Seal of the State of Nevada

EXECUTIVE ORDER 2019-03

ORDER ESTABLISHING THE GOVERNOR’S ADVISORY PANEL FOR CREATING A NEVADA CANNABIS COMPLIANCE BOARD

WHEREAS, the people of the State of Nevada have declared both medical and retail marijuana (“cannabis”) legal under State law. The success of the general cannabis industry in the State is vitally important to the economy of Nevada and to the State’s capacity to fund critical educational reforms, among other public programs. The continued success of Nevada’s cannabis economy is dependent upon public confidence and trust that certified distribution, cultivation, production, and laboratory testing of cannabis are conducted with transparency and integrity and that such businesses do not unduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of creditors of cannabis certificate holders are protected, and that the cannabis industry is free from corrosive criminal and corruptive elements.1

WHEREAS, public confidence and trust is best maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of medical and retail cannabis distribution, production, cultivation, and laboratory testing establishments.2

WHEREAS, all operational cannabis establishments must, therefore, be certified or licensed and controlled to protect the public health, safety, good order and general welfare of the inhabitants of the State and to protect the reputation of the State of Nevada and ensure the development of a legal cannabis economy that captures some—if not most—of the illegal cannabis trade. The federal government should view Nevada’s cannabis industry as adhering to the following policy mandates:3

 I. preventing the distribution of cannabis to minors;

II. preventing revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;

1 See Nevada Revised Statutes Chapter 463.0129.
2 See id.
3 See id.

III. preventing the diversion of cannabis from Nevada, where it is legal under state law, to other states;

IV. preventing state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity, especially financial crimes that are the lifeblood of large-scale criminal enterprises, gangs, and cartels;

V. preventing violence and the use of firearms in the cultivation, production, and distribution of cannabis, unless used by trained security staff to protect the health and safety of cannabis establishment patrons, property, and employees; and

VI. preventing drugged driving and the exacerbation of other adverse public health consequences associated with cannabis use.4

WHEREAS, the development of Nevada cannabis law and policy has been incremental and is still maturing, as described here:

I. On November 7, 2000, Nevada voters approved Ballot Question 9, a constitutional amendment titled The Nevada Medical Marijuana Act, which authorized the possession, use and appropriate methods of supply of cannabis to certain individuals upon advice of a physician for the treatment or alleviation of certain illnesses. The constitutional provision touched upon “medical use marijuana” exclusively.

II. In June of 2001, the Nevada Legislature passed Assembly Bill 453—enabling legislation for the State constitutional provision enacted Ballot Question 9—decriminalizing possession and use of medical cannabis in certain circumstances and under State law. The legislation authorized the Nevada Department of Agriculture to create a system of issuing and cataloging medical cannabis registry identification cards and authorized the Health Division of the Department of Human Resources to classify certain chronic or debilitating medical conditions for treatment by medical cannabis. Governor Kenny Guinn signed the legislation, which was codified as Chapter 453A of the Nevada Revised Statutes (“NRS”). The law did not specify the way qualifying patients and their caregivers were to obtain cannabis. Consequently, no State-approved medical cannabis establishments were licensed under this original constitutional and statutory framework.

III. In June of 2013, the Nevada Legislature approved Senate Bill 374, which Governor Sandoval signed it into law. The provisions of the bill amended NRS 453A extensively, defining medical cannabis establishment to include dispensary, production, and cultivation facilities and independent testing laboratories. The statutory amendment further set out the way one

4 See Memorandum from Thomas W. Cole, Deputy Att’y Gen., U.S. Dep’t of Justice, to All U.S. Attorneys (Feb. 14, 2014), [hereinafter Cole Memo] (outlining federal civil and criminal enforcement priorities for cannabis-related violations of the federal Controlled Substances Act in State’s with legal and regulatory mechanisms regulating cannabis). While Attorney General Jeff Sessions rescinded the Cole Memo in January of 2018, the logic of the Cole Memo as a federal law enforcement resource allocation guide remains instructive.

could apply to obtain a registration certificate to operate a medical cannabis establishment, including enumerating the merit-based criteria the Health Division of the Department of Health and Human Services (“Division”) would use in awarding a limited number of medical cannabis establishment registration certificates. The bill enacted antitrust-similar limits on market concentration for establishment registration certificate holders. Critically, the bill established a tax structure for the Nevada medical cannabis economy.

