“Prediction is very difficult, especially if it’s about the future.” —Nils Bohr, physicist and Nobel laureate
By Alicia Ashcraft, Managing Partner, Ashcraft & Barr
In last year’s “Legal Opinions” section of Nevada Business Magazine, we made three predictions about Nevada’s marijuana industry. We re-visit those predictions in this article to see how well our prognostication powers fared.
Prediction No. 1: More publicly traded Canadian Investors
Last year, we predicted that the Nevada marijuana market would see an influx in publicly-traded Canadian investments. This forecast has come to fruition with a rush of public companies trading on the Canadian Stock Exchange acquiring Nevada marijuana businesses in 2018. Prediction Grade: A+
2018 Prediction No. 2: Tighter Regulatory Control
Last year, we foresaw tighter regulatory control of Nevada’s marijuana industry as the regulators moved to the Department of Taxation. This one also came true. The Department of Taxation has begun exceptionally robust regulation of the industry. Prediction Grade: A+
2018 Prediction No. 3: More Entrepreneurial Opportunities
We forecasted more indirect entrepreneurial opportunities for those in the marijuana space—opportunities like security services, delivery services, and software development. This prediction faltered a bit. Entrepreneurial opportunities still exist around the cannabis industry, but there has not been a revolutionary proliferation. Prediction Grade: B-
Because we have not learned our lesson from last year’s forecasts, we make some new, legal predictions for 2019.
2019 Prediction No. 1: Cannabis Control Commission
Currently, marijuana in Nevada is regulated by the Department of Taxation. The Department of Taxation is a “generalist” department, not geared toward regulating any one, particular industry. Marijuana is an esoteric subject. A maturing and growing industry demands more specialized regulators. Thus, in the 2019 Legislative Session, we predict that the Nevada Legislature will consider creating an independent commission to regulate cannabis. This type of structure would be similar to the Nevada Gaming Commission or the Nevada Athletic Commission, taking over regulation in the state as early as 2020.
2019 Prediction No. 2: Greater Regulation of CBD
One substance derived from the cannabis plant that is touted as having medicinal properties is “CBD.” “CBD” is shorthand for the chemical “cannabidiol.” Cannabidiol is the non-psychoactive chemical found in both marijuana and hemp. Hemp is not a “Schedule I” substance and is not illegal at the federal level. Hemp is regulated by the Department of Agriculture in Nevada. On the other hand, marijuana is a “Schedule I” substance and remains illegal at the federal level because it contains a psychoactive chemical called “THC,” or tetrahydrocannabidiol.
Proponents attribute many (unproven) health benefits to CBD oil, and because it is non-psychoactive and can be derived from legal hemp, CBD products have proliferated over the last year. CBD oil is available in convenience stores, marijuana dispensaries and even over the internet.
Currently, regulation of CBD is in a gray area. It is not illegal at the federal level (so long as it is derived from hemp and contains little THC). Hemp products are regulated by the Nevada Department of Agriculture, but CBD is marketed (and potentially manufactured) from marijuana products regulated by the Nevada Department of Taxation. Thus, to resolve this gray area, we predict a greater regulation of CBD in Nevada.
2019 Prediction No. 3: Banking Reform
Tax revenues from marijuana have exceeded expectations thus far, and the industry has become profitable as a whole. Despite its success, legal cannabis transactions remain largely cash-based, and banking is still a problem. While it is not illegal for those in the cannabis trade to open and maintain bank accounts, many banks refuse to serve marijuana commerce because the banks must comply with substantial federal and state regulations. Thus, because the marijuana industry will continue to grow, we predict that federal and state banking laws will be reformed to permit cannabis operators to freely open bank accounts.
Legal cannabis commerce will continue to be a dynamic and entrepreneurial field for 2019.