Tuesday March 20, 2018
By Paul Barach
As you may know, Nevada legalized cannabis in 2016 and adult-use sales officially kicked off in 2017. At the start of recreational sales up until now, Nevada has been experiencing a rapidly growing cannabis industry full of ups and downs. From supply shortages and high prices to issues like tourists having no place to consume their cannabis legally, Nevada has certainly felt firsthand what it’s like to roll with the punches and headaches that accompany a brand new industry.
While there have been some trials and tribulations, Nevada’s cannabis industry continues to grow and cement itself as a legitimate source of commerce for the state. As more time goes by and the industry continues to progress, it’s not uncanny to believe that Nevada may become a future powerhouse and destination for cannabis tourism and events.
Nevada Adult-Use Cannabis Overview
Nevada’s recreational cannabis market got the jump on its neighbor California last July, when the state rushed through a provisional law that opened up sales in 2017. While California was waiting to open their dispensaries, Nevada’s recreational cannabis sales hit a record $37.9 million for the month of October. Sales then dropped to $33.4 million in November, although this is still $11 million over projected sales for that month. By the end of December, Nevada had collected $19 million in taxes.
It remains to be seen whether 2018 becomes the stellar year that 2017 was for Nevada. However, things are still looking bright for the Silver State.
With a 10% state sales tax to compete against neighboring California’s 15% state sales tax, Nevadans will not be tempted to buy across the border any time soon. If anywhere close to the 42 million tourists that came to Las Vegas in 2017 head there this year, Nevada’s cannabis market is assured a steady supply of customers.
This is great news for the local economy, even though competition is about to increase dramatically. Last year, there were nearly 300 licensed dispensaries across Nevada employing more than 6,500 people. This number is forecasted to rise dramatically after this coming November. Under Nevada’s Regulation and Taxation of Marijuana Act, November is when non-medical marijuana licensees may apply for a retail license. This means that anyone will be able to open up a dispensary, which will provide countless new jobs and increase healthy competition.
On top of increased access to licenses, there are also innovations to the marijuana market itself coming this year. Similar to Denver, where the first social consumption business is approved and slated to open in the near future, Las Vegas also looking to create a safe place for people to consume their cannabis in a social setting.
While the Jeff Sessions rollback of the Obama administration’s “hands off” approach to state-controlled legalization and regulation efforts caught Nevada off guard, many legislators are still pushing through with their efforts for marijuana lounges.
On the retail side, things are going far better for Nevada’s cannabis dispensaries and businesses than for their growers. State legislators are moving forward with new laws allowing more and more dispensaries to cultivate their own product rather than having to buy from farms. Many of the state’s traditional growers are worried they’ll go out of business as dispensaries vertically integrate. Meanwhile, Nevada’s hemp farmers are experiencing a boom.
With the growing demand for CBD and its medicinal properties, first rate, high-CBD varieties are selling for a reported $350 a pound.
As a point of reference, that’s nearly 10 times the price that mid-grade hemp flower goes for in Colorado. Nevada’s hemp farmers are expecting to continue ramping up production, as land is cheap, there’s a longer growing season and it’s dry enough so that mold is not an issue. Some farmers are even looking past Nevada to expand into the European market.
The Future of Nevada’s Cannabis Industry
As stated above, Jeff Sessions’ Justice Department could prove to be an enormous damper on Nevada’s growing market. With the formal removal of the 2013 Cole Memorandum, which deprioritized the use of federal funds to enforce cannabis prohibition, states like Nevada are left to navigate a vague legal world.
The leaders of Nevada’s cannabis industry have publicly stated their concerns that the removal of the Cole Memo could wipe out millions of dollars in local investments and in state tax revenue. However, a spokesperson for Nevada’s Department of Taxation has said that the state’s body for regulating cannabis would take no action against the market unless directed otherwise by federal authorities.
In other legal limbo is the gaming establishments that drive Nevada’s economy. State officials are still debating whether gaming establishments may endanger their businesses and risk their licenses by hosting marijuana business conventions. A second issue on the legislative floor is whether marijuana possession and consumption will be legal in casinos that are licensed locally to allow either. Both of these will be debated under the possibility of future federal scrutiny and action.
Barring direct federal action, one can expect Nevada’s cannabis industry and culture to grow throughout 2018 and beyond.
As seen previously in Washington and Colorado, marijuana prices are expected to drop considerably over time as the market matures, laws improve and production increases. We can also expect a further slash in pricing as dispensaries begin growing a significant amount of their flower in-house.
Competition will be fierce as licenses open up in November and new marijuana lounges open around Las Vegas. Overall, Nevada’s strong tourism business will all but ensure their cannabis industry continues thriving with full legislative support. Nevada knows that “What happens in Vegas, Stays in Vegas,” and that includes marijuana sales revenue.
How do you think Nevada’s cannabis industry will progress? What improvements could it make to be better?