Nevada Expands Cannabis Industry With Consumption Lounges

Following a tumultuous round of dispensary licensing in 2018, which caused uncertainty and infighting in the state’s fledgling cannabis industry, the Cannabis Compliance Board (CCB) took over the marijuana regulatory reins in 2020. The code focused on cracking down on bad actors and offering personalized regulation that brought stability to the industry from the 2021 parliamentary session.

Lawmakers in this session took a significant step to widen and diversify the industry’s ownership that is overwhelmingly white and male. They achieved this while creating a new license type for cannabis consumption lounges that allows tourists to legally consume marijuana. Following lessons learned in the eight years since the state first permitted marijuana dispensaries, the board also approved numerous other changes such as permanent curbside pickup, reevaluating police protocol for determining whether someone is driving under the influence of marijuana, and revised product labeling.

Assemblyman Steve Yeager (D) said that it’s been a long journey from the start of the 2013 session, when they launched the dispensaries, to where they are now.

“It’s really nice to see how the industry has matured,” said Yeager. “The legislation that we see this session is really in recognition that we’ve primarily done things right and to try to take that next step.”

A new legislative session would allow the compliance board to meet with legislators due to the work it had to do in July 2020 after becoming the state’s marijuana regulator.

Klimas says they are “very pleased” with how it came up.

“So much of this legislative session was focused on education for the CCB,” said Klimas. He added that they would report the CCB’s progress to the legislature for the first time in 2021. The director believes the legislature got the message.

The session saw the passage of a wide range of cannabis-related legislation, most of which, according to Yeager, was aimed at implementing best practices and making selective changes to existing regulations. He also mentioned that many of these changes occurred due to the pandemic as more people became comfortable with cannabis use.

Yeager said, “I think the stigma is definitely going to lessen.” Steve believes that because of the pandemic, many people in the cannabis industry are customers for the first time. He says that as they move forward, “consumers will become more comfortable with it.”

The following bills were signed into law by Gov. Steve Sisolak and relate to the state’s marijuana industry and the CCB:

AB341: Authorizing cannabis consumption lounges

Due to AB341, a bill that will help establish the licensing and regulation of cannabis consumption lounges, the marijuana industry will see the most significant change in the 2021 legislative session.

A number of those who work in and around the industry say that the Yeager bill, which calls for increasing diversity in state cannabis business owners, has been met with great enthusiasm. To help solve the problem of having no legal place to consume cannabis, the assemblyman mentioned the consumption lounges as a Las Vegas-based effort.

“I see that…as a plus from the tourism aspect,” Yeager expressed in an interview with The Nevada Independent. “But then on the local side, right, being able to bring in new players into the business, having that create jobs—that’s really important coming out of the pandemic.”

Though NuWu Cannabis Marketplace, which is on the Las Vegas Paiute Tribe land, already provides a space for people to consume cannabis, Yeager’s bill authorizes the first tightly controlled, state-licensed locations Nevadans and permits travelers to use medical cannabis outside of their residences.

To comply with requirements, lounges will be restricted to adults over 21. In addition, venues will allow ready-to-consume or single-use products to be sold. Still, they won’t do so in quantities that will enable them to be construed as retail cannabis dispensaries.

Lobbyist Scot Rutledge said that many Chamber of Cannabis members has been enthusiastic regarding the lounges.

According to Rutledge, there is an immense amount of anticipation because it’s the first time for Nevada in “providing for a new license type.” Futhermore, he stated that the intention is to allow the community outside the trade “to have as much of a chance…to participate.”

With the bill, 20 cannabis consumption lounges and 20 retail consumption lounges will be allowed to begin operations with the possibility of additional independent licenses. Those applications would be decided upon by the CCB within 180 days.

Expanding the diversity in industry ownership is now possible with these new licenses. According to a demographic report published by the CCB in February, owners and board members of Nevada’s marijuana businesses are predominantly white and male compared to the workforce of the industry, which is more racially diverse.

The bill stipulates that 10% of the first 20 independent lounge licenses must go to applicants from underrepresented groups.

“Those 10 licenses are reserved for social equity applicants, and if there aren’t any, they stay there until there is. They don’t get redistributed among other people,” said Yeager. “We’re purposely holding some back, which I’m hoping is going to help us achieve the purpose.”

