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Several states have legalized recreational use of cannabis but no state has yet created a state-sanctioned place for adults to legally consume cannabis. This leaves many consumers with no place to enjoy legal cannabis as no state permits public consumption. A bill in Nevada could make it the first state to allow for cannabis clubs.

Senate Bill 236 would grant cities and counties authority to issue licenses to businesses wishing to allow cannabis use at their premises or to hold special events where cannabis use is permitted. Cities and counties would have the ability to establish an application process and create rules for these businesses. These businesses could not be located within 1,000 feet of a school or community facility, defined as a daycare, playground, public swimming pool, recreation center, place of worship, or drug or alcohol rehabilitation facility. Businesses could not allow consumption of marijuana in public view and could not allow individuals under 21 to enter the business or special event where marijuana is consumed. These licensed businesses could be the cannabis clubs that recreational states have been missing.

SB 236 passed the Nevada Senate by a 12-9 vote and now heads to the Assembly where it must pass in the same form it passed the Senate. If it does, it will then go to the Governor’s desk for signature and it would become law with his signature.

Legalization initiatives in California and Maine may allow for cannabis clubs, but those states have not drafted regulations addressing cannabis clubs. Alaska experimented with the idea of cannabis clubs but ultimately has not permitted such clubs.  Oregon and Washington explicitly prohibit consumption of marijuana at a place of business. Some towns and counties in Colorado allow private clubs where individuals can consume cannabis but they are subject to local rules and regulations. For example, the City of Denver passed Initiative 300 last November to allow businesses to permit cannabis consumption, but the program has yet to be fully implemented.

Colorado considered legislation that would have allowed for social consumption clubs state-wide but the bill ultimately failed to make it through the legislature. According to the Cannabist, Colorado Governor John Hickenlooper would have vetoed the bill had it made it to his desk:

Given the uncertainty in Washington [DC], this is not the time to be … trying to carve off new turf and expand markets and make dramatic statements about marijuana. The federal government can yield a pretty heavy hand on this and I think we should be doing everything we can to demonstrate … we are being responsible in how we implement the will of our voters.

The fear of federal crackdown was too much for lawmakers in Colorado and it remains to be seen whether Nevada will ultimately go forward with licensing businesses to permit cannabis consumption. Nevada is a logical choice for these clubs given that it is a hub for tourism and it already permits legal gambling and prostitution which are outlawed in most other states. One can imagine a few social use clubs fitting in on the Las Vegas strip. Las Vegas could become the US-version of Amsterdam or Barcelona, where cannabis consumers can enjoy their product at a cafe or bar.

 

California cannabisWhat a long, strange road the election has been. After a wild and unpredictable night, marijuana may not be the first thing the media discusses in the election’s wake. Still, it cannot be overstated how successful the evening was for marijuana legalization. Cannabis ballot measures won in eight out of its nine races. This is unprecedented, and it shows the extent to which cannabis legalization is a bipartisan issue.

The below is a state-by-state rundown of where things ended up. For a comprehensive report on California cannabis and on what it will take to participate in its new adult-use cannabis industry, go here. And for the same on Florida’s new medical cannabis industry, go here.

Arizona — Lost — Proposition 205, which sought to legalize marijuana for all adults and license its production and sale, did not pass. Prop. 205 was pretty similar to legalization initiatives seen elsewhere, like Washington, Colorado, and California. Despite backing by the Marijuana Policy Project, Arizona apparently is not quite ready to go further than medical marijuana, which narrowly passed there in 2010.

Arkansas — Passed — Arkansas passed Issue 6, which legalizes medical marijuana for certain debilitating conditions.

California — Passed — This is the big kahuna. California, home to 12% of all Americans, passed Prop. 64, legalizing marijuana for all adults. The state is already working on regulations for its medical marijuana market, and both the medical and recreational markets are expected to go online some time in 2018. But if there is a straw that breaks that camel’s back federally, this is it.

Florida — Passed — Florida’s Amendment 2 passed overwhelmingly. With more than 70% of the vote, Florida got past its challenging 60% barrier on all citizens initiatives. Now, Florida will build a real commercial medical marijuana regime on top of its currently extremely limited high CBD program. Florida’s measure is broader than most state medical marijuana laws, including conditions like PTSD and gives physicians significant leeway in determining what to treat with medical marijuana.

