K&H Blog

IADON V. Department of Taxation

Industry Politics, Law

Today Judge James Wilson released his order on IADON’s Preliminary Injunction, it was granted.

It’s a judgement that will have a big impact on the industry in terms of distribution.  If you aren’t familiar with this case it’s IADON (Independent Alcohol Distributors of Nevada) v. Nevada Department of Taxation. The short version is that Question 2 gave wholesale liquor distributors exclusive distribution rights for the first 18 months of legal retail sale of marijuana for adult use, “unless the Department determines that an insufficient number of marijuana distributors will result from this limitation.” At the end of the day the judge had to decide if the Department of Taxation gave the wholesale liquor distributors the chance to claim the opportunity afforded them in the language of Question 2.  The decision came down to the word “sufficient”.  Since what constitutes a sufficient number of license holders to serve the needs of the retail marijuana market has not been clearly defined, the Department of Taxation has no guidelines to use to determine if the number of wholesale liquor distributor applicants is insufficient.

The question that hasn’t been asked is if the wholesale liquor distributors are prepared for a July 1 start date for retail sales.  They have expressed in court that they can handle the demand, transportation, and security but will they have the requirements met to legally transport in time?

The order means that the July 1 Recreational Roll Out could still go on but only if the Department of Taxation exclusively licenses wholesale liquor distributors who have applied, those applicants who are not wholesale liquor distributors cannot be considered.  It also means that the Department of Taxation has to first define what qualifies as sufficient with respect to meeting Nevada’s cannabis market  distribution needs.  It then can determine whether the number of available qualified wholesale liquor distributor applicants is sufficient or insufficient.

What we are witnessing is potentially a large change in the Nevada cannabis industry.  We have been mainly vertically integrated in terms of distribution; this decision could mean the Nevada market may move to a three tiered system.

We will continue to follow how this unfolds and assess the impact this will have on our clients and the industry here in Nevada.

(source of quote is Full Text of Question 2 initiative)

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