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Complaints About Licensing Roil Nevada's Cannabis Industry

Associated Press

In less than two years, legal recreational cannabis has gone from zero to a billion-dollar business in Nevada.

But not everything is mellow.

The state’s process of awarding marijuana business licenses has come under fire recently, with lawsuits alleging the process is opaque and unfair.

Several unsuccessful candidates in the most recent round of licensing have filed suit seeking to halt the state from issuing new licenses.

“We believe that the state process did not run according to the initiative petition that was approved by the voters and by the statute that mirrors that initiative petition,” said John Ritter, a cannabis business executive and board member of the Nevada Dispensary Association.

Clark County District Judge  Elizabeth Gonzalez last week  set a hearing on several of the lawsuits for late May, but similar litigation has also been filed in Northern Nevada.

“We and 10 other marijuana businesses with existing licenses are still trying to figure out what went wrong at the Department of Taxation,” Ritter said.

Ritter told KNPR's State of Nevada he was surprised when his company received no licenses in the latest round of state licensing. He said the state had taken other people on tours of his facilities as a way to show how a cannabis operation should be run.

After he was denied, Ritter called the deputy director of the Department of Taxation to find out why, but he received very few answers.

He was told, however, that temporary workers had been used in the processing of the applications, which he found shocking. 

“When you take a temporary worker that has no history in the industry, that has no history in regulating our companies and basically say, ‘okay, you make the choice.’ It just doesn’t make sense to me," he said.

When he did find out who received the licenses, Ritter and his fellow dispensary owners were not happy.

“50 percent of the licenses were awarded to out of state and out of country companies, not the local business that had started the industry with medical marijuana and ran by-the-book operations that were easy to vet because most of us have been here for many years,” he said.

After seeing the licensees and talking to other operations who didn't get a license, Ritter was convinced "something had gone wrong with the system that they were using."

In addition to that, he felt the state's unwillingness to answer questions about the process was a red flag they were hiding something.

“It is ripe for corruption because it’s not an open process,” he said. Ritter is not saying that something corrupt happened at the Department of Taxation. He is concerned that it could because of the way the system is set up. 

Attorney, and former Secretary of State, Ross Miller is representing several plaintiffs in the case. He said he has never seen this level of secrecy.

“I’ve been around government for a long time. I’ve never seen anything like this,” he said, “Here, they won’t tell you who won. They won’t tell you the criteria they used and it’s clear just looking at the way they processed the applications that they didn’t follow the rules that the Legislature set out for them.”

Ross is convinced that when Judge Gonzalez sees the evidence she'll grant the injunction.

One of Ritter's biggest concerns is the background checks for marijuana business owners. Under the law passed by voters, background checks are supposed to be done on all owners. However, in this latest round of licensing, publicly traded companies were given licenses.

Ritter said there is no way to background check the owners of publicly traded companies. He said the Department of Taxation made up its own rule that the background checks only had to be done on officers, directors, board members and those actually running day-to-day operations.

He is concerned criminals could be involved in a publicly traded company that owns a cannabis business and he believes getting marijuana out of the hands of criminals was the intent of the ballot initiative legalizing it in the first place.

John Ritter, cannabis industry executive; Ross Miller, attorney suing the state

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With deep experience in journalism, politics, and the nonprofit sector, news producer Doug Puppel has built strong connections statewide that benefit the Nevada Public Radio audience.