The CCB will decide who is considered a social equity applicant as there is no hard-and-fast definition. Cannabis Advisory Commission member Klimas announced that the definition will be established through the establishment of an equity, inclusion, and diversity subcommittee within.

“We’ll need to define what a social equity applicant is. That’s really the start of it,” said Klimas. “What does it mean to be an individual that has been harmed by the War on Drugs and how can we help get those individuals into this industry.”

The measure also gives the CCB the ability to give applicants more financial leeway in addressing social equity issues. In contrast to retail consumption lounges, which can cost as much as $100,000, independent consumption lounges generally cost $10,000, and license fees for both types of lounges are $10,000. It allows the board to reduce all expenses for a social equity applicant by up to 75 percent.

Many regulations are left to the board, and local governments can draft additional regulations by passing ordinances.

“We just didn’t believe that 120 days was really enough time to sort of figure out some of the details around how these venues might be operated or all of the things that need to be considered in licensing those businesses,” Rutledge said. “So I think we did it the right way by deferring a lot of those decisions to the CCB.”

According to Klimas, developing regulations will take several months. In the meantime, the board will use workshops, board meetings, and advisory committee meetings to shape the new cannabis regulations.

Accusations of unfairness and favoritism from the Department of Taxation marred the licensing round for 2018, which took place last year.

“Given some of the past licensing processes,” said Klimas. “This process is going to be about openness and transparency and thoroughness to ensure everybody’s on the same page and the board is very public in how we’re going to do things.”

Though the CCB is primarily completing the regulatory framework, Rutledge still made sure to add that he and other cannabis advocates would like to create a specific framework for the lounges.

Additionally, law enforcement did not want to see marijuana and alcohol sold in the exact location—a reason why one aspect of that framework was implemented. This other policy aims to give more freedom to businesses that operate lounges under the “bring your own marijuana” model. Unfortunately, it has proven ineffective for these types of companies in the past.

Rutledge stated that they “understood that what they had done in Denver originally” prohibited several lounges from selling cannabis. However, he also said that “bring your own cannabis model” did not work well in their situation.

Nevada Dispensary Association’s executive director Layke Martin said that both retail and independent lounges can provide the industry with new ideas.

“I think there’s a lot of opportunity for creativity and entrepreneurship,” said Martin. “I think a lot of these can become a destination, in and of themselves. And so it could be a video game thing where you can also consume cannabis. Or it could be like a tasting room situation where you can also consume cannabis, and you have the opportunity to get educated and try new products, kind of like a tasting room in a winery.”

Planning for the likelihood of lounges has been in place at several existing dispensaries, including Planet 13 and The Apothecary Shoppe, since the idea was presented but ultimately abandoned during previous legislative sessions.

Klimas said the new licenses are not expected to “come on board” until sometime next year, possibly mid-2022. However, Yeager believes that the lounges will serve to stimulate the return of Nevada’s economy.

“I can tell you without a doubt that Vegas is back in a really big way, and I think the addition of consumption lounges is only going to add to that,” said Yeager. “I actually think it’s going to put Las Vegas on the map, to the extent that it isn’t already, to be the cannabis destination, especially if we’re able to open up some really interesting, innovative concepts.”

In the Assembly, the bill passed by a 29-12 vote, while in the Senate, it passed 17-3. As a result, the Nevada Senate was the last legislative body to take action on the bill. Only Senators Dina Neal (D-Las Vegas) and Fabian Doñate (D-Las Vegas) voted against it.

AB149: Improving Cannabis Testing Transparency

Assemblywoman Sarah Peters (D-Reno) proposed a bill requiring the laboratory’s testing information to be available online.

To supply the database, which is expected to cost nearly $250,000 over the next two years, the CCB still requires approval from the Interim Finance Committee of the Legislature. However, Klimas is excited about offering the functionality to consumers.

“It’s just another level of transparency that we can bring out. I would do it tomorrow if I had the capacity to do it,” said Klimas. “This data should be available for everybody to use. Right now, you can go to a dispensary, and if you purchase a product, you can ask for the certificate of analysis. So you can see that kind of information, [but] some people don’t know they can ask for it.”

At this moment, customers can head to a dispensary, where they can purchase a product. Afterward, they can request the certificate of analysis. Then, information of that type is examined to ensure it is correct. “[But] people are unaware that they can request it,” Peters ended.

