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Judge mulling Nevada bid for recreational pot sales July 1

| Monday, June 19, 2017, 10:09 p.m.
In this Saturday, Aug. 13, 2016 file photo, marijuana plant awaits judging in the Oregon Cannabis Growers' Fair marijuana plant competition in Salem, Ore.

CARSON CITY, Nev. — Nevada's marijuana regulators are working furiously to launch recreational sales on July 1, a fast-approaching deadline that could hinge on a judge expected to decide Tuesday whether the liquor industry should be guaranteed a piece of the pot pie before tourists and residents can light up.

Lawyers for the liquor industry and the Nevada Department of Taxation are arguing whether the state has the authority to issue marijuana distribution licenses to anyone besides alcohol distributors.

Carson City District Judge James Wilson said he had hoped to issue a decision following a daylong hearing on Monday, but he now plans to rule Tuesday.

The state says it has the power to temporarily license some existing medical marijuana cultivators and retailers to serve as their own middlemen. It wants to get a head-start on collecting millions of dollars in tax revenue devoted to education before permanent rules are required by Jan. 1, 2018.

The liquor lobby sued, saying the state has failed to give it the first shot at distribution licenses as called for in the ballot measure approved by voters in November, the only legal pot state with that arrangement.

Wilson has blocked all licensing until the matter is resolved. He refused the state's request last week to dismiss the lawsuit, a move that could jeopardize the July 1 startup.

It has been legal for adults to possess up to an ounce of marijuana in Nevada and consume it in private residences since the beginning of this year, but currently only medical dispensaries can sell it.

Further delay is “not going to stop the sale or use of (recreational) marijuana in Nevada,” Chief Deputy Attorney General William McKean said Monday.

“As I walk down the street, there are a lot of people who are using it right now and they're being supplied by the black market. The difference is the state is not going to get the taxes,” he said.

Kevin Benson, a lawyer for the Independent Alcohol Distributors of Nevada who filed the lawsuit, said keeping the temporary injunction in place won't necessary scuttle the July 1 recreational sales

“If they would just issue some licenses to the alcohol distributors, they could get started,” he said.

The law says alcohol distributors have exclusive rights to pot distribution licenses, unless the state determines there is not enough interest to meet anticipated demand.

The tax department said there was “insufficient interest” among the liquor lobby when it published the proposed regulations in March. It later said that determination would be made after all applications were processed.

Benson said the state has never defined what is sufficient or insufficient to meet the anticipated demand, or for that matter, what they expect the demand to be.

“The department created a self-fulfilling prophecy and predetermined the alcohol distributors would be insufficient to meet the demand,” he said. “If you don't know what the demand is, you don't know what has to be done to meet the demand.”

Benson said extending distribution license to existing medical dispensaries for recreational purposes would render any licenses granted to alcohol distributors “worthless.”

“There's not going to be any business left for the alcohol distributors because most of the medical dispensaries are already distributing to themselves. They will have no need for a third-party,” he said.

Two wholesale liquor license holders testified Monday they alone have the capacity to serve the entire state.

One of them was Allan Nassau, a former tour and production manager for rock bands including the Allman Brothers and INXS who now owns Red Rock Wines — a boutique wine distributor. He testified that his business currently serves more than 300 restaurants in Las Vegas, many on a daily basis. He says delivering pot to more than 100 retailers would be easy compared to that.

“I've been responsible for the logistics of literally tons of sound and light and stage gear going from city to city around the country,” Nassau said. “This is something I could basically do in my sleep.”

Nevada Department of Taxation Deputy Director Anna Thornley testified state regulators have been planning since February to get an “early start” recreational marijuana distribution program running by July to begin bringing in millions of dollars in tax revenue before a permanent system must be adopted on Jan. 1, 2018.

“It's the department's intention to issue licenses by July 1,” she told the judge.

Department spokeswoman Stephanie Klapstein said no distributor licenses will be issued to applicants that are not liquor wholesalers as long as the judge's restraining order is in place but said the department is ready to act when it receives clearance.

“We have a ‘war room' in Vegas where our staff are working long hours to move the applications through the review process,” she said.

Klapstein said 93 have been received — five from liquor wholesalers and 88 from existing medical marijuana establishments.

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