Nevada cannabis operators and other stakeholders lobbied for structural changes to the state’s adult-use and medical marijuana programs, and the legislature answered by approving several industry-friendly bills during its most recent session.
The industry-backed changes signed into law last month by Gov. Joe Lombardo included eliminating and capping various fees, reassessing penalties for operating violations and creating a dual license for retailers serving both medical patients and recreational consumers.
The policy overhauls, which garnered bipartisan support in Nevada’s Democrat-controlled Legislature, will save some operators tens of thousands of dollars per year in business expenses while significantly expanding retail access, industry insiders told MJBizDaily.
“As the legal cannabis industry continues to evolve and look for ways to better serve consumers with safe and affordable products, we are grateful that our state legislators and Gov. Lombardo responded with a slate of supportive legislation,” said Scot Rutledge, a partner at Argentum Partners, a government affairs and marketing firm based in Reno.
The developments come as Nevada posts cannabis sales well below the peaks seen in 2021 and industry executives prepare for the highly anticipated rollout of consumption lounges, primarily in Las Vegas.
Fines and fees
Through Senate Bill 195, the Nevada Legislature granted cannabis operators reprieve from excessive fees, penalties and other compliance costs.
Key provisions of the bill include:
Eliminating the regulatory practice of “stacking” charges or violations. Under the new law, operators will be cited for a single violation rather than multiple citations for the same offense.
Throwing out the regulatory practice of “time-and-effort” billing, in which licensees were charged high hourly rates by the state’s Cannabis Compliance Board (CCB) for routine audits, inspections and investigations.
Lowering the maximum penalty for any single business violation from $90,000 to $20,000.
Under the previous system, stacking violations could lead to outrageous fines, according to Layke Martin, executive director of the Nevada Cannabis Association.
In one example she cited, the state fined a retailer $40,000 in response to a complaint about lack of paper towels in a bathroom.
“If you look at some of the complaints in Nevada, you will see that they were most often in the six figures,” she said.
“Many of the times, they were for administrative violations.”
Under SB 195, the CCB is also prohibited from invoicing cannabis businesses and applicants for so-called “time-and-effort” charges for normal business interactions with regulators, including document reviews and compliance inquiries. In Nevada, that rate was set at $111 per hour.
Last year, Nevada cannabis operators paid $1.7 million in time-and-effort charges, Martin said.
The new law mandates that regulators bill operators only for costs and charges authorized by state statute.
Opponents criticized the previous policy for essentially double-charging marijuana businesses since the CCB’s annual budget of about $10 million is entirely funded through cannabis excise taxes.
“We saw a 500% increase in time-and-effort billing to the industry over the past few years,” Martin said.
“I have one licensee in our in our membership who was billed $47,000 over the course of the year.”
The goal of these changes is to alleviate some of the economic burden on operators and incentivize compliance and cooperation, according to Melissa Waite, a Las Vegas attorney with the law firm Dickinson Wright.
“Cannabis operators hope SB 195, coupled with other changes during the session, will provide more certainty and fairness in the disciplinary process,” she said.
Omnibus bill ushers in wholesale changes
Senate Bill 277 not only provides new benefits for consumers, retailers and the state’s supply chain, it reduces maximum fees for nearly every marijuana license, as outlined in legislation sent to the governor for his signature.
Last-minute amendments to increase some of those maximums were met with fierce industry resistance, insiders told MJBizDaily.
“The result was that the fees for initial licensing and renewal of an adult-use cannabis license were reduced, except for the initial issuance of an adult-use retail license, which remains unchanged at $20,000,” Waite said.
“The bill includes many other changes that undoubtedly benefit the industry.”
Other stipulations of the omnibus bill include:
The creation of a dual license for medical and recreational retailers, allowing them to serve any type of customer.
Increasing the purchasing limits of flower from 1 ounce to 2.5 ounces.
Increasing the purchasing limits of cannabis concentrates from an eighth of an ounce to a quarter of an ounce.
About one-third of Nevada’s 100 cannabis retailers will benefit from the dual-license designation, allowing them to serve both adult-use and medical consumers.
The state had roughly 12,500 medical marijuana cardholders at the end of May, according to the latest figures from the state’s Department of Health and Human Services.
More than 100 cultivators, processors and distributors also will benefit from the expanded market, according to the CCB.
Unique factors led to big changes
The bundle of approved cannabis-related legislation also included:
Establishing a working group to study psychedelics.
Creating an employment path in the industry for former convicts.
Revising the excise tax on wholesale cannabis to 15% of the actual sales price, rather than 15% of the “fair market value” set by the Nevada Department of Taxation. Fair market value often inflated the actual cost of goods sold, industry representatives said.
CCB Executive Director Tyler Klimas credited lawmakers for taking an aggressive approach to mitigate some of the industry’s biggest pain points and acknowledging what many states have yet to do.
“This is a recognition that the cannabis industry is a significant player in the state’s economy,” he told MJBizDaily. “And we’re evolving appropriately.”
The proliferation of bills also is partly a consequence of state lawmakers convening every other year to pass legislation as well as the industry coalescing to address specific challenges.
“I think everyone has expectations and is comfortable with the idea that every two years, we’re going to come back and tweak things as the industry evolves,” Martin said.
“And then, we come back and try to fix what we can in a four-month time period.”
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.
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