As with other independent laboratories, some state’s labs have expressed concerns about transparency in the past. However, in 2019, a group of four marijuana testing labs, including questionable labs, openly condemned other unidentified labs for allegedly attempting to inflate THC content readings and fail samples as a corporate strategy.

According to previous regulations that mandate the CCB to implement cannabis testing standards for independent laboratories that conduct tests for a wide range of criteria, including microbial contaminants (bacteria, molds, and yeasts), cannabinoid and terpenoid content, and heavy metals and pesticides.

Because the board’s tracking system allows them to trace cannabis products from seed to sale, all online information will be based on that data. Additionally, the database must also contain all of the test results conducted on cannabis products by an independent lab.

There was no disagreement with the bill in the Assembly and Senate. However, Sen. James Ohrenschall’s (D-Las Vegas) wife, Riana Durrett, is a member of the CCB, so he abstained from voting.

SB168: Cannabis Product Curbside Pickup

The new bill introduced by Senator Roberta Lange (D-Las Vegas) and Senator Joe Hardy (R-Las Vegas) would allow and regulate curbside pickup for medical marijuana dispensaries following the CCB’s regulations. In addition, the measure legalizes an activity previously allowed last year during the state’s mandatory stay-at-home order due to coronavirus infection.

Curbside pickup service now features some of the present-day amenities, such as reserved parking spaces, security cameras with a direct line of sight to the vehicles, and a ban on people under the age of 21 driving.

Supporters of the initiative argue that providing the service is beneficial to businesses and helps customers obtain their products more conveniently.

“Reviews of dispensaries often praise curbside pickup, especially in regards to customer convenience.” said Martin, noting that the “customers really liked it.”

Also included in the measure is the power for local governments to pass ordinances to regulate curbside pickup that goes beyond what was authorized by the governing board.

The bill passed in the Assembly with a 35-6 vote and a 19-1 vote in the Senate.

SB122: Mandatory Cannabis Employee Health and Safety Training

Senator Chris Brooks (D-Las Vegas) introduced SB122, which would require new hires at facilities involved in marijuana cultivation, production, and dispensing to complete a one-year course from the federal Occupational Safety and Health Administration (OSHA). The course is designed to new hires about personal and work health and safety.

Employers must pay for the training and fire employees who do not complete the training within one year. For example, employees hired before July 1st, 2021, must complete the OHSA training program by July 1st, 2022, except for legal employees and those who are not involved in the day-to-day operations of an establishment or communications.

A 30-hour course for supervisory personnel and a 10-hour course for other staffs are required, both of which must be undertaken by a permitted outreach trainer and can be completed online or in person.

Although other training requirements for cannabis business employees are already in place, Martin emphasized the importance of such training.

“It’s a very regulated industry; safety and security [are] paramount,” said Martin.

Some Republican lawmakers voted against the bill, which passed 31-11 in the Assembly and 14-7 in the Senate. During a committee vote on the bill in March, several Republican senators shared concerns that the legislation would be onerous and unnecessary for retail employees in the industry.

AB400: Driving While High On Cannabis

AB400, which was approved by the Yeager Coalition and put into effect on July 1, eliminates specific “per se” limits for cannabinoids. Under the bill, cannabinoids found in someone’s blood would result in a DUI unless the person committing the offense had a felony conviction, including ones that resulted in someone’s death or caused substantial bodily harm.

Rather than using a blood or urine test, drivers will be presumed to be impaired under AB400 if their ability to legally operate their vehicle has been compromised due to the prevalence of cannabis in their system.

There is no science in the idea of “per se” limits, according to Rutledge. That’s definitely a “problem for anyone who uses cannabis,” he added. Rutledge also noted that the law is cruel for patients who may not be under the influence while operating a vehicle, who theoretically use more THC than the average recreational user.

Yeager discussed that “per se” limits do not reflect impairment because THC is metabolized differently in each person’s body.

“I was up at the session in 2013 and 2015 as a lobbyist,” said Yeager. “And I remember talking back then to folks in the Legislature about the DUI laws because cannabis is this weird … space because it’s federally illegal but legal in the state. And our state laws around DUI really contemplate its federal illegality, and we’re almost zero tolerance.”

Because people were not ready to accept the underlying concept behind the bill, it took time for them to realize that cannabis impairment cannot be treated the same as alcohol, and thus the bill was passed during the 2021 legislative session.