IV. In August of 2014, the Division opened the first filing period for applications for medical cannabis establishment certificates. In November of 2014, the first provisional certificates to operate a medical cannabis establishment were issued. In March of 2015, a single medical cannabis cultivation establishment and a single testing laboratory were granted final certificates to operate, with the first medical cannabis dispensary opening in Sparks in July of 2015.

V. On November 8, 2016, the voters of the State of Nevada approved Ballot Question 2: The Regulation and Taxation of Marijuana Act (“2016 General Act”), a statutory ballot question codified as NRS 453D, which confirmed that the “use of marijuana should be legal for persons 21 years of age or older, and its cultivation and sale should be regulated similar to other legal businesses” and providing for the regulation of cannabis according to the following dictates:

A. Cannabis may only be purchased from a business that is licensed by the State of Nevada.

B. Business owners are subject to a review by the State of Nevada to confirm that the business owners and the business location are suitable to produce or sell cannabis.

C. Cultivating, manufacturing, testing, transporting, and selling cannabis will be strictly controlled through state licensing and regulation.

D. Selling or giving cannabis to persons under 21 years of age shall remain illegal.

E. Individuals must be 21 years of age or older to purchase cannabis.

F. Driving under the influence of cannabis will remain illegal.

G. Cannabis sold in the state will be tested and labeled.

The 2016 General Act designated the Nevada Department of Taxation as the regulatory and taxation authority for implementation of the 2016 General Act, which legalized the cultivation, use, and sale of cannabis beyond the 2001 medical applications. The law took effect on January 1, 2017.

VI. To prepare the State for implementation of the 2016 General Act, on February 03, 2017, Governor Brian Sandoval signed Executive Order 2017-02 establishing the Task Force on the Implementation of Ballot Question 2: The Regulation and Taxation of Marijuana Act (“2017 Task Force”). Executive Order 2017-02 directed the “Nevada Department of Taxation to adopt all regulations necessary or convenient to carry out the provisions of the Act, including accepting applications and issuing licenses for marijuana establishments.” The 2017 Task Force was comprised of 15 members, including representatives from the Nevada Department of Taxation, Department of Health and Human Services, Department of Public Safety, Department of Agriculture, the medical cannabis industry, social service agencies, and local law enforcement agencies.

VII. On May 30, 2017, the 2017 Task Force issued its final report to Governor Sandoval. The 2017 Task Force recommended that, as a first step to create consistency in regulatory oversight of both the medical and retail cannabis industries, jurisdiction for administering the State’s medical cannabis industry be transferred by the Nevada Legislature from the Division of Public and Behavioral Health, Department of Health and Human Services, to the Nevada Department of Taxation.

VIII. In June of 2017, pursuant to the recommendation of the 2017 Task Force, the Nevada Legislature passed Assembly Bill 422, which, among other things, amended NRS 453A to transfer responsibility for regulating medical cannabis establishments from the Division of Public and Behavioral Health of the Department of Health and Human Services to the Department of Taxation, which now regulates retail cannabis. Governor Brian Sandoval signed the bill into law.

WHEREAS, Nevada’s world class gaming industry and the renowned regulatory structure which protects the gaming industry, its patrons, and the State’s reputation evolved in a manner instructive to Nevada’s medical and retail cannabis economies:

I. In 1931, Governor Fred Balzar signed into law a “wide open” gambling statute (“Original Nevada Gaming Act”). As enacted, this statute provided no authority to regulate gaming. Uncertainty and pressure from the federal government caused the Original Nevada Gaming Act to be broadened and improved over time, including transferring regulatory authority for implementation of the Original Nevada Gaming Act to different State agencies at various early points in the development of Nevada’s gaming industry.5

II. In 1945, the Nevada Legislature passed law authorizing the first state casino licenses with an accompanying gaming revenue tax. The Nevada Tax Commission became the first regulatory authority for the gaming industry. The 1945 statutory amendment to gaming provisions granted no express authority to the Tax Commission to truly regulate the gaming industry, however.6

III. Nevada Attorney General Alan Bible issued an official Attorney General Opinion, which argued that the 1945 gaming statute authorizing the Tax Commission to grant casino licenses transferred implied authority to the Tax Commission to pass regulations necessary to inquire into the backgrounds and probity of potential casino licensees.