Maine — Passed — Question 1 in Maine, a recreational marijuana initiative, was opposed by many in Maine’s government and business establishment as well as many in the medical marijuana community. However, it passed and Maine is now on the road to joining the other fully-legal cannabis states. 

Massachusetts — Passed — Massachusetts passed Question 4, legalizing recreational marijuana. This is another business licensing and taxation initiative, which follows the same basic structure as the other major recreational laws in the United States. 

Montana — Passed — I-182 will expand Montana’s medical marijuana program, turning it into more of a standard medical marijuana program, including allowing physicians to prescribe for PTSD and chronic pain.

Nevada — Passed — This one was close, but Nevada passed Question 2, legalizing recreational marijuana. Nevada’s medical marijuana business regime always felt like a precursor to recreational legalization, and the early investors in Nevada’s licensed medical businesses are now poised to take advantage and transition into the recreational market.

North Dakota — Passed — This one is a little surprising, because there wasn’t much polling done in North Dakota. North Dakota has passed Measure 5, which is a limited measure legalizing marijuana for the treatment of specific conditions such as cancer, AIDS, and hepatitis C.

Overall, a very good night for cannabis, assuming that our new President does not seek to toughen federal laws regarding state-law cannabis.

nevadaThis is proving to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. We are now working through the top ten. The remaining states all have legalized medical marijuana and the criminal penalties in the remaining states range from bad to good, but many have decriminalized the possession of small amounts of marijuana. Now we turn to state number nine: Nevada.

Our previous rankings are as follows: 10. Hawaii; 11. Maryland; 12. Connecticut; 13. Vermont; 14. Rhode Island; 15. Kentucky; 16.Pennsylvania; 17.Delaware; 18. Michigan; 19. New Hampshire; 20. Ohio; 21. New Jersey; 22. Illinois; 23. Minnesota; 24. New York; 25. Wisconsin; 26. Arizona; 27. West Virginia; 28. Indiana; 29. North Carolina; 30. Utah;  31. South Carolina; 32. Tennessee; 33. North Dakota; 34.Georgia; 35. Louisiana; 36. Mississippi; 37. Nebraska; 38. Missouri; 39. Florida; 40. Arkansas; 41. Montana; 42. Iowa; 43. Virginia; 44. Wyoming; 45. Texas;  46. Kansas;  47. Alabama;  48. Idaho; 49. Oklahoma;  50. South Dakota.

Nevada

Criminal Penalties. Nevada punishes possession of less than one ounce of marijuana with a $600 fine or a mandatory assessment for addiction. A second offense earns a $1,000 fine or mandatory treatment. A third offense earns up to a year in prison and a $2,000 fine. A fourth offense earns 1-4 years in prison and a fine of $5,000. Courts can defer possession offenses if the defendant agrees to undergo treatment.

The sale or delivery of cannabis is punished as follows in Nevada:

  • Less than 100 pounds earns 1-4 years in prison and a fine up to $5,000.
  • 100-2,000 pounds of marijuana earns 1-5 years imprisonment and a fine up to $25,000.
  • 2,000-10,000 pounds earns 2-10 years imprisonment and a fine up to $50,000.
  • Over 10,000 pounds earns a minimum of five years and a maximum life sentence with the possibility of parole or a sentence of 15 years with the possibility of parole after 5 years and a fine up to $200,000.

Medical Marijuana. Nevada first legalized medical cannabis in 2000, but the state did not approve of retail cannabis distribution and production until 2013. In a prior post, we published the below infographic to show the basics of Nevada’s medical program:
Nevada InfoGraphic

Recreational Marijuana. When Nevada overhauled its medical marijuana program, many (including us) thought it did so with an eye towards creating a full-scale recreational cannabis market in 2016. On November 8th, Nevada voters will consider Question 2, also knowns as the Marijuana Legalization Initiative. If it passes, this initiative will allow adults over 21 to possess up to one ounce of marijuana flower or one-eighth of an ounce of concentrated marijuana. Those who live farther than 25 miles from a licensed store could grow up to six plants in an enclosed and locked area. Nevada’s Department of Taxation would regulate the legal cannabis market. The Initiative would create licenses for the five following “marijuana establishments”:

  • Cultivation Facilities: Licensed to cultivate, process, and package cannabis.
  • Testing Facilities: Licensed to test cannabis and cannabis products. This includes testing for potency and contaminants.
  • Product Manufacturing Facilities: Licensed to purchase, manufacture, process, and package cannabis. Licensed to sell to other manufacturing facilities and retail stores, but not to consumers.
  • Distributors: Licensed to transport cannabis from one establishment to another establishment.
  • Retail Marijuana Stores: Licensed to purchase from cultivation facilities, product manufacturing facilities, and other retailers and then to sell cannabis products to consumers.

