Lawmaker: Nevada’s regulation of weed strangling industry as sales fall 

Nevada’s Cannabis Compliance Board is thwarting growth of the industry according to experts, who say the state’s practice of charging licensees for regulators’ time and effort amounts to double billing because the agency is already fully funded via an excise tax paid by licensees. 

“It’s fully funded by that 15% wholesale excise tax on cannabis products and the $63 million that’s brought in annually from that tax is more than six times the CCB’s operating budget,” Layke Martin, executive director of the Nevada Cannabis Association, testified Wednesday before the Senate Commerce and Labor committee. 

Tyler Klimas, executive director of the agency, said the CCB’s $10 million budget is not covered by $8 million generated in excise tax.

“The CCB bills licensees for inspections and audits, travel time, reviewing security footage, even communicating with licensees to resolve a compliance issue,” Martin told lawmakers. “If you’re a licensee and you have a meeting with the CCB about an issue, you will get a bill from the CCB for their staff time at the hourly rate of $111 per hour. It doesn’t matter if the staff person is brand new, they’re still billed at the rate of $111 per hour. If there are three CCB staff at the meeting, you’ll get a bill for $333, the hourly rate for all three people.

Martin says the charging practice makes it “impossible for licensees to budget for these expenses, and it’s challenging for them to control costs,” adding licensees are spending “tens of thousands of dollars” on fees monthly, rather than “growing their businesses and hiring employees.” 

“Not only are these fines and fees a threat to the existing industry, but they will create significant challenges for any new entrepreneurs trying to open up a licensed cannabis business in Nevada,” Sen. Rochelle Nguyen told the Senate Commerce and Labor Committee during a hearing on Senate Bill 195. 

“In total, we have paid the CCB approximately $47,000 in time and effort fees since our 2021 inspection,” testified Koaunin Villa of Green Life Productions in Pahrump, who said her company was forced to defend its methods to the state before getting the green light to continue the process its employed for eight years.

SB 195, which has seven primary sponsors, including Nguyen, would prohibit the state from engaging in time and effort billing. It would also encourage self-reporting of violations and incentivize compliance.

Nevada’s cannabis industry employs about 18,000 people and contributed $147 million to the state education fund last year, according to Nguyen, who says the industry has an annual economic impact of $2 billion a year. But sales are down by as much as 20% from last year, she said. 

Senate Bill 195, sponsored by Nguyen, is designed to encourage “cooperation between regulators and the industry, just like we see in gaming,” she testified.  

Since the state’s creation of the CCB in 2019, “there have been many successes and there have been many growing pains,” Nguyen said.  “I expect that we will probably be back here year after year session after session trying to clean up what is a baby board or baby commission.” 

Nguyen said the intent behind the CCB’s creation was to emulate the Gaming Commission, “and we’re just not seeing that and I think that has nothing to do with the people that are a part of the board.”

Nguyen noted licensees not only compete with one another, but with an unlicensed market that makes up an estimated half of sales. “Those people are obviously not paying taxes. Those people are not regulating and testing the products that are going out. When we have an over- regulated industry that doesn’t allow people to efficiently and effectively and safely grow, I think you will see an even bigger growing market of black market and gray market sales.”

A goal of SB 195 is to encourage self-reporting, conserve state resources, and incentivize compliance, according to Martin, who says the current regulatory system offers licensees no benefit for self-reporting violations.

Brandon Wiegand, COO of Thrive Cannabis Marketplace, characterized the CCB as taking a “hostile stance and aggressive approach” toward the industry, and alleged “the behavior of the CCB has created a culture of fear that permeates the industry, impacting licensees and their employees.”

CCB officials refuted some of the allegations.  Klimas cited five instances where self-reported violations resulted in fines.

“If the regime feels like it’s tough, it’s because it is,” he said, testifying from a neutral position on the bill.

Note: The original version of this story misidentified Brandon Wiegand, who works for Thrive Cannabis Marketplace, not the Source.