In the Assembly, the bill was passed along party lines, with Republicans opposing it and other senators voting for it.

AB158: Reduced Cannabis Penalties for Minors

Assemblywoman Daniele Monroe-Moreno’s (D-North Las Vegas) bill to reform penalties for minors who purchase or possess alcohol or cannabis eliminates mandatory jail time and fees for first and second offenses, making them significantly less severe.

Monroe-Moreno has described the bill as a way of being helpful to children who make mistakes, rather than a purely punitive measure. Supporters of the bill have called it another means of helping those affected the most by the War on Drugs.

Underage drinkers and those with less than an ounce of cannabis would face less severe penalties, such as 24 hours of community service and meeting with a panel of victims of substance-impaired drivers.

Penalties for a second violation are revised to include 100 hours of counseling, support group, or treatment.

AB158 received unanimous support in the Assembly and Senate, and it was signed into law by the Governor on May 28th.

AB326: Illegal Market Crackdown

Assemblyman Tom Roberts (R-Las Vegas) introduced AB326 to address the state’s illegal cannabis supply chain by allowing district and city attorneys to file civil lawsuits against anyone who cultivates and distributes cannabis illegally. Even if someone commits an infraction, they can still be subject to criminal charges.

AB 326 would also require that all advertising for a cannabis establishment include the establishment’s name and license number.

According to Martin, the goal of the black market intervention is to hinder illicit market activity from functioning in the shadows of the legal market.

While Ohrenschall recused himself from the vote, no one in the Assembly or the Senate raised objections when the bill passed the Senate on May 21.

SB168: CCB Regulation Of Packaging and Labeling

SB168 allows the board to establish regulations regarding the packaging and labeling of cannabis and cannabis products.

“We have really extensive packaging and labeling regulations on the books right now,” Klimas said. “What this bill allows and recognizes is that this is an ever-evolving industry, so let’s make sure the board has the power to … host workshops and get stakeholder feedback both from the public and the industry. And if we need to make changes on packaging and labeling, then we can do that and we don’t have to wait every two years.”

Additionally, Klimas believes they have the freedom to make any necessary changes to packaging and labeling whenever necessary. The board hosts workshops on labeling and packaging regularly, which helps the agency to remain “in the know” with the regulations.

The bill passed in the Assembly with a 35-6 vote and a 19-1 vote in the Senate.

SB49: Modifications to CCB Disciplinary Hearings

SB49 is intended to assist the CCB with its complex administrative discipline processes. This includes allowing them to hire staff to help with hearings and removing the authorization for the board to take a witness’s testimony by deposition due to time constraints and resources required for a deposition.

SB49 also makes it easier for a person to have an ownership interest in a cannabis business. By removing the barrier for minority stakeholders, the board can pass policies to waive state regulations for less than a 5% ownership stake. The provision is designed to help large corporations lessen their tax burden.

According to audit investigator David Staley, the requirements could be a hindrance for publicly traded companies with thousands of frequent-trading shareholders

The words “THIS PRODUCT CONTAINS CANNABIS” will now be required on cannabis products offered for sale, in place of current requirements that label such products with such words as “THIS IS A CANNABIS PRODUCT” or “THIS IS A MEDICAL CANNABIS PRODUCT.”

This bill garnered 41 votes in the Assembly and zero votes in the Senate.

SB278: Cannabis Wholesale Tax

The “wholesale sale” clarification introduced by Sen. James Settelmeyer (R-Minden) is sponsored by the marijuana excise tax.

According to Klimas, when facilities are owned by the same individuals, one can perform a function better than the other and transfer product between them. That gives clarification when the taxes are added, he stated.

On June 3, the bill was approved without opposition by both chambers and was signed into law by the governor.

SB404: Authorizes Cannabis Weighing and Measuring Equipment Regulations

SB404, introduced on behalf of the Governor’s Office of Finance, directs the State Sealer of Consumer Equitability to establish cannabis weighing and measuring equipment regulations. The bill is intended to bring up-to-date existing legislation, which previously did not include references to cannabis-specific equipment.

While Assembly members voted 33-8 in favor of the bill, several Republicans were against it in the Senate.

