Nevada Marijuana Hits a Snag
It’s only been just over a week since Nevada legalized recreational marijuana, and the state is already close to declaring a state of emergency. No, this isn’t the result of “reefer madness”-inspired crime waves or the collapse of society as we know it.
Instead, what we have here is a very successful weed rollout in the state; so successful, in fact, that the laws are holding the Nevada marijuana economy back.
Let me explain.
There are 47 licensed retail marijuana stores, and they are quickly running out of stock. Marijuana, to no one’s surprise, is a hit. The drug has been selling fast ever since it became legal at the beginning of July.
Now weed is flying off the shelves so quickly that many of these marijuana sellers will have to resupply in the coming days. But here’s the catch: they can’t. Due to a legal bind, these sellers are permitted to sell the drug, but are not allowed to restock.
This came about due to the original law, first passed in November, promising wholesale alcohol distributors exclusive transportation rights for wholesale marijuana for the first 18 months of legal sales. But, as the applications came in for these companies to ship marijuana, the state was unable to keep up. And with marijuana now in short supply, the state is looking to broaden its pool of transporters.
This, of course, was met with legal action by the alcohol wholesalers that were promised exclusive rights to transportation…and that brings us to the Nevada marijuana state of emergency.
One of the solutions to the marijuana bind that Nevada currently finds itself in is a “statement of emergency” allowing state officials to consider adopting an emergency regulation that would help alleviate the shortage. This move was endorsed by Governor Brian Sandoval. (Source: “Nevada dispensaries running out of marijuana; governor steps in,” Reno Gazette-Journal, July 7, 2017.)
The move would relieve the pressure on the Nevada marijuana business. And that’s exactly what the state wants, as tax revenue has seen quite the uptick since the implementation of the marijuana laws (to no one’s surprise).
The emergency regulation would allow the department to look at a larger pool of applicants for distribution licenses, and therefore help restock the vendors that are running out of product. The Nevada Tax Commission will vote on the regulation on Thursday.
What this Means for Marijuana Stocks
This is important for marijuana stocks for a number of reasons, not the least of which is that the way marijuana laws are crafted and shaped will mean a lot for the future of the business. This is because more states are likely to adopt regulations on the drug and either follow in each other’s footsteps or at the very least try to avoid the same mistakes.
Consider also that, in spite of the legal hiccup that Nevada marijuana has currently run into, things are still looking very bright for the state. The Nevada Dispensary Association earlier this week estimated that dispensaries earned about $3.0 million in sales. As a result, the state profited about $1.0 million in tax revenue between July 1 and 4. That’s $1.0 million extra in tax revenue in three short days! Those types of numbers will go a long way toward convincing voters and politicians alike that legalization is a viable option.
And the tax is also going toward a program that enjoys bipartisan support: education. Revenue collected from the 15% cultivation tax goes towards schools, while the 10% sales tax will enter the state’s rainy-day fund, which can be used for any expenditure.
So, the two big takeaways for those watching the marijuana stock market in Nevada are: 1) watch the laws and see what does and doesn’t work when implementing recreational marijuana; and 2) the success in Nevada continues to build a strong case for more marijuana legalization legislation in the future.
As I keep telling my readers, marijuana stocks will be big.