
marijuana sales in Nevada gives licensed liquor wholesalers a
temporary 18-month monopoly on marijuana distribution rights ...
"unless the [Nevada] Department [of Taxation] determines that
an insufficient number of marijuana distributors will result from
this limitation." In order to fill its shelves, a
Nevada-licensed recreational marijuana dispensary must use a
licensed recreational marijuana distributor to transport the
product from the cultivation facility to its retail outlet, because
the law for recreational use does not allow dispensaries to
transport marijuana from a cultivation facility to their stores
(whereas dispensaries selling medical marijuana were allowed to
move "medical-use" product from cultivation locations
without an independent distribution network).
Despite efforts by marijuana dispensaries to stock up prior to
July 1, overwhelming demand for recreational marijuana has resulted
in dwindling supplies. And now, distributors are nowhere to be
found. That is because very few liquor wholesalers have applied to
become licensed marijuana distributors, and those that have made
such application have failed to meet the requirements for
licensure. The Nevada Department of Taxation (NDOT) reported that
as of July 7, 2017, ZERO distribution licenses have been issued by
NDOT.
Perhaps liquor wholesalers fear risking their federal alcohol
permits issued by the Alcohol and Tobacco Tax and Trade Bureau? It
would appear that marijuana distribution licenses would have to be
issued to persons other than liquor wholesalers – however,
nothing is that simple. A small group of liquor wholesalers, known
as the Independent Alcohol Distributors of Nevada, sued and, on
June 21, won a temporary injunction against NDOT to prevent
marijuana distribution licenses from being issued to persons other
than liquor wholesalers.
In response, on July 7, Governor Sandoval endorsed emergency regulations that would give NDOT the authority to determine whether there are a sufficient number of marijuana distributors to service the market – a determination that would allow NDOT to open up distributor licensing to those other than licensed liquor wholesalers. The emergency regulations will be considered by NDOT on July 13. Stay tuned.
2017 Legislative Update – Overview of Changes To Nevada
Gaming Law
by Jennifer Gaynor, Greg Gemignani, Kate Lowenhar-Fisher, and Jeff Silver
The Nevada Legislature, which meets every other year for 120 days, recently wrapped their 2017 session. In this session, the Legislature tackled a diverse set of issues that will impact gaming companies that operate in Nevada, including changes to the confidentiality of information submitted to Nevada's gaming regulators, allowing for pari-mutuel wagers on esports and other events beyond traditional sports and racing, and adjusting the boundaries for casino resort development within the city of Las Vegas.
Assembly Bill 75 – Nevada Gaming Control Board's Omnibus Bill
Assembly Bill 75, which was brought by the Nevada Gaming Control
Board ("Board"), exempts manufacturers, distributors, and
independent contractors associated with gaming from certain
licensing requirements and revises provisions governing the
regulation of trustees of an employee stock ownership plan by the
Nevada Gaming Commission ("Commission").
What may be the most interesting change, however, is this
bill's addition of a fifth possible action that Nevada gaming
regulators may take to dispose of a gaming application:
"rejection of the application." Before this bill, the
Commission could approve or deny an application, or refer the
application back to staff (the fourth option available is
withdrawal of the application, which may be done at the Board level
only). Now, the Commission may "reject" an application.
Such a rejection is not a "denial," but it allows the
Commission to dispose of an application without having to deny it.
This was done to provide the Commission more flexibility. But what
is unclear is how other jurisdictions will handle a
multi-jurisdictional applicant or licensee that has received a
rejection (but not a denial) from Nevada. Additionally, gaming
contracts regularly address contingencies that include what may
happen if a licensing application that is required for a party to
fulfill a contract is withdrawn or denied. This standard gaming
contract language will need to be updated to reflect the additional
potential outcome of "rejection."
Assembly Bill 219 – Adjusting Gaming Districts in the City of Las Vegas
This was a bill brought on behalf of the City of Las Vegas to
help them redefine the location of Gaming Enterprise Districts
("GEDs") within city boundaries, to balance between
gaming development and preservation of settled residential areas.
This bill eliminates a portion of the Las Vegas Boulevard gaming
corridor GED where that GED encroached into an established
residential area within the city. The bill also creates the
Historic Downtown Gaming District, to encourage development in the
historic gaming center of downtown Las Vegas. This district matches
up with the City's long-standing "permissive downtown
casino district" where nonrestricted gaming would be
acceptable, within a zone bordered by Main Street, Stewart Avenue,
Third Street, and Carson Avenue. The change was needed to allow for
development of new and expanded gaming resorts within the downtown
core.
Senate Bill 120 – Adjustments to Nevada's Problem
Gambling Program
Senate Bill 120 revises the membership and duties of the
Advisory Committee on Problem Gambling. The bill allows
Nevada's Governor more flexibility in filling the appointments
to the Advisory Committee on Problem Gambling because the
membership requirements had been so narrowly defined that some
advisory seats were left vacant as there were no appropriate people
to fill them. The bill also provides that the Advisory Committee
shall provide advice and information to decision- makers in the
state, such as the Governor, Legislature, and the Department of
Health and Human Services, about problem gambling for purposes
including assisting in the establishment of priorities for problem
gambling programs and services and recommending legislation,
regulations, or the adoption of public policy concerning problem
gambling.
Senate Bill 240 – Pari-Mutuel Wagering for
"Other Events"
Brought by the Boyd School of Law gaming law class, Senate Bill 240
clarifies that the pari-mutuel system of gaming may be utilized for
wagers on events other than horse racing, dog racing, or sporting
events. With the growing popularity of "esports" –
competitive video games where players often compete in a
stadium-style tournament – the gaming law class believed that
it would be helpful to provide flexibility to gaming operators in
offering wagers on such events. This bill also allows for
pari-mutuel wagering on a variety of other non-racing or sporting
events, which may, for example, potentially include the results of
reality competition shows.
Senate Bill 376 – Confidentiality of Information Submitted to
Nevada's Gaming Regulators
Senate Bill 376 addresses the confidentiality of data and
information provided by gaming applicants and licensees to state
regulatory agencies. This bill amends NRS 463.120, the statutory
section that provides for confidentiality of information submitted
to the Board and Commission as part of the Nevada state gaming
application process, to provide that
... if any applicant or licensee
provides or communicates any information and data to an agent or
employee of the Board or Commission in connection with its
regulatory, investigative or enforcement authority:
(a) All such information and data are confidential and privileged
and the confidentiality and privilege are not waived if the
information and data are shared or have been shared with an
authorized agent of any agency of the United States Government, any
state or any political subdivision of a state ... in connection
with regulatory, investigative or enforcement authority ...
(b) The applicant or licensee has a privilege to refuse to
disclose, and to prevent any other person or governmental agent,
employee or agency from disclosing, the privileged information and
data.
"Information and data" is defined to mean all
information and data in any form, including, without limitation,
any oral, written, audio, visual, digital, or electronic form, as
well as any account, book, correspondence, file, message, paper,
record, report, or any document containing self-evaluative
assessments, self-critical analysis, or self-appraisals of an
applicant's or licensee's compliance with statutory or
regulatory requirements.
This change was made because the confidentiality of information
obtained by the Board and Commission as a part of their routine
regulatory responsibilities has been under continual assault by
civil litigants, and the Board wants to encourage full disclosure
by applicants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.