Nevada’s Department of Taxation will license and regulate recreational cannabis and start accepting license applications within twelve months of Question 2’s passage. The Department will only accept applications for retail marijuana stores, product manufacturing facilities, and cultivation facilities from registered medical marijuana businesses for the first 18 months. During that same period, only wholesale liquor dealers can apply for marijuana distributor licenses, unless the Department determines there are an insufficient number of distributors given this limitation.

Bottomline. Nevada has some harsh criminal penalties, but they are reserved for the sale and delivery of large amounts of cannabis. Those caught possessing a small amount of cannabis have options to enter into a treatment center in lieu of jail time. Nevada’s established medical marijuana program should lay the groundwork for a legal recreational market if voters approve Question 2. And who can forget Las Vegas? The City of Sin is already a major travel destination and legal pot could make it a mecca for cannabis tourism. For all of these reasons, Nevada ranks number nine in our State of Cannabis series.

 

Cannabis insuranceWith the advent of state-legal cannabis, the businesses that make up the rapidly growing billion-dollar cannabis industry are still having to struggle to secure many professional services non-cannabis businesses obtain as a matter of course – most notably banking. One bright spot for cannabis businesses, however, is insurance. Dozens of insurance companies that cater to the cannabis industry have sprung up in recent years and federal courts have held cannabis inventories is insurable despite federal prohibition.

But, what if you cultivate state-legal marijuana at home for your own use? Will your general homeowner’s insurance policy cover cannabis plants in the event of theft or fire? A number of large insurance providers would tell you the answer is “no,” and federal court decisions do not consistently side with policyholders. Here is what you need to know about the state of the law and factors to consider when approaching the issue of insuring cannabis in your home.

A U.S. District Court in Hawaii ruled in 2012 that the federal prohibition on cannabis meant that a homeowner’s insurance policy did not cover the theft of medical marijuana plants grown in accordance with state law. The policy in question contained an exclusion for coverage of “cocaine, LSD, marijuana and all narcotic drugs,” but included an exception for “legitimate use of prescription drugs by a person following the orders of a licensed physician.” The plaintiff argued that because she had fully complied with Hawaii’s medical marijuana laws, her plants should have been covered under her homeowner’s insurance policy. The court disagreed, concluding that it could not enforce the insurance contract against the insurer because of the Controlled Substances Act and the supremacy of federal law. A more recent case, on the other hand, should give policyholders hope: a 2016 decision in the U.S. District Court in Colorado held in favor of a cannabis business that sought coverage for its cannabis inventory. Like many aspects of state-legal cannabis, however, the insurability of cannabis is likely to remain uncertain and contested and state-by-state until there is reform at the federal level.

So, what should you do to protect yourself and your plants if you grow at home?

  1. Look at your policy and talk to your insurance provider. The terms of a homeowner’s insurance policy can vary, but most include some version of the language above regarding controlled substances and illegal activities. Only your insurance provider can tell you if it considers state-legal cannabis cultivation to violate this clause. Some insurers are more aggressive about enforcing these provisions than others.
  2. Do not become a business. Nearly all homeowner’s insurance policies do not cover business activities. The definition of what that means is not uniform in all jurisdictions, but be especially careful if you are a caregiver cultivating marijuana for someone else or if you sell your excess cannabis supply into state-legal channels.
  3. Stay compliant with state laws. It should go without saying, but be sure to maintain compliance with all state laws. At issue in the case from Hawaii was whether the plaintiff had more than the allowed number of cannabis plants under Hawaii state law. Even if you have a friendly insurer, failing to follow state marijuana laws will be a deal breaker. No insurer will be obligated to cover damage or theft to marijuana plants in excess of state limits.

