After a recent legislative overhaul that went into effect on July 1, 2020, Nevada statutory law governing medical and adult-use cannabis currently codified at Chapters 678A through 678D. NRS Chapter 678A generally provides for the administration of Nevada cannabis law, Chapter 678B governs cannabis licensing and control, Chapter 678C regulates the medical use of cannabis, and Chapter 678D relates to adult use.
Because Nevada first enacted a medical cannabis licensing scheme, regulatory authority was originally placed within the Nevada Department of Health and Human Services. Following the enactment of adult-use licensing, regulatory authority was transferred to the Nevada Department of Taxation – Marijuana Enforcement Division.
In 2019, the Nevada Legislature passed a legislative overhaul of Nevada marijuana law, which, among other changes (including a switch in terminology from “marijuana” to “cannabis”), created the Nevada Cannabis Compliance Board comprised of five members appointed by the Governor, and transferred regulatory authority to that body as of July 1, 2020, with the exception of some tax matters which remain subject to the Nevada Department of Taxation. The Board was tasked with the regulation, licensing and registration of cannabis businesses. Following an expedited rulemaking period, the Board enacted a comprehensive set of regulations, the Nevada Cannabis Compliance Regulations (“NCCR”) 1 through 14. The Board is advised by the new Cannabis Advisory Commission, which will implement studies and make recommendations to the Cannabis Compliance Board related to the regulation of cannabis in the State of Nevada. By statute, the Advisory Commission is comprised of 12 members, including the Executive Director of the Cannabis Compliance Board, the Director of the Department of Public Safety, the Attorney General, the Executive Director of the Department of Taxation, and eight other Governor appointees with specified areas of expertise. These bodies are modeled after Nevada’s Gaming Control Board and Gaming Commission, and industry that was also historically regulated by the Nevada Department of Taxation.
Nevada first legalized the medical use of cannabis under certain circumstances in 2001; however, no business could legally sell medical marijuana—and there was no provision for the licensing or regulation of cannabis-related business— until July 1, 2013.
Nevada allows certain licensed health care providers to certify patients with serious medical conditions (including cancer, AIDS, glaucoma, opioid addiction, seizures, or sever or chronic pain or nausea, etc.) to obtain a registry card. Patients with valid registry cards and their designated primary caregivers are exempt from state prosecution for possession, delivery, and production of cannabis and paraphernalia under certain circumstances, as well as retail sales tax on cannabis sales. Patients and their caregivers are authorized to possess and transfer up to 2.5 ounces of usable cannabis and/or twelve cannabis plants within any one 14-day period.
NRS Chapter 678B provides for the licensing and regulation of four types of medical cannabis establishments: dispensaries, cultivation facilities, production facilities (which manufacture products infused with cannabis, such as oils and edibles), and independent testing laboratories. Dispensaries, cultivation facilities, and production facilities may be, and usually are, vertically integrated. The statues and regulations require medical cannabis establishments to observe strict security, employment, location, advertising, labelling, operating, and other requirements. In addition, all individuals who work in medical cannabis establishment are required to obtain a cannabis establishment agent registration card from the Cannabis Control Board. Individuals with certain felony offenses may not own or work in a medical cannabis establishment.
The Regulation and Taxation of Marijuana Act was enacted by initiative petition in 2016. The Act decriminalized possession and personal use of cannabis and cannabis products, allowing individuals age 21 years and older to possess and transport up to one ounce of cannabis or one-eighth of an ounce of concentrated cannabis. Those provisions are currently codified in NRS Chapter
NRS Chapters 678B and 678D provide for the licensing and regulation of adultuse cannabis establishments, which categories generally includes the same categories as medical cannabis establishments: retail stores (corresponding to medical dispensaries), cultivation facilities, production facilities, and independent testing laboratories. Medical cannabis establishments of the same category were given priority under the law to apply for the new adult-use cannabis licenses of the same type. Today, most businesses retain both type of licenses following recent legislative changes that streamlined the taxation process and allow for keeping both types of product in a single stream until the point of sale to the consumer, where the product is designated as either medical or adult-use and taxed accordingly.
