While the recreational use of marijuana by adults over the age of 21 has been legal in Nevada since 2017, the law has restricted the consumption of marijuana to a “personal residence.” But with a focus on tourism, Nevada legislators recently approved new legislation that permit the opening of cannabis consumption lounges throughout the state.
On June 4, 2021, Governor Steve Sisolak signed into law Assembly Bill 341. Going into effect on October 1, 2021, this bill creates two types of cannabis consumption lounge licenses to allow on-site consumption of single-use marijuana products within the lounge.
The first category of consumption lounge licenses are those to be held by currently licensed and operating retail dispensaries. A dispensary ownership group is permitted to apply for and may be granted a maximum of one cannabis consumption lounge license, no matter the number of dispensaries they operate. When opened, these dispensary-owned lounges must be “adjacent” to the dispensary whose ownership group obtained the lounge license. That means ownership groups with multiple dispensaries will have to decide to which of their dispensaries the lounge will be adjacent. And, in order to even apply for a cannabis consumption lounge license, there is a $100,000 non-refundable application fee.
The second category includes those that will be opened and operated by ownership groups that are “independent” from any retail dispensary owners. Though run by independent owners, these lounges are required to obtain any marijuana products from a licensed retail dispensary. The only restrictions on the locations for the independent lounges are a series of setbacks from schools, community facilities and gaming properties. Initially, the number of these independent lounges is capped at 20, but that can be increased to match the number of retail dispensary lounges, at the discretion of the Nevada Cannabis Compliance Board (CCB).
One of the stated goals of the law is to address the lack of diversity within Nevada’s cannabis industry. With that in mind, half the independent lounge licenses are required to go to ownership groups made up of social equity applicants, i.e., those from communities that have been adversely affected by the War on Drugs. It will fall on the CCB to determine the exact requirements to qualify as a social equity applicant. The application fees for the independent lounges are significantly lower than those for retail dispensary lounges, with qualifying social equity applicants getting an even greater reduction in the required fees.
While many of the consumption lounges that eventually open are likely to resemble bars or the traditional cafes of Amsterdam, there are no statutory limitations on size, hours of operation or even whether a lounge may serve food or alcohol. The CCB’s regulations are likely to address some of these issues, but the statutes themselves were left open in an attempt to promote creative lounge concepts. Among the concepts discussed at the legislature were yoga studios incorporating the use of cannabis with wellness classes or restaurants with a focus on cannabis-infused dishes.
The limited number of lounge licenses available was intended to create value and attract financing for those ownership groups that may need assistance getting their concepts off the ground.
With each new lounge that opens, Nevada’s cannabis industry grows.