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How Would National Legalization of Marijuana Impact Nevada?

The U.S. House of Representatives recently passed the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act to federally legalize marijuana. Senate Majority Leader Chuck Schumer expects to introduce his marijuana legalization bill, the Cannabis Administration and Opportunity Act, before the August recess. While past efforts to legalize marijuana in Congress have failed, signs are pointing toward eventual federal legalization.

Dennis Gutwald authored an article in the Las Vegas Sun that describes the outlook for national legalization of marijuana and the impact it would have in Nevada. Dennis also explains how legalization at the federal level would set in motion a flurry of transfer of interests through acquisitions and divestitures in cannabis establishments as U.S. publicly traded companies and private equity companies enter the market and replace Canadian companies as the industry’s current primary source of capital. Gaming and liquor industries and many lenders that have abstained from involvement in the cannabis industry may join the party.

Dennis’ article is available here and below.


Federal legalization of marijuana, whenever it surfaces, will be like ‘bursting dam’,” Las Vegas Sun, April 25, 2022

From the time voters and legislatures in states such as Nevada began passing their own laws to legalize medical and/or recreational use of marijuana, the push to legalize the substance on a federal level has faced seemingly impossible odds. Ironically, on April Fools’ Day, the full U.S. House of Representatives voted on the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, a bill to federally legalize marijuana.

When the MORE Act reached the floor, it was only the second time that marijuana legalization has seen the light of day by a full chamber of Congress. The House voted with a slim bipartisan majority of 220-to-204 to federally decriminalize marijuana. Significant challenges still await in the Senate, but the door is opening to a more accepting perspective of marijuana at the federal level.

Marijuana under federal law will be legalized at some point. We aren’t going back.

The MORE Act, sponsored by House Judiciary Committee Chairman Jerry Nadler, D-N.Y., would remove marijuana from the list of federally controlled substances, end associated criminal penalties, establish a process to expunge convictions, and place a federal tax on sales to fund various initiatives.

The Controlled Substances Act of 1970 regulates the manufacture, cultivation, possession, use and distribution of certain drugs, including marijuana. A version of the bill passed the House in 2020, but the Senate never took it up. However, this time around Democrats have a narrow majority in the Senate and the party’s leader in that chamber, Sen. Chuck Schumer of New York, is drafting his party’s own version of a legalization bill that he plans to introduce, the Cannabis Administration and Opportunity Act.

Nonetheless, opposition to legalizing marijuana has come from both parties. While past efforts to legalize marijuana in Congress have failed, signs are pointing toward eventual federal legalization. Momentum and practical reality compel change. Under the current patchwork of laws that exist on a state-by-state, county-by-county and even municipality-by-municipality basis throughout the country, there is simply too much confusion for consumers, too many questions for the judicial system, and too many conflicting permissions and prohibitions for the business, finance and investment community. In essence, federal legalization is needed to decrease the risks and increase the rewards.

The lack of federal legislation has been an issue for cannabis companies operating in states where cannabis is legal, such as Nevada. Because cannabis is still illegal under federal law, publicly traded companies and private equity funds have not been able to invest in cannabis businesses.

Most lenders will not lend to a cannabis company because lenders are federally chartered, and some landlords will not lease to cannabis companies because they have loans that prohibit the landlord from engaging in activities that violate laws. Cannabis businesses must also deal with longer-than-expected delays in regulatory approvals that can create challenges in daily operations, financing arrangements and business planning.

These fundamental business challenges have created an environment where U.S. cannabis companies must look for cross-border investors, and only Canadian companies have been investing in cannabis companies in Nevada and other states that have legalized cannabis. Existing cannabis establishments in Nevada were founded by Nevada residents, but Canadian publicly traded companies and Canadian private equity funds have been slowly and consistently acquiring them for considerable sums.

When cannabis is legalized at the federal level, there will be a flurry of transfer of interests through acquisitions and divestitures in cannabis establishments in Nevada and other states as U.S. publicly traded companies and private equity companies enter the market and replace the Canadian companies as the industry’s primary source of capital.

A host of other industries, including the gaming and liquor industries and many lenders that have abstained from involvement in the cannabis industry, will join the party. When federal law changes to make cannabis legal, U.S. public companies and banks will be encouraged to dive in and invest in this industry with enormous potential for growth.

In some ways, it will be like a bursting dam. The regulators at the Nevada Cannabis Compliance Board, which governs Nevada’s cannabis industry through strict regulation of all areas of licensing and operations, are well aware of what will likely be a massive and sudden wave of business activity when federal cannabis legislation finally moves forward. The board is doing its best to prepare for the implications, but it will need a great deal more funding, for everything from staffing to systems, to truly be able to handle what some are referring to as the next Comstock lode Silver Rush in Nevada.

Whether or not the MORE Act passes the Senate, at some point legislation is coming on a national scale. Regardless of what happens in Washington, D.C., Nevada will continue to move forward with its own legislation that further expands the business of cannabis in Nevada. New state legislation passed at the end of 2021 allows recreational cannabis business owners to apply for licenses to open on-site consumption lounges where adults can legally smoke, eat or dab cannabis products.

The new legislation allows an existing dispensary to add a space for a lounge and independent businesses to build a consumption lounge with single-use cannabis products for sale. The Las Vegas Paiute Tribe operates the only cannabis consumption lounge in the state, so the first state-approved cannabis consumption lounges are expected to open in 2022. Nevada is not waiting for Washington, D.C.

About McDonald Carano

In 2024, McDonald Carano celebrates 75 years of serving Nevada’s legal, business, government, and civic communities. More than 60 lawyers and government relations professionals serve Nevada, national, and international clients from our offices in Reno, Las Vegas, and Carson City. McDonald Carano provides legal services and government affairs and advocacy advice to startups, corporations, private companies, trade associations, nonprofits, public entities, high-net-worth individuals, and family offices throughout Nevada. We are proud to be your Nevada law firm since 1949.

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