For more on growing cannabis in your home state, check out the following:

 

Home grown cannabisAs cannabis reform has spread across the United States, it has given birth to a marketplace increasingly driven by business interests. This is the fourth installment in our series looking at how the changing landscape of cannabis policy affects a key group of often-overlooked stakeholders: medical marijuana patients who choose to cultivate their own supply of medicine. Go here for the home grown laws in Washington and Oregon, here for the home grown laws in California and Alaska, here for the home grown laws in Michigan and Illinois, and here for the laws in New York, Rhode Island, and Vermont. Though there are undeniably many benefits to the expansion and professionalization of the commercial cannabis industry, it is also important to account for these small-scale medical marijuana producers that started it all.

This week we look at the laws governing home cultivation of cannabis in Hawaii, Nevada, and New Mexico. These three states’ home grow laws each largely track medical marijuana laws nationally, but demonstrate the inexact legislative science of allowing patients an adequate yet reasonable supply of medical marijuana.

Hawaii. Hawaii first implemented medical marijuana legislation in 2000 and has made reforms a number of times since. Its current patient cultivation laws mirror those of many other medical marijuana states. Qualifying patients may possess an “adequate supply” of marijuana, which is defined as an amount not to exceed four ounces of usable marijuana. Patients and designated caregivers may possess no more than seven cannabis plants at one time. Patients and their designated caregivers can cultivate only at the patient’s residence, at the caregiver’s residence, or at another site owned or controlled by the patient or caregiver. Each cannabis patient can maintain only one grow site and must register the site with state authorities.

Nevada. Nevada first approved medical marijuana in 2001 by voter initiative, removing criminal penalties for users of medical marijuana who have “written documentation” recommending marijuana to alleviate an approved condition. Patients who cultivate cannabis for their own consumption, or their designated caregiver, may possess up to twelve plants. From those twelve cannabis plants, patients are allowed to possess as much as two and a half ounces of cannabis in a two-week period. Patients are allowed to cultivate their own marijuana only if they live more than twenty five miles from the nearest medical marijuana dispensary.

Keep in mind that Nevada has seen movement towards significant additional cannabis reform that voters could approve as soon as November of this year, so these laws may change substantially in the near future.

New Mexico. New Mexico legislators voted to approve medical marijuana in 2007. New Mexico’s laws are fairly patient-friendly, allowing possession of up to six ounces of usable marijuana and four mature plants. In addition, patients may possess twelve seedlings. New Mexico law defines usable marijuana as dried marijuana leaves or flowers, excluding seeds and stalks. Patients may only cultivate marijuana at their own residence or property. Additionally, cannabis patients must apply for a Personal Production License from the New Mexico Department of Health.

Quote-25Aug

Evangelist Franklin Graham, in his attempt to use “Reefer Madness” style scare tactics, actually does a great job at pointing out some of the positive changes the United States has experienced during the Obama Administration. Four states HAVE legalized recreational pot, and all of their economies are thriving because of it. And yes, adult recreational use IS on the ballot in five states for this November.

And though we’ve come a long way, we’ve also only just begun. Even if all five states (Arizona, California, Maine, Massachusetts, Nevada) voting to legalize cannabis in November approve their legalization, nine states is not enough. We cannot stop until the number of states with legal cannabis is fifty. We cannot stop until the longstanding stigma associated with cannabis has ended and people like Franklin Graham realize the futility of trying to frighten voters out of doing what’s right. Because the truth is, cannabis is not dangerous or harmful to our youth, our nation, or our future.

But thanks, Franklin, we’ll ignore your ignorant call to voters and take your comments as a compliment. Vote this fall to support cannabis legalization.

 

Nevada cannabis licenses. Make your bet now.
Nevada cannabis licenses. Don’t wait to place your bet.

We have written quite a bit on Nevada cannabis license transfers in Nevada. If you haven’t read our previous posts tracking the legislation, approval, and ultimate sales of licenses, check them out here, here, here, here, and here.  We previously stated that the market is going to boom and bust for those selling licenses. Even with recent policy changes from the state, we still think this is true.

As a refresher, Nevada has said that provisional licenses will expire in May. At one point this meant that a licensee not operational prior to this deadline risked the state pulling its provisional licenses. But about eight hours after our last post on license sales the state of Nevada issued a policy statement indicating that it did not intend to nullify the license of a licensee making “significant progress towards opening.”

