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License Dispute Could Delay Nevada Recreational Pot Sales

RENO, Nev. (AP) — The July start of Nevada’s recreational marijuana sales could be delayed after a group of liquor wholesale distributors filed a legal challenge to a licensing deadline, arguing they have the first rights ahead of existing medical dispensaries to distribute recreational pot.

A state judge sided with the alcohol distributors and issued a temporary restraining order late Tuesday prohibiting Nevada’s Department of Taxation from enforcing a deadline that passed Wednesday to apply for marijuana distribution licenses.

Carson City District Judge James Wilson ruled the department failed to follow the proper regulatory procedures in making a determination last month that the medical dispensaries themselves could apply for distribution licenses because there wasn’t enough interest among the liquor wholesalers.

“The statute clearly gives a priority and exclusive license to alcohol distributors, in order to promote the goal of regulating marijuana similar to alcohol,” Wilson wrote in an 8-page opinion.

Officials for Nevada’s Department of Taxation still expect the first recreational sales to begin July 1 at some existing medical marijuana dispensaries but acknowledged Thursday it’s not clear how the regulatory process will play out as a result of the judge’s ruling.

The Independent Alcohol Distributors of Nevada filed the complaint arguing that the November voter-approved ballot measure gave liquor wholesalers exclusive rights to marijuana distribution licenses for the first 18 months of sales in the state.

Sam McMullen, an attorney for the liquor wholesalers, said Wilson’s new order likely will delay the expected July 1 start for recreational marijuana sales.

“We just want our rightful place,” he told the Las Vegas Review-Journal. “We don’t want to slow this down inordinately.”

Nevada Tax Department spokeswoman Stephanie Klapstein said Thursday the ruling means the agency cannot issue marijuana distributor licenses to anyone other than liquor wholesalers until the judge holds a hearing and rules on the merits of the case.

“We expect a hearing on the matter to be scheduled for some time in the next couple of weeks,” Klapstein said in an email to The Associated Press. “We are still looking toward a July 1 launch of the program.”

The recreational sale of marijuana in Nevada became legal Jan. 1.

The law requires permanent regulations be in place by Jan. 1, 2018 to regulate the sale and distribution of the pot. But Nevada’s Legislature is expected to give final approval within the next week for a “quick start” program intended to allow existing medical dispensaries to sell pot recreationally in the meantime so as not to lose out on the tax revenue expected to total $70 million over two years — all of it targeted for education.

Because the ballot measure states that “the people of the state of Nevada proclaim that marijuana should be regulated in a manner similar to alcohol,” state regulators subjected the pot sales to the same three-tiered system that separates alcohol production, distribution and retail sales.

Accordingly, the law states the law states that the department may only issue marijuana distributor licenses to alcohol distributors, “unless it determines that this would result in an insufficient number” of distributors.

But Judge Wilson said the department didn’t follow the necessary regulatory process in making that determination, including providing prior public notice and accepting public comment.

The liquor wholesalers “demonstrated irreparable harm, because they are likely to be entirely shut out of the marijuana distribution business if the department proceeds to issue marijuana distribution licenses to existing marijuana establishments, instead of solely to alcohol distributors,” Wilson wrote.

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