Why Nevada Pot Dealers Are Freaking Out

Why Nevada Pot Dealers Are Freaking Out by Jason Simpkins – Outsider Club

On July 1, recreational marijuana sales became legal in Nevada.

Just a week later, the state was facing a weed shortage so great the governor issued a state of emergency.

The root of the shortage is a legal battle over distribution.

You see, when Nevadans voted to approve recreational pot in November, they voted to regulate it “like alcohol.”

Those who wrote the bill (and common sense) say that simply meant marijuana would only be sold to adults over the age of 21 at licensed locations.

But alcohol distributors disagree.

They say weed distribution falls under their exclusive purview.

“The alcohol distributors really want exclusive rights, not just the ability to apply and compete in an open marketplace,” Neal Gidvani, senior counsel in financial services and cannabis law at Greenspoon Marder, told Fortune.

Shockingly, they got a judge to agree, leaving just two alcohol distributors licensed to transport marijuana in all the state.

Now, dispensaries are running out of product, Nevada isn’t collecting tax money, and the governor has declared a state of emergency.

All of this for what boils down to a massive money grab predicated on a legal technicality.

For Nevada, it’s a disaster. And for other states still grappling with their own legalization efforts, it’s a cautionary tale.

California, for instance, is desperate to avoid a similar fate.

The Bureau of Medical Cannabis Regulation has already said it will ensure sufficient licenses are provided to growers, testers, and distributors before sales go live on January 1, 2018.

However, a brand new state agency, the Department of Tax and Fee Administration, is being created to handle marijuana cultivation and excise taxes. That department was established on July 1 and is still in the process of organizing.

Furthermore, federal banks are still refusing to process pot sale proceeds because the drug remains illegal under federal law. That means the new tax agency will have to accept cash payments for taxes from as many as 250 cannabis distributors.

Wouldn’t you just love to rob that Brink’s truck?

Kidding aside, Nevada’s pot problem serves as a cautionary tale for investors, too.

It’s easy to get carried away by the massive potential of the marijuana market. We’re seeing stocks shoot up by hundreds and thousands of percent overnight.

It’s absolutely thrilling.

But it’s also tricky.

For one thing, any fledgling industry has its share of frauds, failures, and flameouts. But the cannabis industry is further complicated by the muddled legal picture.

Each state has its own set of marijuana laws. And as Nevada demonstrates, they’re not especially clear. We’re still in a bit of a trial-and-error period, and kinks need to be worked out.

Meanwhile, as I mentioned earlier, the federal government still considers cannabis a Schedule I drug, alongside heroin, LSD, ecstasy, and peyote. (FYI that means it’s somehow considered more dangerous than OxyContin, cocaine, and Vicodin.)

That’s keeping banks from handling marijuana money and processing payments.

Worse, we’ve got an attorney general, Jeff Sessions, who has some kind of weird vendetta against pot.

He willfully conflates marijuana use with the opioid crisis that’s plaguing our country.

He’s said marijuana is “only slightly less awful” than heroin, that “good people don’t smoke marijuana,” and that the KKK was OK until he found out they smoked pot.

He has publicly made plans to go after states that have legalized not just recreational marijuana but medical marijuana, too. That includes a “crime reduction task force” and a letter asking Congress to repeal the Rohrabacher-Farr amendment, which has protected medical marijuana states from federal prosecutions since 2014.

I don’t know how successful he’s going to be with these efforts, but that’s just the point.

There’s still a lot of uncertainty in the marijuana business.

That’s why we launched The Marijuana Manifesto.

You’re no doubt familiar with our analyst, Jimmy Mengel.

Jimmy knows more about cannabis investing than anyone else I can name right now. He’s been out in front of this budding industry since the very beginning. He’s toured marijuana grow houses and retail facilities throughout the United States and Canada.

He recommended a marijuana treatment company and sold the stock for a 93% gain in seven months. He recommended a Canadian marijuana delivery company that handed out a 73% gain in the same amount of time. And he and his readers are still sitting on a pot stock that booked a 380% gain in just three months.

So if you’re serious about investing in pot stocks, sign up for The Marijuana Manifesto. It’ll give you all the info you need to bank huge gains and avoid the landmines.

Get paid,

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Jason Simpkins

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Jimmy is a managing editor for Outsider Club and the Investment Director of the personal finance advisory The Crow's Nest. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.