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Budding Business

As the vote for recreational use nears, the public perception of marijuana changes

matrix_mmj_closeup_of_bud_by_krystal_ramirez_WEBKrystal Ramirez

They call it Sin City for a reason.

Las Vegas was built on not just giving a nod and a wink to vices, but welcoming them with open arms—prostitution is legal [in nearby Nye County], alcohol is served 24-7 and gambling is practically a religious rite. This November, Nevadans will vote on whether to legalize the adult recreational use of marijuana, one of five states with that question on the ballot. With the regulatory framework already in place and a windfall of jobs and tax revenue poised to break over our state, all that’s left is for the majority of citizens to add cannabis to the list of things that happen here and stay here.

Question 2 states that “the cultivation and sale of marijuana should be taken from the domain of criminals and be regulated under a controlled system.” Supporters are hoping that the third time will be the charm for decriminalizing cannabis in the Silver State. Attempts have been made before in 2002 (39 percent in favor) and 2006 (44 percent gave the thumbs-up), but 2016 may be the year to ride a tide of demographic change and national trends to the finish line.

“The public has really changed dramatically. It’s like gay marriage—the whole country’s views are totally different,” says state Senator Tick Segerblom, D-Las Vegas. “I also think the population has changed—the millennials poll really high on it.” Data concurs: The percentage of Americans who use marijuana more than doubled from 2002 to 2013, going from 4 percent to almost 10 percent, according to a study by the National Institute on Alcohol Abuse and Alcoholism, which also indicates that 21 percent of people ages 18-29 partake. It’s not just kept on the down low in living rooms either: Smoking pot has become another sitcom/movie gag like the crazy boss or the broken-down car and a topic not just in hip-hop songs, but country and indie rock, too. Celebrities are increasingly open about use—Rihanna is as likely to accessorize with a blunt as with a Louis Vuitton bag—and a number are even entering the marijuana business as entrepreneurs.

As users have come out of the shadows, so has the industry. “I think the people who say ‘it’s a bunch of stoners starting companies’ haven’t gone to a conference or haven’t had any meetings with people in this space,” says David Dinenberg, CEO at KIND Financial, a company that creates seed-to-sale compliance software for the cannabis industry. KIND, based in California, also just inked a deal with Microsoft to make the tech company’s cannabis-tracking software available on their state and local government platform. “I think that [Microsoft] saw an opportunity, and we’re lucky enough that they chose us,” he says. With medical marijuana now legal in over half the states in the country and recreational use permitted in four plus Washington, D.C., not even Bill Gates can afford to ignore it anymore.

Bakers from The GroveKrystal Ramirez

Bakers from The Grove

Nevada’s medical marijuana industry has been serving patients for more than a year now; the population of cardholders has grown to almost 21,000 as of July 2016. It’s an industry that has been built on professionalism and compliance, and tight regulations keep it that way. The grows are enormous, state-of-the-art facilities that fall somewhere between NASA and a tech startup, with guys in cargo shorts and lab coats moving through sterile white hallways to junglelike grow rooms, checking carbon dioxide levels and humidity percentages on wall monitors. The dispensaries are part boutique/part doctor’s office, with smiling employees in logoed polo shirts pulling product out of glass cases for a woman with sunglasses on her head and a motorcycle helmet balanced on her hip, as well as a 60-something man in a Guyabera shirt whose name and favorite strains are known to the staff. The investments have been enormous, but if Question 2 does pass, existing cannabis businesses get an 18-month head start before new players can enter the field.

MatrixKrystal Ramirez | Vegas Seven

Matrix

“At the end of the day, it’s the fastest-growing industry in the country,” says Dinenberg. Estimates by ArcView Market Research found that legal cannabis sales hauled in $5.4 billion in 2015 and are projected to net $6.7 billion in 2016, so it’s not hard to see how legalized adult recreational use could offer a payout of Megabucks proportions. A recent study by RCG Economics and the Marijuana Policy Group found that the adult-use marijuana market in our state could be worth over $390 million by 2024 and create about 6,000 jobs a year.