AB101: Allows Veterinarians to Give Animals CBD Products

This bill, sponsored by Yeager, allows licensed veterinarians to use CBD or hemp products in the treatment of animals and recommend such products to pet owners. It also forbids the state Board of Veterinary Medical Examiners from disciplining veterinarians who administer or use such products.

As Yeager points out, this bill, dubbed the “pot for pets” bill, does not deal with marijuana, as do several other bills he has sponsored. Cannabis has more THC and less CBD, whereas hemp products (which are legal under this bill) have more CBD and less THC. Both compounds are found in the Cannabis genus of plants.

“It was surprisingly easy to get through, this time,” Yeager said of the measure, which has been considered but rejected in past legislative sessions. “And maybe that’s just the comfort level that we have, Nevadans have, not just with the cannabis industry but certainly with CBD. I think a lot of people have experience with CBD at this point.”

AB101 passed the Assembly 40-0 and the Senate 20-0 before being signed into law by the Governor on May 28.

SB58: Cannabis-Related Criminal Investigations

SB58 initiative is supported by the Investigation Division of the Department of Public Safety to increase coordination between state agencies while working on criminal investigations about cannabis. The division is now required to provide investigative services to help carry out such investigations.

No one in the Assembly or Senate opposed SB58 when it was passed.

Failures on Licensing Attempts

While lawmakers approved the licensing of more than 40 new cannabis establishments through consumption lounges, discussions about adding new license types stalled during the session.

SB235: Dual Licensing

The CCB would have been allowed to issue more cannabis establishment licenses under the state’s cap than currently permitted under the adult-use licensing system. Instead, a new licensing procedure meant to increase the number of new permits and prioritize social equity applicants will be done every two years by the board.

Even some of the Nevada Dispensary Association members left because of the backlash caused by the bill. Those who lost out in a previous round of licensing favored a proposal that would have given those who were shut out in the most recent licensing competition a chance to join the market.

As a result of the constitution, the lengthy legal battle over the previous licensing round was reignited. In addition, issues concerning the market’s ability to support many new marijuana shops also came to light.

There are currently 85 licensed cannabis dispensaries 40 additional dispensaries that could be licensed during the 2018 process. However, because the number of retail cannabis stores in the state is limited, there will be fewer than usual.

It is possible to have up to 80 dispensary licenses in Clark County, 20 in Washoe County, four in Carson City, and two in every other county in Nevada under current state laws. However, regulations set in a particular locality can place further restrictions on the number of licenses allowed in a county.

Yeager noted that though he was not aware of the measure during his committee chairmanship, many disputes surrounded the issue.

According to Yeager, the industry “was so conflicted on that concept,” and it just kind of blew up.

The bill was never put to the vote on the Senate floor.

AB322: Cannabis Event Licensing

This bill, sponsored by Assemblyman C.H. Miller (D-North Las Vegas), sought to create a new license type known as “micro-licensing.” The bill aims to facilitate the operations of cannabis events that allow people to purchase and consume products. Like food festivals, events might feature various vendors that offer cannabis products for customers to use onsite.

The proposed measure was estimated to have a monetary impact in the millions by the CCB. Unfortunately, it never got a hearing in the Assembly’s money committee. However, supporters of additional cannabis legislation touted it as a positive next step.

Given the time it took to set up cannabis lounges, Yeager thinks it’s a good idea but “was just very wary” of doing too much at once. However, he considered that the next step is likely to be cannabis events and the licensing of more significant events—since people are already attending those events. “We know that…we probably should regulate it in some fashion,” he ended.

The new types of licenses issued over the next two years in retail and independent consumption lounges are being considered even though the number of new permits is only two for the next two years.

“Obviously lounges will be a licensing round, but when we’re talking about the traditional establishments, like cultivation, production and retail, we’re going to open up those licensing rounds at some point,” said Klimas. “But we want to make sure that those decisions on how many to award, how many to open up are driven by data.”

Despite SB235 failing to conduct a market study, board member Klimas said the board plans to launch a comprehensive survey of the industry, most likely by a third party.

“We want to know what is the health of the market in the state of Nevada, what’s our supply, what’s our demand, what are our needs,” said Klimas. “That’s going to be something exciting over the next year or two to get those results and see where this industry needs to continue to mature towards and how the CCB is going to facilitate that. That’ll likely end up and result in new legislation that we’ll bring forth in the 2023 legislative session.”

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