Less than a month after Nevada legalized recreational marijuana,
a fierce battle is underway over who gets to distribute the drug.
Currently, only alcohol wholesalers can apply for distribution licenses.
But the state is worried that they can't meet demand on their own,
and is trying to open up the market to other types of companies.
Now, the liquor distributors are suing—
to keep their monopoly.
In the meantime,
dispensaries in Nevada are doing their best to make sense of the shifting regulations.
— A block and a half west of the Las Vegas strip,
with the Trump International Hotel looming in the background,
sits Reef,
a marijuana dispensary unlike most others in Nevada.
The operation is massive—
165,000 square feet and about 150 employees.
Matthew Morgan, Reef's CEO, gave us the tour.
— I've seen a lot of pot.
So this is Girl Scout Cookies, obviously another very famous strain.
If I built this out, as close to the strip as it is,
it'd become the destination point.
— So it was a visibility move.
— Of course.
It's like the Costco of weed.
— Every step of the process involved in bringing marijuana
from the soil to the store happens within these walls.
— So how many strains are you selling at this moment?
— About 12.
So we're running a little low.
Normally, I like to keep between 16 and 20 on the shelves.
— It's a smooth, unbroken process, except for one wrinkle.
Distribution,
meaning physically moving the packaged product to the place where it's sold,
is currently restricted by law to alcohol distributors.
So, when the time comes for Reef to restock its dispensary shelves,
they have to hire a different company, called Blackbird—
one of only two currently licensed to distribute cannabis in Nevada.
A Blackbird employee shows up in the morning and grabs a cart loaded with four plastic bins.
He walks the cart down a short hallway,
then moves the bins down an even shorter hallway,
and hands the cargo—
3,760 pre-rolled joints—
to the workers in Reef's stock room.
The whole process takes about a minute and a half.
— The situation you're currently in,
where you have to hire a third party distributor
to move the product from your grow to your dispensaries,
does that affect your bottom line at all?
— If we're talking about money, it's not a huge issue.
But just logistically, it's a nightmare.
— Do you ever feel tempted to just…
walk the product from the grow to the store yourselves?
— Um…
you know, I have a pretty good relationship with the regulators in Nevada,
so I'm not trying to deteriorate that relationship.
So, to answer your question, no.
— Reef's predicament is a side-effect of special interest politics,
Nevada-style.
The voter initiative that legalized recreational cannabis
was actually written by a national group—
the Marijuana Policy Project.
In an attempt to lure the state's powerful liquor lobby into the fold,
the group included a provision limiting distribution to alcohol companies for the first 18 months.
Political consultant Scot Rutledge
helped run the state's successful campaign to legalize recreational marijuana:
— So why was that provision in the initiative in the first place?
— Politics.
You know, they came to Nevada.
They understood that alcohol is king here.
Las Vegas sells a lot of alcohol.
And so, as opposed to creating a natural enemy,
they said, "Look, let's try to find a way to include them in this new industry."
— So it was an attempt to sort of preemptively appease the liquor lobby?
— Correct.
— As it turns out,
many big alcohol distributors were worried
that dealing with a product that's still illegal according to the federal government
would jeopardize their business.
By the time legalization rolled around,
not a single alcohol company had gotten a cannabis distribution license—
and very few had even applied.
It was almost two weeks into legalization before when Blackbird got the first one.
And Tim Conder, the company's CEO, has been busy ever since.
— I did 20 deliveries myself yesterday,
we're, like, we're slamming.
— So you're one of very few players
who can fulfill this very specific step in the process
that's absolutely necessary for the whole machine to run.
— Yes.
— Does that mean you can kinda charge whatever you want?
— We definitely could.
We don't choose to, but we probably could.
For us, these partnerships with dispensaries and cultivators in Nevada are important for the long-term.
— Eager for tens of millions of dollars in new tax revenue,
the state is trying to open up applications to other companies.
But a few small liquor distributors
are still fighting in court to hold onto their 18-month monopoly.
If the state prevails,
then Reef will be able to apply for its own distribution license,
allowing them to walk their product down their own hallway.
In the meantime,
the current arrangement doesn't seem to be pleasing many people.
— So this isn't even necessarily very good business for you—
like, having to come here to move boxes down the hallway.
— Not whatsoever.
You know, maybe if we were price gouging, it would be.
But we see the ridiculousness in that practice.
— Advocates for legal cannabis are happy the industry is up and running,
even if parts of it don't make much sense,
and even if the rules seem to change every week.
But some entrepreneurs think there are bigger problems yet to come,
and that the industry isn't ready to meet demand—
which is already huge, and growing.
— I anticipate the whole state running out of product.
As a whole.
— When do you think that's going to happen?
— Before the end of the year.
This is one of those markets where demand is going to far exceed supply.
— Just from all the tourists on the strip.
— I can just see what's happening, you know, from up here.
And I'm watching it unravel before my very eyes.
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