This has brought up a whole new slew of questions for our cannabis licensees. What exactly is “significant progress?” For example, does this mean that a licensee must start construction? How about getting bids to start construction, does that count? What about if a licensee is working diligently to secure a location after having its initial location fall through? All of these are real-world scenarios that have happened to our clients and they are all worried they will no longer have a license come May.

It’s language like “significant progress” that keeps lawyers in business.

Usually language like that used by the state can be argued back and forth by parties and decided by a court. In this case, there is a state agency that will be making the decision on whether to rescind licenses. There may be an ability for a licensee to plead their case, but we’re not sure what, if any, process there will be to do so because nothing firm has been established. We are thinking we will see a policy statement on this soon. Maybe in 8 hours?

What does all of this mean for Nevada cannabis licensees? If you are worried about whether you have made “significant progress” or if you are now realizing you lack the funds to move forward on your license, now could well be a good time for you to sell your license. Nevada cannabis licenses are going for hundreds of thousands of dollars — millions if we’re talking about dispensaries. There is money to be made by selling Nevada cannabis licenses and it makes no sense to let one go unused. License prices are holding pretty firm right now, but we expect they will soften as May approaches and when they do, we anticipate a fast crash to zero, as the licenses will eventually become unusable.

Purchasing a Nevada cannabis license now is a bet on the future of Nevada marijuana. If you buy a the license now, you will be getting involved in a cannabis industry that caters to the small Nevada population of medical marijuana card holders and out of state visitors with their own medical cards.  BUT, if recreational marijuana passes in our election in November (which we are believe will happen), these licenses will almost certainly start selling for a lot more even than today.

Are you willing to bet on the future? Whether you’re an MME license holder wondering whether proving you’ve made “substantial progress” sufficient to avoid rescission, or you’re a potential investor wondering if Nevada will be going recreational in November, it’s a bet you’re going to have to make. But this is Nevada, after all.  What more were you expecting?

The cannabis industry has been keeping a close eye on Nevada, and with good reason. In 2013, a full 13 years after Nevada initially approved medical marijuana, we finally saw approval of retail cannabis distribution and production in our state. Unfortunately, right now there are not many Nevada patients, which begs the question of what Nevada growers, producers, and retailers are going to do.

Marijuana and NevadaNevada has so far allowed only 12,000 licensed patients to purchase cannabis at one of the 66 dispensaries that (hopefully) will open over the next year or so. Nevada, right now, has roughly one cultivation facility for every three dispensaries, which means Nevada has approximately 180 patients per dispensary and only 60 patients per commercial grow. If you are scratching your head  thinking that those numbers don’t add up, you are right. Businesses are not going to invest millions to get a Nevada cannabis grow operation up and running just to be able to supply 60 people on a regular basis, unless they are betting on the future, which most are.

Nevada’s Medical Marijuana Future. Nevada welcomes more than 40 million visitors a year. With an obvious eye to those tourists, Nevada is the only state in the country to allow full reciprocity with other states’ medical marijuana programs. About 0.34% of our population currently carries a medical marijuana card. If we apply that same percentage to the tourists that come to Nevada, that nets an additional 140,000 patients a year. Though these are transient visitors, that is still an approximate daily number and that is a lot more potential customers for the dispensaries. Medical cards among Nevada residents have also been on the rise and many expect the number of Nevada cannabis patients to hit around 60,000 within the next few years.

Recreation is Nevada’s Big Bet. Even 200,000 potential medical patients is not enough to sustain a profitable business for the number of marijuana businesses the State of Nevada has approved. The big bet comes with the 2016 election, at which time Nevadans will vote on recreational use. The national media seems to believe that a yes on recreational vote is a done deal in Sin City, but that unfortunately is not the case. Nevada is still a conservative state at heart. We are also home to the Las Vegas Sands Corporation, and its billionaire founder Sheldon Adelson. Adelson recently spent millions in a successful bid to stop medical marijuana in Florida. It’s possible he will launch a similar opposition effort here, though we have reasons to believe that he will not.

If Nevada does vote yes on recreational marijuana in 2016, current cannabis licensees will likely have first crack at recreational licenses. At that point, 41 million new potential customers will clearly create opportunities for Nevada cannabis businesses to thrive. Even our high prices, due in large part to stringent testing requirements (on average, 1/8 oz. costs about $60-$70 — about double the cost in Colorado — due to stringent testing requirements) won’t be enough to keep the industry down. We are, after all, the city where you can buy 100 bottles of Dom, a fireworks show, and a private 737 flight on the same menu.