5 See Robert D. Faiss and Gregory R. Gemignani. “Nevada Gaming Statutes: Their Evolution and History,” Occasional Paper Series 10. Las Vegas: Center for Gaming Research, University Libraries, University of Nevada Las Vegas, 2011. 6 See id.

IV. In 1949, the Original Nevada Gaming Act was amended to require fingerprinting of casino employees

V. In 1950, Tennessee U.S. Senator Estes Kefauver empaneled a federal committee with the charge of reviewing the influence of organized crime in America. Kefauver chaired the committee, which became known as the Kefauver Committee. This group soon began intense scrutiny of Nevada’s early gaming industry and was critical of Nevada’s thin gaming regulatory apparatus. While Nevada’s federal delegation pushed back on Kefauver and federal efforts to quash the gaming industry, State leaders realized that they must strengthen the controls of the Original Nevada Gaming Act.7

VI. In 1955, the Nevada Legislature passed the Gaming Control Act of 1955, which created a two-part regulatory structure with a full time Gaming Control Board acting as the administrative agency, reporting the findings of its investigations into gaming applicants to the Nevada Tax Commission, which had ultimate authority to approve casino licenses.8

VII. Problems with the gaming industry persisted. Governor Grant Sawyer, who won election in late 1958 on the slogan that “Nevada is not for sale,” pursued legislation during the 1959 Legislative Session to move regulatory authority for the gaming industry from the Nevada Tax Commission to an independent agency, the Nevada Gaming Commission.9 Nevada’s current gold standard gaming regulatory structure, the Nevada Gaming Control Act, with authority divided between the Gaming Control Board and the Nevada Gaming Commission, issued directly from Governor Sawyer’s 1959 efforts.

WHEREAS, the historical parallels between the development of Nevada’s legal gaming industry—the result of the genius and initiative of the industry’s most important figures and the active management of the industry by Nevada’s world class regulatory structure, often responding to considerable pressure from federal law enforcement agencies—and the early history of Nevada’s nascent medical and retail cannabis industry, subject to similar federal law enforcement scrutiny and pressure, suggests that the latter, if properly managed, could follow a similar trajectory as Nevada’s successful gaming industry.

WHEREAS, among the 2017 Task Force’s recommendations was that the Nevada Legislature create, when feasible, a Cannabis Compliance Board to provide direct oversight and accountability to the retail and medical cannabis industries. The 2017 Task Force suggested that the structure of such a Cannabis Compliance Board be based on the gaming regulatory structure contained in NRS Chapter 463 of the Nevada Gaming Control Act.

WHEREAS, the thoughtful and informed development of a Cannabis Compliance Board is a significant priority for the cannabis industry, the State of Nevada, and its people; and

7 See id.
8 See id.
9 See id.

WHEREAS, the 80th Session of the Nevada Legislature begins on February 4, 2019 and establishing a Cannabis Compliance Board requires that the Legislature pass enabling legislation for creation of the Cannabis Compliance Board and its associated Executive Branch agency, together with a legislative appropriation to fund the creation and operations of the new agency, with an effective date after November 22, 2019.

WHEREAS, by the authority vested in me as Governor by the Constitution and laws of the State of Nevada and the United States, it is hereby ordered as follows:

NOW, THEREFORE by the authority vested in me as Governor by the Constitution and laws of the State of Nevada and the United States, it is hereby ordered as follows:

SECTION 1: The Governor’s Advisory Panel for Creation of a Cannabis Compliance Board (“Advisory Panel”) is established within the executive department, Office of the Governor.

