Question: When did wholesale alcohol distributors get involved with Nevada’s recreational marijuana program? Why does the delivery of marijuana to dispensaries depend on them?
Lots of Nevadans are asking now that pot shops are running out of marijuana less than two weeks after recreational marijuana sales began in Nevada.
Alcohol distributors’ unfinished court battle with the state has halted any imminent delivery of wholesale marijuana to retailers since they are the only ones currently allowed to deliver wholesale marijuana product, the product that gets sold to dispensaries from the cultivators.
Gov. Brian Sandoval last week endorsed an emergency regulation in an effort to get supply out to dispensaries during the state’s early start program. The Nevada Tax Commission will vote on it Thursday, and a district court judge is expected to review it assuming the commission approves the regulation this week.
But how did we get to this point?
Short answer: A small group of wholesale alcohol distributors gave money to the marijuana legalization campaign at its start, which inspired language in Question 2 that entitled distributors to exclusive rights to deliver recreational marijuana to dispensaries for the first 18 months of legal sales.
Long answer: In 2013, marijuana legalization activists were in the midst of writing Question 2, the Nevada ballot measure that legalized adult-use marijuana in November. They were also in talks with alcohol, gaming and even mining stakeholders statewide, pushing for their support.
“We had to affirmatively have conversations with all of those people before we could submit anything. We were looking to build a viable coalition, the alcohol distributors were part of that,” said Heather Azzi, lead author of Question 2 and the senior campaign counsel for the Marijuana Policy Project, a national lobbying group.
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About one-third of alcohol distributors hated the idea of collaboration, another third didn’t care and the rest said, “I’m in,” according to Joe Brezny, former chairman of the Coalition to Regulate Marijuana like Alcohol.
Expecting that those distributors would contribute between $100,000 and $250,000 to the campaign, the ballot measure was written to entitle alcohol distributors to exclusive rights to deliver recreational marijuana to dispensaries for the first 18 months of legal sales, Brezny said.
Advocates figured alcohol distributors know how to deliver goods, and it would create more accountability by using an independent third-party middleman between cultivators and dispensaries.
“Boy, do I wish we never had done that,” he said.
Initially, investors from the alcohol industry remained on-board. On May 14, 2014, seven investors — six of them from the alcohol industry — donated $12,500 each, according to records from the Nevada Office of the Secretary of State:
Capitol Beverages of Carson City
Bonanza Beverages of Las Vegas
Crown Beverages of Sparks
Nevada Beverage Co. of Las Vegas
Morrey Distributing Co. of Sparks
GBB Express of Wells
Patrick J. Blach Gaming Trust of Elko
Past that date, however, alcohol investors closed off their pockets. They realized operating in the recreational marijuana industry, an industry that is illegal under federal law, could potentially endanger their federal liquor distribution licenses, Brezny said.
Based on that fear, Azzi included in the ballot’s language that an insufficient number of qualified applicants for the recreational marijuana distribution licenses could open the application process to applicants outside the alcohol industry.
Using that loophole, the Department of Taxation argued in March that, in fact, there were too few alcohol distributors that were interested and/or eligible for the recreational marijuana distribution licenses.
A band of distributors, not the same ones who contributed to the Question 2 campaign, formed the Independent Alcohol Distributors of Nevada and challenged the department in court. A district court judge in Carson City validated the distributors’ concerns and ordered a stop on all distribution licenses until the department wrote a new regulation.
The Nevada Tax Commission will vote on the new regulation on Thursday, though the regulation will thereafter have to be reviewed in court before it goes into effect, according to Kevin Benson, attorney for the Independent Alcohol Distributors of Nevada.
While alcohol distributors still would be able to apply for distribution licenses under the proposed emergency regulation, the door would also be open to outside applicants. If the court refuses the regulation, it’s back to the drawing board.