However, because the Act was an initiative petition drafted by Nevada’s licensed alcohol distributors, the Act also introduced a new type of licensed adult-use cannabis establishment, an adult-use cannabis distributor. In Nevada, only a licensed cannabis distributor is permitted to transfer cannabis and cannabis products between different cannabis establishments, including the transfer between a production room to a retail store with respect to a vertically integrated licensee. Because the Act granted priority in obtaining distributor licenses to businesses licensed to distribute alcohol, there was initially a shortage of distributors. This resulted in a shortage of product in retail stores, where integrated businesses were not permitted to move their product from their cultivation facilities to their own retail store front, even when these facilities were in different rooms in the same building, or different buildings on the same lot. The situation prompted the Nevada Governor to declare a State of Emergency in July 2017, authorizing the Department of Taxation to promulgate emergency regulations allowing existing medical and adult-use cannabis establishments to apply for and obtain distributor licenses. While there remain a few businesses that function solely as distributors, most cannabis establishments are fully integrated with their own distributor licenses, enabling them to move their own product into their stores and between facilities.
While the process to obtain a new license is restricted, highly involved, and highly competitive, the process to transfer both cannabis establishment licenses to new owners is simple and straightforward. Any new owner need only submit a few forms, attest that he or she does not owe child support, attest that the transfer of the license will not create a monopoly, and pass a standard criminal background check which will disqualify a potential owner only if he or she has been convicted of certain excludable felony offenses. Currently, there is no indication that the Cannabis Control Board will issue a new set of licenses, and the last round of licensing is currently undergoing litigation. Thus, the only way to obtain a Nevada cannabis license in the foreseeable future is to procure a transfer of a license or an ownership interest in the entity that owns a license.
As of January 2021, there are 739 operational cannabis establishment licenses within the State of Nevada, including 65 dually licensed dispensary/retail stores, and 45 provisionally approved medical certificate holders, grandfathered in under prior policies and regulations that are no longer in effect. A new law effective July 1, 2019 required the Department of Taxation to publish the names of all owners of licensed cannabis establishments. While the list was initially published, it was removed in December 2019. The Cannabis Control Board recently debuted a searchable database listing the owners, officers, and/or board members of each licensee.
Cannabis is taxed by the State of Nevada as follows: the cultivator pays a 15 percent excise tax on the wholesale price; the retail store pays a 10 percent excise tax on the retail sale; and the consumer pays a retail sales tax at the local rate. Sales to medical users possessing a valid registry card are exempt from the 10 percent retail sales tax. Thus, only cultivators and retail stores file and pay Nevada cannabis taxes on a monthly basis.
With certain exceptions, NRS 678C.850 generally requires employers to attempt to reasonably accommodate the medical needs of an individual who holds a valid medical cannabis registry card unless it would pose a threat of harm to person or property, impose an undue hardship, or prohibit the employee from fulfilling any of his or her job responsibilities.
NRS 613.132, effective January 1, 2020, prohibits an employer from failing or refusing to hire a prospective employee because a post-offer, pre-employment drug screen indicates the presence of “marijuana,” unless a certain exemption is met. Notable exemptions include positions that require a commercial driver’s license, positions covered by a conflicting collective bargaining agreement, and positions that are safety sensitive in the employer’s determination. This law also allows an employee who is tested within the first 30 days of employment to provide a rebuttal test at the employee’s expense, which results must be accepted and “given appropriate consideration” by the employer.
It is an open question whether NRS 613.333, Nevada’s “lawful use” statute that was designed to prohibit employment discrimination against tobacco users, prohibits an employer from taking an adverse employment action on the basis of off-premises, off-duty use of cannabis, because it is unclear whether the use of cannabis is “lawful in this State” given the illegality under federal law. While California and Colorado have held that cannabis use is not protected by their respective lawful use statutes for that reason, Nevada’s statute is materially different in its wording. Further, the legislative history of NRS 613.132, the cannabis pre-employment testing law, reveals that sponsoring legislators assumed off-duty, off-premises use was already protected by Nevada law, which is why they enacted new protections solely related to pre-employment testing or testing within the first 30 days of employment. Until a case requiring interpretation of the lawful use statute makes its way to the Nevada Court of Appeals or the Nevada Supreme Court, the law remains uncertain.
Hemp and CBD
Nevada recently adopted the U.S. Farm Bill, Section 7606 regulations, allowing eligible Nevada producers to carry out research projects relevant to the cultivation of industrial hemp under the guidance of the Nevada Department of Agriculture.
Nevada law also authorizes its Department of Agriculture to adopt certain regulations relating to the testing of crops of industrial hemp and commodities and products made using industrial hemp by independent testing laboratories who are licensed to test medical and retail marijuana. Those regulations are forthcoming.
In addition, statutory law recently transferred some of this authority to the Nevada Department of Health and Human Services to adopt regulations governing the testing and labelling of products made using CBD. Those regulations are also forthcoming. Until those regulations are in place, only licensed cannabis retail stores/dispensaries are permitted to sell CBD products whether the CBD is derived from cannabis or hemp..