And in these days of outsourcing, cannabis paychecks stay put—the regulation/compliance system and federal illegalities mean that not only can most of those jobs not go overseas, they can’t even cross state lines. “The law requires so much of the industry to be located here that there’s more money circulating in the Nevada economy than would otherwise be the case,” says John Restrepo, principal at RCG Economics. “It’s different than alcohol—whether you’re a supermarket or a bar, there will be a local distributor, but that alcohol is usually produced in another state.” That leads to not only more employment within the industry, but more employment because of it. “The three main industries are cultivation, retail and manufacturing,” Restrepo says. “Then there are the folks that are the suppliers—copiers, toner, janitorial services and repairs, engineers that help design places, people who work on the construction side.”

“The fun part is, we have no state subsidies whatsoever. We had to pay Tesla $1.5 billion to get 5,000 jobs,” Segerblom says. “[The marijuana industry is] giving us 5,000 jobs and it doesn’t cost us a cent.” Actually, if you factor in the abundance of licensing fees, marijuana businesses actually pay the state to be allowed to create work.

Shatter from The DispensaryKrystal Ramirez

Shatter from The Dispensary

The state also stands to gain from the taxes on recreational marijuana—Colorado pulled in more than $16 million in taxes in June 2016 alone. The RCG report indicates that Nevada will get about $464 million in taxes and fees between 2018 and 2024, with much of it going to public schools. Adam Cohen, senior vice president of business development at Electrum Partners, a consulting firm for the cannabis industry, thinks those tax revenues could benefit residents on a number of levels. “One of the challenges for Nevada parents is our schools are poorly funded and are struggling with really difficult situations,” he says. “This could change that entire structure and allow us to create really well-funded schools—which will change the environment for people looking to settle here, and will up property values.”

Tourism has always been part of the Nevada model; our state currently has a reciprocity program in which medical marijuana cardholders from other states can make purchases here. “We’re the state that advertises itself as what happens here, stays here,” Segerblom says. “We need to be out front on this as opposed to falling behind everyone else. It’s a huge thing with millennials. If we’re trying to attract them to Nevada as a great place for tourism, it’s something we want to be able to offer.” Cohen used to work in casino analytics and believes that being slow on legalization may have already “cost us some dollars.” He recalls that “the most-searched travel destination in the United States in the first quarter of 2015 was not Las Vegas, it was Denver, Colorado. In the second quarter of 2015, yet again it was Denver.”

While the presence of legalized weed alone probably won’t sway those who don’t partake, it will make those who may have already planned to add a little Hangover or Fear and Loathing to their Vegas experience do it legally—while giving Nevada some tax dollars and PR. “People are going to want to go to the dispensaries, see how it’s grown, take a selfie, buy a T-shirt, buy a joint and go back home and tell everyone how great their experience was,” Segerblom says.

The Grove Cannabis Facility

The Grove Cannabis Facility

But visitors could take home more than a souvenir from the Nevada cannabis industry. Our state’s stringent regulatory framework may have complicated matters for entrepreneurs, but it’s proving helpful for other states. Dineberg acknowledges that “everyone says Colorado is the blueprint,” but “I also look at the Nevada that way. … Nevada was really the first state to come out and mandate lab testing. Look at the effect that has: Every new state coming out has a lab-test requirement. Even Colorado is going back to clean that up.”

Cohen agrees. “Pennsylvania is a great example. Their market is just opening up, they’re beginning a regulatory framework and the governor reached out to discuss what Nevada has done,” he says. “We have a reputation for having a great regulatory framework for difficult-to-regulate industries. Gambling and prostitution are already legal here and managed really well. We have an opportunity to set the tone nationally.”

And perhaps internationally. “I think the reality of where we’re going and where we are in the industry isn’t going away. It’s going to become a more and more global industry,” Dinenberg says. Much as Vegas has led the world in gaming, it could also lead the world in cannabis. “Our grows, our dispensaries, our edibles are state of the art. Things that people have learned in other states, they’ve brought here, so we’re starting at the top,” Segerblom says. “Once we get going, we’ll be one of the top innovators in the world.”

Of course, if all of these things are to come to pass, Question 2 needs to get a majority of the vote on November 8. “Right now the polling is in our favor, but polling at 55 percent is kind of a dangerous thing,” Cohen says. “It’s on the edge.” More optimistically, Segerblom gives Question 2 “80-20” odds of passing. “It’s a once-in-a-lifetime opportunity,” he says, “It’s a perfect industry for Nevada and a perfect time for Nevada to take the lead.”

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