Legal Cannabis Sales in Nevada Continue to Fall; the industry blames the illegal market

Nevada’s cannabis industry has begun to decline after years of growth. It also continues to face stiff competition from the illegal market, as evidenced by new data from the Cannabis Conservation Board (CCB), which regulates the industry at the state level.

Legal dispensaries in the state recorded $829 million in taxable sales in the fiscal year that ended in June, according to statistics released this month. Sales have fallen every year since peaking at just over $1 trillion in the fiscal year ending in mid-2021.

According to an analysis released in late September, the illicit market generates between $242 million and $370 million in annual sales, accounting for a quarter to a third of total cannabis sales in Nevada.

Although medical marijuana has been legal in Nevada since 2000, it wasn’t until 2016 that voters legalized the recreational use of cannabis through a ballot question.

In 2015, the first medical dispensaries began to open, and in 2021, the legislature allowed the purchase of products that regulators believe can evolve and be safer for consumers than purchases through illegal sources.

But some who regulate the industry say a lack of law enforcement and awareness campaigns has allowed the illegal market to flourish, taking away potential tax revenue that could be spent on schools and infrastructure.

Legal sales are subject to a 10 percent excise tax plus a standard sales tax rate of nearly 8 percent, plus a 15 percent wholesale tax paid at the farm level.

While taxes on cannabis can be an important source of revenue for the state, the CCB report warns that the taxes could force some consumers to seek cheaper illicit products.

“We don’t want to renew the war on drugs, but we need to make sure businesses are following the law,” said Lake Martin, executive director of the Nevada Cannabis Association. “So it’s more about using the civil tools that we have to enforce the law against unlicensed sales.”

The CCB report notes that some consumers do not trust the legal market because they perceive the products to be less powerful and more expensive, and that they do not associate greater government oversight with greater safety.

Martin encouraged an awareness campaign highlighting the safety of regulated dispensaries and the health risks of consuming unregulated cannabis, which can be laced with detergent or other drugs.

Martin added that dispensaries are currently prohibited Gaza or the Las Vegas hotel strip, which may encourage tourists to seek out delivery services, many of which are unlicensed.

Adriano Guzmán, president of the CCB, acknowledges that regulation can be difficult without law enforcement intervention.

Although the CCB has inspectors, they mainly check the sanitary standards of businesses that have a license or those seeking one, and cannot physically shut down non-compliant operations.

The Las Vegas Metropolitan Police Department did not respond to requests for comment.

Although the CCB report predicts that the illegal market will decline by 2030, Martin disagrees with this prediction, especially if more measures are not taken to stop the illegal activity.

In 2022, the US Drug Enforcement Administration destroyed nearly 11,471 illegal marijuana plants in Nevada, compared to 5,686 plants in 2022.

“Everything we’re seeing in the market is actually the opposite,” Guzman said. “Until we bring law enforcement resources to bear on these businesses, there is no reason for these unlicensed sales to stop.”

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