Nevada has officially passed a bill that will allow medical marijuana dispensaries and cultivation operations to set up shop in the state, bolstering the red-hot national MMJ industry and paving the way for hundreds of new jobs and scores of possibilities for entrepreneurs.
Gov. Brian Sandoval signed the bill Wednesday night despite concerns over the estimated $2 million it will cost the state to implement the program.
The measure – Senate Bill 374 – sets up a regulatory structure for the production and sale of marijuana and related products in the state, covering everything from quality and safety rules to requirements for obtaining an MMJ business license.
Aside from dispensaries and grow sites, there will be opportunities for testing labs, edibles manufacturers and infused products companies, all of which are covered in the new regulations. Additionally, ancillary companies that service all these operations will find a robust new market.
Under the bill, a limited number of dispensaries can open in each county based on population size, ranging from 40 in Clark County – which includes Las Vegas – to just one in smaller counties. In total, more than 60 dispensaries could eventually open, though it will likely take years for the industry to reach its full potential and hit that number. The state will finalize rules and begin the application process next spring, and the first dispensaries could open in the summer of 2014.
Nevada could generate estimated $8 million to $10 million in annual sales initially at current patient levels, according to Medical Marijuana Business Daily, based in part on averages from other comparable states with existing MMJ markets. Nearly 4,000 Nevada residents currently have medical marijuana cards.
The new law has been a long time coming: Nevada voters legalized medical marijuana way back in 2000, but the original law did not allow for dispensaries. Since then, numerous dispensaries, collectives and similar types of operations have sprung up to provide patients with cannabis, only to be shut down by authorities.
Now, they will have a legal framework under which to operate.
Here are some business-related highlights of the bill:
– The Subcommittee on the Medical Use of Marijuana of the Commission will be created to make recommendations on specifics of the program. The commission will include a variety of stakeholders, including legislators, a member from the state’s health division, law enforcement officials, a registered patient and members of the MMJ business community.
– Home cultivation will not be allowed in the future, except in limited cases (such as if a patient lives more than 25 miles from a dispensary or can’t travel to one for health reasons). Current home-growers will be grandfathered in until March 31, 2016.
– Patients can buy up to 2.5 ounces of usable marijuana in a 14-day period.
– Fees for patients will drop by up to 50%.
– Up to 40 dispensary licenses will be awarded in counties with a population of 700,000 or more; 10 in counties with between 100,000 and 700,000; two in counties with 55,000 to 100,000 residents; and one in all other counties. However, those numbers could fluctuate depending on the area, as the state will not issue more than one dispensary license per 10 pharmacies in a particular county.
– The state will also set limits on the number of grow sites, infused products companies and testing labs based on what it feels is “necessary to serve and supply” dispensaries.
The state has until April of next year to set final rules. It will then begin accepting applications
– It will cost up to $35,000 in fees to obtain an MMJ business license, including a nonrefundable charge of as much as $5,000 just to apply. The maximum fees are as follows: $30,000 for an initial registration certificate for a dispensary plus $5,000 in annual renewal fees; $5,000 for an initial independent laboratory testing lab certificate and $3,000 to renew; $3,000 for a cultivation, edibles or infused products certificate and $1,000 to renew; $75 for an initial agent registration card and $75 to renew.
– Those that obtain a license will also have to pay for the costs of processing the application, such as the background check fees.
– As part of the application process, entrepreneurs must have at least $250,000 in liquid assets to cover startup costs. Owners, officers and board members of medical marijuana operations must also undergo background checks, and those with certain criminal convictions will be barred from receiving a license.
– Applicants must submit operating rules that include proposed security measures, inventory tracking plans, whether or not they will sell or deliver edibles and/or infused products, and other detailed information.
– The state will accept applications for MMJ establishments for a maximum of 10 business days each year, giving entrepreneurs a very short window of time to participate in the industry. A word of advice to potential applicants: “Businesses interested in operating in Nevada will be well-advised to watch for the rules to be promulgated and know them well before applying,” said Chris Lindsey, a legislative analyst with the Washington, DC-based Marijuana Policy Project. “Ten days is not a big margin for error.”
– Selection criteria include overall financial resources of the applicant, previous professional experience – with bonus points going to those who have operated other companies before – educational background, knowledge of the MMJ industry and/or using cannabis to treat patients, proposed location and the quality of the business plan.
– MMJ operations must be at least 1,000 feet from an existing school and 300 feet from certain types of community facilities such as park, playgrounds, swimming pools and churches. They also must comply with local zoning and land use ordinances and “be professional in appearance,” which the bill defines as being “orderly, dignified and consistent with the traditional style of pharmacies and medical offices.”
– The bill calls for measures to prevent a heavy concentration of dispensaries and related businesses from cropping up in one area. No more than 25% of dispensaries in counties with more than 100,000 residents, for instance, can be located in any one governmental jurisdiction, unless local officials rule otherwise.
– A single business owner or group can own only one MMJ business in a particular county or up to 10% of the number of licenses available in that county, whichever is greater, in a bid to prevent monopolies.
– Cannabis businesses must employ electronic patient-verification and inventory control systems.
– Dispensaries must test their marijuana for content, quality and potency via independent labs. These facilities must be able to determine THC concentration, assess whether the sample is organic, test if there are molds, fungus and fertilizer present and meet a host of other requirements.
– Dispensaries can sell to nonresident patients who hold medical marijuana cards in other states. These patients must sign an affidavit, though in April 2014 an electronic cross-checking system will be in place to verify cards from other states.
Packaging and Labeling
– Marijuana products sold in dispensaries must include labels that include THC concentration and weight, and the packaging can’t be appealing to children.