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Nevada’s Legal Weed Market Fights Competition from the Streets & Corruption from the State

By Beard Bros. Crew
Nevada’s Legal Weed Market Fights Competition from the Streets & Corruption from the State
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Have you caught the new Scorsese flick The Irishman yet? Without getting into too many spoilers, the movie is a retelling of the rise and fall of the infamous mafia-connected Teamsters Union boss Jimmy Hoffa and the heartlessly brutal cast of characters within his sphere of influence. It is hard to convey to today’s generation just how polarizingly popular the man was throughout the 1960s-70s and his mysterious disappearance in 1975 is still unsolved, as much as the moviemaker may believe he got right. Hoffa’s ties to organized crime led him to allegedly bankroll massive loans to the mafia by way of the Teamsters pension fund, allowing the mob to skirt the watchful eye of the Feds while still financing major construction projects. Many of these loans, it is said, quite literally laid the foundation for some of the most popular and lucrative Las Vegas landmark hotels and casinos confirming that Sin City was truly built on a bit of corruption.

Well, Hoffa may be dead and gone (or he may be smoking a blunt with Tupac in Tahiti for all we know) but corruption is still in the cards not only in Las Vegas but throughout Nevada and nowhere is that more clear than in the state’s recreational cannabis market and the officials tasked with overseeing it.

YOU GOTTA KNOW WHEN TO HOLD ‘EM…

Nevada has been on the progressive edge of cannabis reform for quite some time dating back to the state’s first iteration of medical marijuana laws passed back in 2001. It was not until 2013, however, that the state implemented an actual regulated marketplace for medical marijuana patients by permitting 60 state-sanctioned MMJ dispensaries statewide. When you mix politicians and money, it becomes a safe bet that some bullshit is about to go down, and it did.

With the introduction of Question 2 – The Initiative to Regulate and Tax Marijuana in 2016, Nevada became one of just eleven states so far that have passed some form of adult-use recreational cannabis laws. Of those eleven, only five of those states have imposed restrictions on exactly how many licenses could be issued total statewide and Nevada is one of those five. The catch is, Nevada only restricts how many retail dispensary licenses will be issued, but places no such cap on cultivators, extractors, or manufacturers. Not only does this make almost no sense when it comes to basic economic rules of Supply & Demand, but it placed undue value on the relatively limited amount of retail licenses that would be up for grabs.

Once the rec laws went into effect, the state more than doubled the allowable number of legal dispensaries up to 130, but that is still a very small number to service the entire state and it immediately sparked fears of monopolization in such a limited sector of the market.

With licensure for potentially lucrative dispensaries hanging in the balance, several county-level officials were busted for accepting bribes disguised as campaign donations from entities vying to get their hands on a storefront to slang weed out of. In September of 2018 when the Department of Taxation announced it was opening the application window, it also vowed to limit each applicant to a max of only one dispensary license in each jurisdiction that they applied in. This, they stated, would cut off any potential cornering of the market by any one entity.

…KNOW WHEN TO FOLD EM’

That promise went up in smoke almost immediately as the Department of Taxation (which for some reason was tasked with overseeing this new industry) rewarded just a handful of entities with multiple licenses per jurisdiction. Sound familiar, California? Of the 61 new rec dispensary licenses up for grabs, just 17 of the 127 applicants got licensed. More than half of those new licenses went to just four companies who openly manipulated the process by day by setting up shell corps or adding the slightest variations to the name on each application and then by night by schmoozing local politicians in order to sway their decisions. Some applicants were literally given a separate application that did not require that they verify a proposed site address. This is a huge accommodation as the costs involved with securing real estate before you even know if you’ll be allowed to use it can be prohibitive – an exclusive group of applicants was allowed to skip that burden.

The Feds got involved when two foreigners that HBO’s John Oliver aptly described as “the guys you buy the rocket launcher from in Grand Theft Auto” tried to bribe a Nevada lawmaker into granting them licensure into the state’s cannabis market. Those two men? Lev Parnas and Igor Fruman, Rudy Giuliani’s henchmen from Ukraine that are now tied up in the president’s impeachment scandal. We told you it’s been dirty out there in the desert!

As more light is shone into the shadowy corners of Nevada’s upstart cannabis industry, it ought to become more and more difficult for these bad actors to get away with such blatant corruption in the licensing process, but the state could snuff it out tomorrow if they’d just open up the licensing process.

