Las Vegas marijuana consumption lounges encounter delays

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Image of the Trece Mexican restaurant space

Planet 13 planned to convert its Trece restaurant into a consumption, food and entertainment space. (Courtesy photo)

Marijuana operators and consumers anticipating consumption lounges opening this summer in Las Vegas will probably have to wait.

Administrative setbacks, tight funding and changing regulations governing smoke ventilation have likely delayed the launch of dozens of lounges for months, with the real possibility that only a few might open by year-end, industry experts told MJBizDaily.

The Nevada Cannabis Compliance Board (CCB), the state’s chief marijuana regulator, could address the regulatory issues at a June 20 meeting.

Industry executives have raised concerns about the state’s consumption-lounge regulations, particularly those covering indoor air quality and the related, astronomic costs of installing and maintaining air-ventilation systems.

Those expenditures – which can amount to hundreds of thousands of dollars – would render consumption areas economically unfeasible for most operators and a near impossibility for social equity licensees, according to cannabis insiders.

The industry for years has closely followed marijuana consumption-lounge developments in Las Vegas, given its potential for cannatourism and global reputation for hospitality innovation.

Despite some earlier projections that lounges were on pace to open in 2022, the only legal consumption lounge in Nevada is the NuWu Cannabis Marketplace located on tribal land about two blocks from downtown Las Vegas.

The space, which has an outdoor dab and cannabis-infused beverage bar, is regulated by the Las Vegas Pauite Tribe, not state government.

The latest setback in the national rollout of consumption areas – largely considered the next iteration in marijuana retail and events – might prove temporary.

That’s because Nevada regulators appear ready and willing to find an amicable solution with operators and other stakeholders regarding air-ventilation concerns.

“We know that we’re going to have to make tweaks to truly launch a successful license program like lounges,” CCB Executive Director Tyler Klimas told MJBizDaily.

More capital concerns

When Nevada regulators established a framework for consumption operations, they included stringent air-quality standards – far more restrictions than for traditional hookah bars and taverns, where patrons in Nevada can still smoke tobacco products if the smoking venue is located in a separate room and is off-limits to minors.

Now that a few consumption spaces are in build-out and others are assessing air ventilation-equipment needs, some hard costs are materializing.

“It’s hundreds of thousands of dollars just to have a system, and if you’re talking about a 2,000- or 3,000-square-foot space, that’s a lot of money just to move air,” said Scot Rutledge, partner at Argentum Partners, a government affairs and marketing firm based in Reno.

Rutledge was the chief lobbyist of the lounge bill in the 2021 legislative session and represents MJBiz in some Nevada dealings, particularly the annual MJBizCon conference at the Las Vegas Convention Center.

Sara Stewart, a consumption-lounge expert, is refocusing efforts in Nevada on helping licensees raise capital rather than providing consulting services.

“As a company, we have realized that license holders don’t have the capital, experience or know-how to open and operate these brand-new businesses,” said Stewart, the co-founder of Ritual Cannabis Hospitality in Los Angeles.

When Nevada regulators approved consumption lounges a year ago, they estimated 60-65 licenses would be issued.

Of those, roughly 40-45 licenses would be attached to existing marijuana stores and another 20 would go to independent lounges, including 10 for social equity applicants, or individuals with a nonviolent marijuana conviction and who live in a designated disadvantaged area.

Timelines in flux

Red tape and other administrative setbacks have derailed progress as well.

The CCB extended deadlines for license holders to submit provisional-use checklists, which include information on business plans, operations and executive experience, among other things.

Several social equity applicants failed to certify the required $200,000 in liquid assets to qualify.

They also needed more guidance on completing paperwork on business development and operating protocols, according to Stewart, who is working with several applicants.

“I don’t think any lounges will be open this summer unfortunately, as the CCB deadline was pushed back a bit and most don’t have locations or are just starting construction,” she said.

“We are actively raising capital for several of them now, so hopefully by next summer we will be opening doors on at least three concepts.”

Multistate cannabis company Planet 13 Holdings planned to convert its Mexican eatery, Trece, into a consumption lounge, restaurant and entertainment experience within its 112,000-square-foot superstore just off the Las Vegas Strip.

The company isn’t providing a timeline on the consumption lounge, a spokesperson told MJBizDaily via email.

Rutledge, who’s working with a few consumption-license clients, expects to see a few venues open in September or October, particularly the ones in build-out.

Many others are awaiting final regulations before moving forward, he said.

“It’s unfortunate, because we’d hoped to see some lounges open up this spring, but it turns out, it’s going to take just a little bit longer,” Rutledge added.

“I think in August we finalize any outstanding regs and then open in Q3 of this year. If not, the beginning of Q4.”

Movement stalls nationwide

Consumption lounges are primarily clustered in only three markets in the country: Denver, Los Angeles and San Francisco.

Last year, Chicago-based multistate operator Green Thumb Industries opened Illinois’ lone retail cannabis consumption lounge under its Rise brand in suburban Mundelein.

A few states such as Maryland, which is set to launch adult-use sales July 1, allow consumers to bring their own marijuana and consume it at so-called cannabis cafes but restrict the sale of MJ products at these venues.

House Bill 0566, which Maryland Gov. Wes Moore signed into law May 3 establishing a recreational cannabis program, allows for 15 of these “designated-use” establishments in the state.

Massachusetts regulators in May scrapped a pilot program to establish cannabis cafes in 12 municipalities, likely ending the potential for consumption spaces to open in that state this year.

Despite industry and local setbacks, CCB’s Klimas is confident Nevada will develop a successful, marijuana consumption industry, partly because of Las Vegas’ leadership position in hospitality and a few key rules the Las Vegas City Council approved in March – including smoking and edibles consumption outdoors as well as retail.

“Nevada has the most comprehensive social-use consumption lounge allowances out there,” he said.

“If you’re going to be successful doing it anywhere, Las Vegas is going to be high on that list.”

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.