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High Stakes: Nevada Gambling Industry Discusses 'Intersections' With Booming Cannabis Industry

Gov. Brian Sandoval Leads Gaming Policy Committee Meeting

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Some of the heaviest hitters in Nevada’s gaming industry met Wednesday morning to discuss how the state should approach its fledgling marijuana industry.

The 12-member Nevada Gaming Policy Committee was revived by Gov. Brian Sandoval, who led the discussion on how federal law affects what Nevada’s casinos can and cannot do related to the cannabis business.

The stakes are high. Nevada controls about 30 percent of the nationwide commercial casino gambling market. Last year, marijuana sales in the U.S. grew 30 percent year-over-year to $6.7 billion, and they could reach $30 billion by 2021.

So far, Nevada gaming regulators, ever since the state kicked off medical marijuana a few years ago, have said that casinos can’t be involved in any way. That includes allowing it to be consumed on their properties. Under federal law, cannabis is a banned substance. Nevada voters last fall overwhelmingly approved recreational use of the plant, and in July the state saw its first adult-use dispensaries open. More than $27 million worth of pot was sold during the first month, dwarfing initial sales in states like Colorado and Oregon.

The public comment portion of the meeting featured conflicting views on recreational marijuana in Nevada. A couple of Nevada residents told the committee that the casino giants should stay out of the cannabis industry, leaving it to smaller enterprises. Based on what was said later in the meeting, they probably don’t have much to worry about right now.

Sandoval said the meeting was to discuss the “potential intersections” of marijuana and gaming. In other words, what business relationships could a company within the cannabis industry have with a Nevada gaming licensee without exposing the casino to risk.

Nevada Gaming Control Board Chairman A.G. Burnett stressed that marijuana has been a controlled substance since 1970. Despite how old the law is, casinos have to abide by it. “Gaming licensees cannot violate federal law,” Burnett said. The Gaming Control Board has the right to punish any licensee that violates federal law, he added.

Dr. Tony Alamo, Chairman of the Nevada Gaming Commission, said that the Commission has had “hours and hours” of discussion already on cannabis and gaming. The gaming regulations on pot haven’t changed since Nevada kicked off recreational sales, according to Alamo.

Later in the hearing, Brian Barnes, a lawyer with Cooper & Kirk, PLLC, said that there could still be potential civil action as a result of the marijuana business, despite the current Department of Justice policy not to enforce the current criminal statute against the industry.

“Any financial relationship between a casino and a marijuana business potentially exposes the casino to suit under [the] civil [Racketeer Influenced and Corrupt Organizations Act],” Barnes said. He said that weed is likely to remain illegal on the federal level “for the foreseeable future.”

According to Barnes, if a casino company invests in a company that sells marijuana it would be money laundering in the eyes of the feds. Renting space to a marijuana business also violates federal law. He added that casinos could fall into hot water by hosting cannabis conventions.

Near the end of Barnes’ comments, Sandoval asked if Nevada itself was engaged in money laundering by taking tax revenue from cannabis sales. Barnes said that the state of Nevada could be not in violation of federal anti-money laundering laws.

Later in the meeting, Cassandra Farrington, CEO of the trade publication Marijuana Business Daily, told the panel about the cannabis industry event MJBizCon, which was held last month at the government-owned Las Vegas Convention Center. MJBizCon was held at the Rio hotel and casino in the past. Farrington said the “business-to-business event” became too large for the Rio. Farrington said she expects more than 20,000 attendees next year, and that no one from the federal government has inquired about the legality of MJBizCon.

Sandoval closed the hearing by underscoring the “grey area” regarding the “position of the federal government.” Sandoval, who admitted to being “frustrated,” said that policy could be created to determine “where these lines are going to be” drawn for the casino and cannabis industries. Sandoval called the issue a “broad discussion.” He also stressed the fact that Nevada is not considering allowing the consumption of marijuana on a casino property.

Alamo said that Nevada should help the gaming and cannabis industries grow “separately.” Though, he did say that based on testimony he does believe that there is a way for casinos to host marijuana-related business events and “not step on a nail” with the feds.

MGM CEO and Chairman Jim Murren said that the committee will “need to take some time” to digest the information, because it’s “too complicated and too important.”

Sandoval said the committee will meet again early next year to deliberate further.