…KNOW WHEN TO WALK AWAY

Unfortunately, that shady business does not stop once an entity is licensed and those investigations into unfair licensing practices soon led to a new target. The next Silver State scam appears to be the third-party cannabis testing labs who now find themselves under the microscope.

As Dana Gentry reports for the Nevada Current, the state has hauled in over $170,000,000 in cannabis sales tax revenue since the recreational marketplace was established. Their promise to the people – particularly the people buying the pot – was that a significant portion of those pinched funds would be allocated toward ensuring that the products on the legal market were laboratory tested and deemed safe for consumption. Indeed, the state banked heavily on using this is their main selling point to try to leech old school heads away from the street market and into the legal/taxed one instead.

A presentation given to Nevada’s Marijuana Enforcement Division in September of this year by a man named Dr. Jim MacRae upended this notion… sort of… and in doing so uncovered an even larger affront on the part of the state. Dr. MacRae, a scientist, and data analyst out of the state of Washington revealed that after a full year of attempts, the state had finally honored his requests to analyze the troves of lab testing data that the state had been hoarding up to that point. When the state relented and handed over the data, controversy erupted over what that data did show, and what it did not.

Dr. MacRae’s presentation showed multiple instances of labs consistently increasing average THC ratios over a relatively short period of time, reflecting the market demand for products that test high in that particular cannabinoid. This is nothing new. We have told you that THC Testing is Bullshit, by which we mean that basing the quality or value of a batch of cannabis on that stat alone is counter-intuitive to anyone who believes in the entourage effect that you get from a full and balanced spectrum of cannabinoids and terpenes. The controversy in Nevada is that customers may be buying weed that says it tested at 23% THC when, in fact, it might barely top 18%. Is that cool? No, not cool. Is it a public health crisis? No, not at all. While officials are arguing that people cannot properly dose their cannabis intake with such a discrepancy, anyone who has ever actually, you know, smoked a bowl will tell you that it just doesn’t work like that, not with flower anyway. Accurate THC labeling is more important in edibles and oils which are more often used medicinally, so this dishonest pumping of THC numbers absolutely needs to stop, but Dr. MacRae’s research pointed to a problem with even deeper roots.

After a full year of asking for that data, it arrived with certain lines redacted throughout the results. In every instance, the lab that ran the test had been blacked out. According to Gentry at the Current, this is a violation of state law. When she requested the same documents that were given to Dr. MacRae, she was told there would be a $5,000 fee to pull the paperwork for her. In a case displaying a similar lack of transparency, state regulators busted licensed testing lab Certified AG last month, again for allegedly producing inaccurate THC test results.

Regulators issued a press release regarding the bust but instead of identifying which actual products were tested and deemed to be mislabeled they offered a warning to “take caution” if you choose to use any products tested by that particular lab. Huh? Ok, we’ll play along… but we have already seen that the state does not make it easy for consumers or consumer advocates to identify that sort of information. NAC 453A.508 details precisely what information must be disclosed to the public on all cannabis labeling and the name of the lab that ran the test is not listed as a requirement.

Again, in most cases a discrepancy in THC content is not going to present a health concern. But if they are fudging THC numbers in Nevada, and the state is letting them remain anonymous while they do it, can we be confident in their findings when it comes to residual solvents, heavy metals, molds and bacteria, or other impurities?

The state’s answer this time is that they plan to “test the testing labs”. We say NAME THEM AND SHAME THEM.

…KNOW WHEN TO RUN

In the eye of this storm of corruption in Nevada was the short-lived state-sanctioned Independent Laboratory Advisory Committee (ILAC), a task force composed of scientists and industry experts that was supposed to tackle the tough questions and provide sound answers. Instead, the group quietly folded their hand sometime around August of this year. No press conferences for that. Former members of the task force have gone on the record to call the Department of Taxation a “shit show” and said that the recommendations made by legacy operators involved with ILAC were commonly ignored leading up to the untimely dissolution of the group.

With Las Vegas becoming a cannabis tourism destination for eager heads from around the world, perhaps a little Latin can cross the language barrier: When it comes to cannabis in Nevada, for now at least, caveat emptor.

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1 Comment
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Alex Gomez
Alex Gomez
10 months ago

When it comes to money, corruption lies around the corner… especially fast money.

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