What's at risk
• $1.1 billion: Estimated economic activity expected to be created by legal marijuana in Nevada by 2024, according to a 2016 study by Las Vegas-based RCG Economics.
• $280M+ invested in real estate by about 300 marijuana-related businesses
• at least 7,000 marijuana-related jobs
• $5M in monthly state tax revenue ($19 million was raised in the first four months of recreational sales)
• $80M-100M in future tax revenue if the industry were to be shut down this spring
U.S. Attorney General Jeff Sessions wasn’t joking when he said he believed marijuana use in the U.S. “should be minimized.”
On Jan. 4, the Department of Justice head rescinded Obama-era guidelines — most notably the Cole and Wilkinson memorandums — that provided marijuana-legal states an opportunity to operate their respective industries without federal interference as long as the state’s industries abided by certain rules, like keeping cannabis out of the hands of children, gangs and motor vehicle drivers.
Without those memos — which were not legal documents, but rather internal guidance policies for Justice officials in enforcing federal laws — marijuana-legal states are vulnerable to being shut down by the feds, experts and industry members said.
But what would a federal crackdown on cannabis look like? In Nevada, it would mean the loss of as many as 7,000 jobs and more than $5 million in monthly state tax revenue, said Riana Durrett of the Nevada Dispensary Association.
“That’s a conservative estimate,” Durrett said. “There are many ancillary jobs created by the industry too.”
More than $280 million has been invested statewide by the industry in real estate by roughly 300 operating marijuana businesses, according to figures from Durrett and the NDA, Nevada’s largest pro-cannabis advocacy organization.
Some of Nevada’s wealthiest entrepreneurs, including doctors, attorneys and bankers who own dispensaries and other cannabis facilities, would be subject to arrest and charges of up to life in prison for trafficking and distribution of a federally illegal drug. They also could face racketeering and money laundering charges. The U.S. Drug Enforcement Administration classifies marijuana as a Schedule 1 drug, putting it on the same level as heroin, LSD, ecstasy and other substances it says has no “currently accepted” medical use.
The raiding process would be “collaborative” between the FBI, the Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, Firearms and Explosives, said DEA spokeswoman Barbara Carreno, but “will take a while to sort out.” Carreno would not comment on specifics, but said the process of raiding state-legal operations would be “well-investigated before anything happens.”
“We will work with the Department of Justice to fulfill the Attorney General’s commitment to combat violent crime, dismantle criminal organizations and stem the rising tide of the drug crisis,” Carreno said.
Carreno called the statement a “big-picture response to a big-picture memo.” She referred further inquiries to the Department of Justice, where spokesman Devin O’Malley did not respond to repeated requests for comment.
Before raiding any marijuana operations, the department would run a background check on the owner and employees involved in selling the plant, DEA Special Agent Melvin Patterson, said. Most information obtained before a DEA raid comes from surveillance agents who scope out the parameters of a suspect’s home and business, and also investigate their families, acquaintances and “activities” that take place at their home.
Patterson said authorities could obtain probable cause for a search warrant for marijuana properties by simply finding cannabis in the trash. DEA agents could also get a search warrant if they observed someone leaving the property with it.
Upon discovering and raiding a grow house or dispensary, the DEA would provide a count of the plants to the DOJ, Patterson said. The plants would be sent to DEA labs for further evaluation and eventually destroyed, while those arrested would be subject to criminal penalties ranging from one year to life in prison, depending on their respective criminal histories and the number of plants seized.
Metro Police spokesman Larry Hadfield said that while the department takes charge of local raids of illegal grow houses and marijuana stores operating without a license, Las Vegas police also could be involved in DEA raids of dispensaries, even though the businesses are permitted under state law.
Services Metro routinely provides to federal authorities during Las Vegas Valley-based operations include local police intel and investigation assistance. While local authorities don’t always participate in joint task-force operations with federal investigators, Hadfield said such alliances “wouldn’t be unheard of.”
“I don’t want to marry us to this, but I think as this trickles down and federal agencies are going to enforce it, we could potentially be involved,” Hadfield said.
With more than $19 million in tax revenue raised during the first four months of recreational marijuana sales last year, Nevada is on pace to reach the $120 million goal set by state officials from July 2017 to July 2019. That revenue, generated by a 15 percent wholesale tax on distribution from marijuana cultivation and production facilities to dispensaries, pays for enforcement and regulation of the industry and supports the state’s Distributive School Account. An additional 10 percent excise tax on recreational sales goes to Nevada’s Rainy Day Fund.
A federal shutdown of Nevada’s legal marijuana industry in the spring would cost the state up to $100 million in future tax revenue, according to figures provided by Stephanie Klapstein of the Nevada Department of Taxation. That included a projected $45 million to $65 million from the Rainy Day Fund — which supported state budget expenditures like education and aid during the financial recession — and $10 million to $15 million from the Distributive School Account, which provides per-student funding in public school districts and charter schools. The school account also funds special education and reimburses some student transportation costs. The marijuana tax money designated for regulation of the industry would be negligible because legal cannabis in Nevada would no longer exist.
Banks and credit unions associated with marijuana business owners also could find themselves in hot water in the event of a federal crackdown, Carreno said. While not one financial institution in the state openly works with Nevada marijuana businesses, the Las Vegas Sun has reported that many business owners in the industry include their marijuana businesses as part of a larger portfolio with their regular bankers.
Editor’s note: Brian Greenspun, the CEO, publisher and editor of the Las Vegas Sun, has an ownership interest in Essence Cannabis Dispensary.