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Nevada races to finalize legal marijuana rules

Nevada races to finalize legal marijuana rules
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Nevada state legislators put the final touches on measures to regulate marijuana this week, just weeks before Nevada becomes the fifth state to legalize the use and sale of marijuana for recreational purposes.

The state, which suffered the brunt of an economic recession that hit its tourism and construction industries especially hard, is now anticipating tens of millions of dollars in tax revenue from legalization. And as tourism figures bounce back to new records, some in the Silver State think legal marijuana will be the next big draw.

“We’re going to really market this thing around the world,” said Sen. Tick Segerblom (D), the chairman of the state Senate Judiciary Committee.

But some opponents of legalized marijuana say the state is rushing too fast to implement a complicated set of regulations on an industry that is still going through growing pains.

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“State officials are clearly rushing into this hoping no one will notice how sloppy implementation is actually going,” said Rafael Lemaitre, a former top staffer in the Obama administration’s Office of National Drug Control Policy. “The way Nevada is moving is reminiscent of a college student who skipped class all semester and is now cramming for finals at the last minute.”

In the final days of this year’s legislative session, members were indeed racing to finish work on a handful of regulations that had not yet been completed.

Some of the final measures passed included streamlining regulators split between the state Department of Licensing and the Department of Taxation; measures regulating the use and sale of edible marijuana products, finalizing tax rates and knocking down a wall between medical and recreational marijuana sales that supporters hope will streamline the industry.

Even some supporters worry the state won’t be completely ready to begin recreational sales on July 1, as required under the ballot measure voters passed in 2016. A Nevada district court judge last week issued a temporary stay blocking the July date, in a dispute over who should be allowed to distribute marijuana products.

“We’re not certain we’re going to be able to hit the July 1 date,” said Scot Rutledge, who ran the campaign to legalize pot for recreational use last year.

Nevada was one of four states in which voters opted to legalize marijuana last year. The version voters passed set the most aggressive schedule for legalizing pot; the other three states, California, Massachusetts and Maine, gave their legislators and regulators a full year to craft rules for the industry before recreational sales begin.

Many of the new Nevada rules are modeled on other states that have pioneered the legalization pathway. The state Department of Taxation is drafting regulations that will allow medical marijuana retailers to sell to the recreational market, a provision based on Oregon law. Other provisions are borrowed from Colorado law, where the state learned hard lessons about home-grown pot plants.

Nevada Gov. Brian Sandoval (R) has spoken with Colorado Gov. John Hickenlooper (D), who has shared his state’s experience with the marijuana experiment, Sandoval told The Hill earlier this year.

“We want to learn from the experience of other states,” Sandoval said in a February interview. “I want a model system.”

Nevada legislators were unable to reach an agreement on whether to allow pot clubs, where people can use marijuana outside their own homes. Consuming marijuana in a public place remains illegal, and the state’s casinos will not allow guests to use marijuana on their premises.

But Segerblom said the decision to create pot clubs could be left to local jurisdictions, some of which see the clubs as a potent attraction for tourists from around the world.

“It’s really going to be more of a local issue at this point,” Segerblom said. “I’ve been talking to attorneys, and it looks like maybe [local jurisdictions] do have the authority” to create clubs.

Nevada will levy a handful of taxes on marijuana products at several levels: Wholesale products will incur a 15 percent tax. Retail sales will be subject to the state’s 8 percent sales tax, as well as an additional 10 percent tax Sandoval advocated.

Those taxes are likely to lead to a quick windfall. Analysts expect the state to sell $700 million in marijuana products over the next two years, generating tens of millions for Nevada’s already stretched budget. If Nevada experiences a rush of sales like Colorado, Washington and Oregon, three of the four states where pot is already legal, those projections are likely on the low end of reality.

The last remaining fight is over who will be allowed to distribute marijuana products. Alcohol distributors were the first businesses allowed to apply for permits, though the state said it would allow licensed medical marijuana establishments, or MMEs, to distribute pot too. The alcohol distributors went to court to block those businesses from distribution, leading to the temporary injunction.

Supporters of legal pot say racing to begin recreational sales will stamp out the black market in pot sales that still exists.

“In order to avoid the black market from flourishing any further, we’re going to move into regulated sales as quickly as possible,” Rutledge said.

But Lemaitre said anything Nevada gets wrong could inspire Attorney General Jeff SessionsJefferson (Jeff) Beauregard SessionsBeto O'Rourke on impeachment: 'There is enough there to proceed' Rosenstein to appear for House interview next week Emmet Flood steps in as White House counsel following McGahn departure MORE, a marijuana legalization skeptic, to move to block state implementation of recreational use laws. Sessions has not said what steps his Justice Department will take to crack down on states where marijuana is legal, after the Obama administration reached a detente with states.

“The situation with federal enforcement is already tenable as it is. Rushing the process could also give Sessions another excuse to reassert federal control, which should surprise no one given his track record this far,” Lemaitre said.