On July 1, 2017, Nevada became the fifth state in the United States to legalize the sale of recreational marijuana. The epicenter of “what happens here, stays here” tourism just added a new vice to its repertoire! So, what’s the problem?

Among other things, Nevada’s recreational marijuana dispensaries are facing the specter of empty shelves. Why? Because a wrinkle in the ballot measure that legalized recreational marijuana sales in Nevada gives licensed liquor wholesalers a temporary 18-month monopoly on marijuana distribution rights… “unless the [Nevada] Department [of Taxation] determines that an insufficient number of marijuana distributors will result from this limitation.” In order to fill its shelves, a Nevada-licensed recreational marijuana dispensary must use a licensed recreational marijuana distributor to transport the product from the cultivation facility to their stores (whereas dispensaries selling medical marijuana were allowed to move “medical-use” product from cultivation locations without an independent distribution network).

Despite efforts by marijuana dispensaries to stock up prior to July 1, overwhelming demand for recreational marijuana has resulted in dwindling supplies. And now, distributors are nowhere to be found. That is because very few liquor wholesalers have applied to become licensed marijuana distributors, and those that have made such application have failed to meet the requirements for licensure. The Nevada Department of Taxation (NDOT) reported that as of July 7, 2017, ZERO distribution licenses have been issued by NDOT.

Perhaps liquor wholesalers fear risking their federal alcohol permits issued by the Alcohol and Tobacco Tax and Trade Bureau? It would appear that marijuana distribution licenses would have to be issued to persons other than liquor wholesalers – however, nothing is that simple. A small group of liquor wholesalers, known as the Independent Alcohol Distributors of Nevada, sued and, on June 21, won a temporary injunction against NDOT to prevent marijuana distribution licenses from being issued to persons other than liquor wholesalers.

In response, on July 7, Governor Sandoval endorsed emergency regulations that would give NDOT the authority to determine whether there are a sufficient number of marijuana distributors to service the market – a determination that would allow NDOT to open up distributor licensing to those other than licensed liquor wholesalers. The emergency regulations will be considered by NDOT on July 13. Stay tuned.