If Nevada legalizes recreational, we should also expect our state to add retail consumption to the list of licensees. These retail establishments would likely be similar to the coffee shops seen in Amsterdam. We anticipate that current licensees will also have the first opportunity to get these licenses as well.

So though Nevada’s current licensees will likely have some tough times in the short term, come November they may well be sitting on a golden egg. Until then, we expect Nevadans will still gamble on buying and selling their licenses, like we discussed here and here.

Nevada Thrift LawAs we all know well, the lack of access to banking remains a large impediment in the marijuana industry. And as we’ve previously blogged here, here, and here, marijuana banking continues to be a hot and important topic as private financial institutions slowly but steadily take advantage of the 2014 FinCEN guidelines. The guidelines, however, are difficult to actually implement. And though some of our financial institution clients are successfully navigating their way through those guidelines to provide financial services to marijuana businesses, most financial institutions continue to avoid the industry, and more options for banking are needed in the industry on the whole.

So, we’re pretty excited to write about developments in Nevada that might further enable thrift banks in the Silver State to provide financial services to medical marijuana establishments (MMEs) here.

Specifically, Nevada’s Assembly Bill 480 would allow Nevada thrift companies to obtain their required deposit insurance from private carriers, rather than from the FDIC, potentially reducing the regulatory hurdles needed to provide financial services to MMEs. Traditional financial institutions must have their deposits insured by the FDIC. Without access to federal guarantees, nationwide banking is effectively impossible for much of the pot industry. However, thrift companies (and credit unions) have the option of having their deposits insured either by FDIC/NCUA or a “private deposit insurer” approved by the Nevada Financial Institutions Divisions (FID) Commissioner. In turn, AB 480 is a fairly significant development where any removal of federal authority from the banking process makes life easier for financial institutions wanting to do business in the marijuana industry.

So, what is a thrift company? Traditional banks generally offer a host of services to the general consumer, including taking deposits in the form of checking and savings accounts, making loans, and providing investment opportunities for its customers. A thrift bank, on the other hand, mainly focuses on just taking deposits for checking and savings accounts.

Before you think starting a Nevada thrift bank may be the next best marijuana-related investment, you should know that like most financial institutions, they’re not easy to start and manage, they’re rife with state regulation, and they’re very pricey to get going and maintain.

Generally, a thrift bank must submit an application to the state, which must be completed within twelve (12) months, after which the thrift bank receives authorization from the Commissioner of Financial Institutions. Authorization is only available once the applicant proves the business was formed in accordance with Nevada laws and is approved to engage in business in the state. Next, the applicant must pay the requisite filing fees which include not more than $2,000.00 for the principal office and not more than $300.00 for each branch office. The applicant must also pay additional expenses incurred in the process of the state’s investigation, and as the Commissioner deems necessary.

The Commissioner begins the investigation and examination process following submission of the applicant and licensing fees. Applicants will be reviewed for: (1) character, reputation and financial standing of the organizers or incorporators; (2) the need for a thrift company or an additional thrift company, as the case may be, in the community where the proposed licensee is to be located, giving particular consideration to the adequacy of existing thrift company services and the need for additional services of this kind in the community; and (3) the ability of the community to support the proposed licensee, giving consideration to competition offered by existing licenses, whether a thrift company has previously operated in the community, and opportunities for the success of the business.

Additionally, the Commissioner will not approve a thrift bank application unless it can ascertain that the public convenience and advantage will be promoted by the establishment of the proposed corporation, the corporation is being formed for no other purpose than the legitimate objectives contemplated by state law, the proposed capital structure is adequate, and the financial responsibility, character and general fitness of the proposed officers, directors, stockholders and other investors are “such as to command the confidence of the community and to warrant belief that the business will be operated honestly and fairly within the purpose of this chapter, and that the proposed officers and directors have sufficient banking, industrial loan.”

Finally, Nevada thrift companies must provide the Nevada Financial Institutions Division (FID) with a fidelity bond on each officer, director and employee for at least $100,000. And the officers and a majority of the directors must also be citizens of Nevada. The President of the thrift must have at least ten years experience in a regulated financial institution and the manager at least two years experience.

