Nevada’s delay of marijuana social use venues leaves business owners to pivot or wait

(Since this story posted, Nevada Gov. Steve Sisolak signed Assembly Bill 533 into law. For more details, click here.)

Because of the huge potentials around marijuana social use businesses in Las Vegas – and all over the country, for that matter – many cannabis industry watchers were intrigued after the Las Vegas City Council voted on an ordinance in May to create a new business license and land-use regulations for such venues.

If Las Vegas had success with those venues, perhaps other cities around the country without social use ordinances might reconsider.

However, Nevada lawmakers have approved a bill that will delay Las Vegas’ plan to license marijuana social use venues this year.

Assembly Bill 533 – which Democratic Gov. Steve Sisolak is expected to sign this week – will prohibit local governments from licensing cannabis consumption businesses.

That provision expires July 1, 2021, which could leave the state without social use venues for up to two years.

Setback for the industry

The Las Vegas council’s vote would have created new business opportunities in Las Vegas and was expected to increase revenue for licensed cannabis retailers.

For the first 12 months of the application period, retailers would have been the only businesses eligible for a social use permit.

The first consumption venues were planning to open later this year, but a spokesman for the city of Las Vegas wrote in an email to Marijuana Business Daily that the municipality will not license cannabis consumption businesses until the state allows them.

“This is a setback for the entire industry,” said John Mueller, the CEO of Acres Cannabis, a vertically integrated cannabis company that applied to open a 9,500-square-foot social use venue next door to its flagship Las Vegas dispensary.

Scot Rutledge of Argentum Partners, a Nevada government affairs and marketing firm, called it “an unfortunate set of circumstances.”

But he remains hopeful that rulemaking for social use businesses will be a priority for state legislators.

“It’s going to happen at some point,” Rutledge said. “But when it happens and what it looks like remains to be seen.”

‘Stuck with what we have’

Mueller instead plans to use the 9,500 square feet he set aside for a social use venue as an event space that serves alcohol.

He isn’t sure whether the city will refund his $5,000 application fee and said the company didn’t sink a “substantial amount of money” into the licensing process, though it did start working with architects on the space.

He’s more disappointed by the delay for social use venues to open in Nevada.

“We’ve lost two years that we invested working with the city on what would have been the gold standard for consumption lounges across the country,” he said. “(Now) we’re stuck with what we have.”

Chris LaPorte, the founder of consulting firm Reset, hoped to work with a licensed dispensary in Las Vegas to open an e-sport and video game social use venue.

“As an entrepreneur, I was excited about the opportunity to do this and to be the first to market and showcase innovation,” LaPorte said. “But, at the end of the day, I can respect the fact that we’re putting together a very structured regulatory process that will be beneficial for all of us.”

It’s possible, too, that the state will allow for low-alcohol content beer and liquor sales or sales of cannabis products in social use venues, which would create additional revenue streams for cannabis consumption businesses, he noted.

“We know how to regulate vice,” LaPorte said. “We’ll look at how things go in West Hollywood and Denver and we’ll look at their best practices, and then we’ll create our own gold standard.”

What’s next?

Assembly Bill 533 also creates a five-member Cannabis Compliance Board, which will be tasked with studying cannabis consumption lounges, among other things.

Rutledge expects the new board to take the lead on social use venues and believes it won’t necessarily have to start from scratch.

The first draft of Assembly Bill 533 would have allowed the board to accept applications for licenses to operate cannabis consumption lounges. It also would have created requirements for applicants who wanted to obtain a permit. It even included recommended distance requirements for those businesses.

Those provisions were eliminated from the final bill, but Rutledge said: “There was a good framework in (the first draft of) Assembly Bill 533 for how the state would regulate and license these businesses.”

“I’m not concerned that we’re starting from scratch, so much as I am that we’re delaying the process and allowing the state to take full control,” Rutledge added.

It is possible some would-be social use venue owners take legal action against the state because they spent large sums of money to prepare for cannabis consumption lounges in Las Vegas, City Councilman Bob Coffin wrote in a text message to MJBizDaily.

Mueller said Acres is not considering legal action.

Mueller noted the marijuana industry will also need to collaborate with the powerful Nevada Resort Association, which opposed the Las Vegas ordinance and supported the amended assembly bill.

The Nevada Resort Association did not immediately respond to a request for comment.

“When this comes back to the Legislature, we’re going to have to work with the Resort Association on something that benefits both sides of the equation,” Mueller said.

Joey Peña can be reached at [email protected]