Nevada marijuana growers are fearful of going out of business as the state moves forward with a set of permanent regulations that some cultivators say give dispensaries an economic advantage.
Cultivators before the Nevada Tax Commission on Tuesday lamented the number of dispensaries that have begun growing their own marijuana, saying that they had for years kept the medical marijuana market supplied with Nevada-grown weed.
But the new regulations could shut cultivators out of the industry, they argued. Cultivators traditionally grow marijuana to be sold to dispensaries, which in turn sell the product to the public.
If enough dispensaries get their cultivation licenses, for which there is no cap in Nevada, some of the growers may have to shutter their operations.
“We produce one of the best products on the market. We supplied a lot of the dispensaries product before they could cultivate. A lot of them no longer need us since they’re growing their own (product), and they’re getting bigger and bigger and shutting us out,” said Craig Romvough, co-owner of Mother Herb, based out of the Las Vegas area. “We need a free market.”
The commission on Tuesday was reviewing a 256-page set of permanent regulations likely to replace the industry’s current, temporary regulations set to expire in March. The commission unanimously approved the regulations, which address testing, labeling, packaging, delivery, security, taxation and a number of other issues. The regulations now are headed to the Legislative Commission for approval in February.
Cultivators asked the commission to consider changing the language in the regulations to give more power to cultivators by partnering them with dispensaries, or allowing more of them to open their own dispensaries. A handful even formed the For Fairness in the Cannabis Industry LLC, aimed at leveling out the competition for cultivators.
“A lot of dispensaries are going online with their own cultivation, and we go to them and they ask, ‘Why should we pay $2,500 a pound when we can grow our own for $700,'” said Mark Bradley, also a Las Vegas-based cultivator who applied for a retail dispensary license. “I’m worried that our business isn’t going to last another 18 months. These were mini-monopolies that were created.”
Nevada Department of Taxation Director Deonne Contine said that there was little that her department, which oversees the burgeoning industry, could do. The original ballot measure, Question 2, that legalized adult-use marijuana a year ago outlined strict rules for the license application process during the first 18 months of legalization. Those rules include a set of guidelines on how to rank applicants, and those guidelines tend to reward those who previously have operated a similar business.
Only medical marijuana establishments, for instance, are allowed to apply for recreational marijuana dispensary, cultivation and production licenses, Contine said.
While many medical marijuana cultivators applied for both a recreational marijuana cultivation license and a recreational marijuana dispensary license, there are far fewer of the latter licenses available. Because there is no cap, however, on the number of cultivation licenses allowed, many dispensaries were able to get cultivation licenses.
Many of Reno’s dispensaries, for instance, are vertically integrated, growing product in a warehouse facility separate from the storefront or they are soon to go online with their own cultivation.
“Everybody that has an issue with the application process today, is someone that didn’t get one,” Contine said.
She added that ultimately the department awarded all licenses based on a set of criteria outlined in the regulations, which set industry standards for things like testing, labeling, delivery and security for the recreational marijuana industry. The department favored establishments that had the best histories of compliance, taxation and overall experience.
“We have to have rules, we have to have rules that consider public health and safety. I always tell people, be competitive in your application,” Contine said. “We’ll give everything a fair look. There is no intention that this process not be fair and we will be mindful too of the regulations and the law.”
Other regulations discussed during the tax commission meeting included a ban on online-based platforms that coordinate home deliveries of recreational marijuana, though retail establishments will continue to work with contracted distributors to allow home deliveries to continue.
“The problem with going to an Amazon or an Uber (for marijuana delivery services) is we could see an issue with law enforcement not being able to identify which websites are legit and which are not,” said Riana Durett, executive director of the Nevada Dispensary Association. “The Amazon or Uber of marijuana also would not be required to pay taxes.”
Contine also discussed the requirements for testing recreational marijuana for a variety of molds, pesticides and other harmful toxins.
The state since debuting the retail marijuana program in July has collected more than $19 million in taxes, according to the state’s most recent data reported in early November. In the retail marijuana industry, there are currently 63 licensed retail stores, 96 cultivators, 67 producers and eight labs.