April 8, 2019

Nevada Department of Taxation Questioned Regarding Transparency of Licensing Process


A new lawsuit could hold up the process of licensing additional retailers in Nevada, according to a report from Las Vegas Now. The Nevada Department of Taxation (NDOT) late last year issued 61 provisional storefront retailer licenses, which would nearly double the current number of 65 licensed shops that are open for business in the state.

Controversially, Nevada officials have stated that existing confidentiality laws prevent them from naming the winners of provisional licenses. However, press releases and other reports have revealed that a small number of companies acquired a significant portion of the new permits, raising questions of whether a handful of businesses might be able to exercise outsized influence on the state’s market.

The Las Vegas Now report states that a lawsuit was to be filed against NDOT on behalf of numerous owners of licensed dispensaries that did not receive provisional permits in last year’s most recent licensing round. The lawsuit will seek to stop the licensing process and potentially have a new one undertaken.

Whether the lawsuit will progress and be successful remains to be seen. It should perhaps be remembered that, at the outset of adult-use legalization in Nevada in July 2017, lawsuits were brought against the state regarding rules specifying that only certain parties could apply for and obtain distribution licenses. In that case, the licensing process was not halted and eventually the lawsuit became moot as distribution businesses permitted by the state got up and running to serve Nevada’s cannabis market even in the face of litigation.

Once it occurs, the opening of additional storefronts in Nevada could create more competition among retailers, which would presumably result in downward pressure on prices. On the other hand, with more shelf space to fill, wholesale demand could increase and additional buyers in the market could allow sellers to raise prices.

However, these straightforward assessments of market dynamics do not take into account the fact that many of the provisional retail licenses are currently held by existing, vertically integrated companies that are largely self-supplying via associated cultivation and product manufacturing operations.