The FinCEN guidelines, found here, must still be followed, of course, but acting as a thrift company isn’t itself an impediment to compliance. Presumably, where an MME is robustly regulated by the State of Nevada and lawful under state law, as long as the thrift company also adheres to the FinCEN guidelines, getting deposit insurance from a private carrier really shouldn’t raise any red flags.

Certainly, there are no guarantees that investors in Nevada will attempt to establish thrift banks or that private deposit insurance companies will rush to offer deposit insurance to thrift institutions. However, Nevada appears to be one of the first states willing to address marijuana banking in a way that might actually work (unlike Colorado), which hopefully will lead to more effective banking regulations and solutions for MMEs that desperately need them.

Anyone want to open a Nevada thrift bank?

UPDATE (December 9, 10 a.m.): We posted the below article below on December 8th at 7:30 a.m. Just 12 hours after we posted, the State of Nevada issued a new policy statement regarding expiration of licenses:

If an MME has submitted its provisional registration renewal on time and continues to make significant progress towards opening, the Division intends to take no action on the MME’s certificate at the 18-month, May 3, 2016 deadline. However, if the MME is not making an effort to become operational, is unresponsive, or submits misleading or incorrect renewal information, the Division reserves the right to investigate and revoke the MME’s registration.

That means in most cases the urgency investors had to sell or purchase MME licenses has mostly evaporated. We like the approach the State has decided to take as it will help patients in our state. Note that this action may also cause the value bubble to burst since the urgency that was driving prices skyward is no more, or at least has been greatly alleviated. We expect to see (and be involved in) a number of MME license sales over the next few months, but only time will tell.

We have previously blogged here and here about the secondary market for MMEs in Nevada. Every week our Las Vegas office gets numerous calls from people wanting our help in buying licenses for Nevada dispensaries, production facilities, and cultivation facilities. Problem is that we get far fewer calls from people trying to sell these licenses. Right now it’s a sellers market! That’s great news for license holders, but not so much for license buyers.

Nevada License Status. If you’re a frequent reader of our blog, you probably already know that Nevada has awarded many cannabis business licenses, but few such businesses are yet operational. Right now there are only six operational dispensaries in the entire state, although three more are about to open. That tells us there are plenty of licenses potentially available for sale. The most current Nevada licensing numbers look like this:

License Type Final Certification Total Awarded Potentially Available
Dispensary 9 55 46
Cultivation 25 182 157
Production 6 117 111
Laboratory 7 17 10

But just because a licensee doesn’t have a final certification doesn’t mean that it is going to be selling. In fact, we are confident that very few Nevada dispensary licenses will come up for sale before the cannabis business attached to the license becomes operational. Many of these potentially available licenses are in the process of seeking final certification and will simply never come up for sale. There are, however, many licenses awarded that will end going to unused either because their owners do not yet realize that they are not going to be able to get operational or because they simply don’t know that they are sitting on a gold mine.

Nevada License Supply and Demand. Right now the supply of Nevada licenses for sale is low while the demand for such licenses is extremely high. Cannabis is not an industry where the supply of business licenses can be increased quickly, so due to the demand, prices for Nevada licenses are high. Right now it’s a seller’s market, and if you are considering selling your Nevada cannabis license, now is the time.

The Nevada License Bust is Coming. Even though right now is a seller’s market for Nevada MME licenses, it is not going to stay that way for long. We have seen what has happened with cannabis license pricing in other states we believe the same thing will happen in Nevada, and fairly soon. Las Vegas residents are all too familiar with boom and bust economics, and they will soon experience the same thing with MME license prices. The main reason we see Nevada MME licenses falling in price soon is because the licenses are provisional. This means that if the license holder does not obtain final certification from the State of Nevada by May 2016, the license becomes nothing more than a worthless piece of paper.

Soon these calls from potential buyers will stop as they will realize that getting state and local approval of ownership and location transfers and building (or building out) a facility will take them take longer than the five months remaining before licenses expires. This seller’s market in Nevada licenses is going to last for only another month or two, if that.

If you’re a potential seller, it’s time to fish or cut bait. It’s time to sit down with your partners and ask if you are actually going to become operational.  If you aren’t, sell now and you can still profit from your investment. If you’re one of those sellers waiting for the top of the market, it’s here and you need to sell before it crashes. Remember, an asset is only worth what a buyer is willing to pay for it, so take advantage of the many investors out there. And if you wait too long, you will get zero.