SECTION 2: The scope of items for Advisory Panel consideration include, but are not limited to, the following:

A. studying the Nevada Department of Taxation’s current cannabis regulatory structure and licensing procedures; review of Nevada’s gaming regulatory apparatus and other similar regulatory structures, identifying elements necessary to create an exemplary Cannabis Compliance Board;

B. review of potential banking solutions for Nevada’s cannabis industry;

C. review of potential cannabis consumption lounges;

D. review of current advertising restrictions applicable to the cannabis industry;

E. review of the current confidentiality provisions employed by the Nevada Department of Taxation in licensing and regulation of the cannabis industry, which have resulted in claims of opaque application grading and certificate award processes;compact status for federally recognized tribes in the State;10 and

F. review of current enforcement mechanisms and practices for current cannabis establishment certificate holders;

G. review of antitrust provisions concerning market concentration of cannabis establishment ownership groups;

H. review of Nevada cannabis law, policy, and compact status for federally recognized tribes in the State;10 and

10 See Memorandum from Monty Wilkinson, Deputy Att’y Gen., U.S. Dep’t of Justice, to All U.S. Attorneys and Certain U.S. Dep’t of Justice Staff (Oct. 28, 2014), [hereinafter, Wilkinson Memo] (outlining U.S. Dep’t of Justice policy regarding cannabis issues in Indian country). The Wilkinson Memo cites extensively to the Cole Memo, which was rescinded; still, as with the principles

I. review of other items as directed by the Governor.

SECTION 3: The Advisory Panel shall report to the Governor on the items outlined in Section 2
and work with the Legislative Council Bureau to prepare enabling language for a Cannabis Compliance Board for the Legislature’s consideration during the 80th Session of the Nevada Legislature
.

SECTION 4: The Advisory Panel shall be comprised of seven (7) members, unless the Governor otherwise amends the size of the Advisory Panel. Moreover, each member shall be designated by and serve at the pleasure of the Governor and, unless specifically named, meet the qualifications of one of the categories below.

A. Chris Giunchigliani, former member, Clark County Commission, former member, Nevada State Assembly, past president, Clark County Education Association, and past president, Nevada State Education Association;

B. J. Brin Gibson, General Counsel to Governor Steve Sisolak and the Office of the Governor and former Chief, Gaming Division, Office of the Nevada Attorney General;

C. Arlan D. Melendez, Chairman, Reno-Sparks Indian Colony;

D. Professor Jennifer Roberts, Associate Director of the International Center for Gaming Regulation, UNLV;

E. one member nominated by the Speaker of the Nevada State Assembly;

F. one member nominated by the Majority Leader of the Nevada State Senate; and

G. a representative of a Nevada county with a population of less than 200,000.

SECTION 5: J. Brin Gibson is appointed Chair.

SECTION 6: The Governor shall appoint a Vice Chair.

SECTION 7: The Chair shall have the authority to issue guidelines for operation of the Advisory Panel and to amend such guidelines as necessary. The Advisory Panel Chair may form working groups, in consultation with the Office of the Governor, chaired by one or more members of the Advisory Panel and comprised of individuals with subject matter expertise pertinent to the focus of the particular working group. The Chair of the Advisory Panel shall identify and approve matters for review by any working group.

governing resource allocation contained in the Cole Memo, similar notions, as they apply to Indian country, contained in the Wilkinson Memo, though it does not constitute law or even necessarily current policy, are instructive.

SECTION 8: The Office of the Governor, the Office of the Attorney General, and the Department of Taxation will provide support staff, facilities, and resources to the Task Force at the Chair’s request and in consultation with the Office of the Governor.

SECTION 9: Members of the Advisory Panel shall serve in a volunteer capacity and without compensation.

SECTION 10: The Advisory Panel shall meet at regular intervals and at the discretion and call of the Advisory Panel Chair.

SECTION 11: All meetings of the Advisory Panel and any working groups of the Advisory Panel shall comply with the Nevada Open Meeting Law, as codified in NRS Chapter 241.

SECTION 12: All records documenting the Advisory Panel’s discussions, deliberations, and recommendations shall be retained and transferred to the Nevada State Library and Archives for retention pursuant to State retention policies.

SECTION 13: This Order shall be effective upon signature and remain in effect until the Advisory Panel, working with the Legislative Counsel Bureau, (1) completes enabling language for the Legislature’s consideration, not later than March 15, 2019, and (2) reports to the Governor on the items outlined in Section 2, not later than May 1, 2019, unless the Advisory Panel is terminated earlier or extended beyond that date by further Executive Order.

Footer State Seal

IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of Nevada to be affixed at the State Capitol in Carson City, this 25th day of January, in the year two thousand nineteen.

Signatures of Governor Sisolak, Cegavske and Scott