The newly created Nevada Cannabis Compliance Board (“NCCB”) is charged with overseeing all disciplinary proceedings governed by Nevada Revised Statutes 678A.500 to 678A.640 and has the authority to suspend or revoke cannabis establishment licenses and cannabis agent registration cards. The NCCB also has authority to impose a civil penalty in an amount up to $90,000 per violation on any person who fails to comply with or violates any provision of the newly enacted regulations adopted by the NCCB. There are five separate categories of potential violations under the NCCB regulations, each relating to specific acts and each carrying different levels of penalties.
CATEGORY I VIOLATIONS:
Category I violations are the most serious and a violation thereof will make a person ineligible to receive, renew, or maintain a license. The acts that would constitute a Category I violation include, but are not limited to:
Conviction of an excluded felony offense; operating without all required permits, certificates, registrations and or licenses; making a false statement to the board; intentionally failing to pay taxes; operating a cannabis establishment while the license is suspended or revoked; transporting cannabis across state lines without an agreement with government authorities; and refusing to allow and inspection or obstructing regulatory personnel or law enforcement officer from performing his or her official duties.
There is a presumption that an appropriate penalty for the first category I violation is a fine of not more than $90,000 and a suspension of the license for not more than 30 days. If there is a second or subsequent violation within 3 years, the penalty is the revocation of a license or cannabis establishment agent registration card.
CATEGORY II VIOLATIONS:
Category II violations are of a severity that create a present threat to public health or safety and include: Making an unintentional false statement to the board or agents; unintentionally destroying or concealing evidence; failing to verify age or selling cannabis to a person under 21 years of age; allowing a person under the age of 21 to work or volunteer at the cannabis establishment; purchasing, cultivating, producing or otherwise using cannabis from an unapproved source; not properly segregating medical patient retail sales from adult use retail sales; selling and amount of cannabis in excess of transaction limits; and failing to renew the cannabis establishment license on time.
There is also a presumption by the NCCB that the appropriate penalty for the first category II violation is a penalty of not more than $25,000 and a suspension of a license or cannabis establishment agent registration card for not more than 20 days. For the second category II violation within 3 years the penalty is a fine of not more than $75,000 and a suspension for not more than 30 days. A third violation within 3 years will result in a revocation of a license or cannabis establishment agent registration card.
CATEGORY III VIOLATIONS:
Category III violations are of a severity that create a potential threat to public health or safety, such as: Failing to keep any required records; failing to tag plants as required; allowing any activity which violates state law; failing to notify the NCCB, or agent, within 24 hours after discovery of a serious incident or criminal activity on the premises; violating packaging or labeling requirements; failing to meet requirement of the disposal of cannabis waste; exceeding the maximum serving requirement for cannabis products; picking up, unloading or delivering cannabis at an unauthorized location; failing to properly update the licensee’s point of contact with the Board; and failure to maintain standard operating procedures.
The presumptive penalties for a category III violation is a fine of up to $10,000 for the first violation. For a second violation within 3 years the penalty is a fine of not more than $30,000 and a suspension for not more than 10 days. If there is a third violation within 3 years, the penalty is a fine of not more than $90,000 and/or a suspension for not more than 20 days. If there is a fourth violation within 3 years, the penalty is a fine of not more than $90,000 and a suspension for not more than 60 days. Finally, if there is a fifth violation within 3 years the penalty is a revocation of a license or cannabis establishment agent registration card.
CATEGORY IV VIOLATIONS:
Violations under Category IV are violations that create a climate that is conducive to abuses associated with the sale or production of cannabis or cannabis products, including: Failing to display a cannabis establishment agent registration card or proof of temporary registration; violating advertising requirements; failing to respond to an administrative notice of violation or failing to pay fines; failing to maintain a standardized scale; improper storing of cannabis, cannabis products or other foods; failing to properly wash, rinse and sanitize product contact surfaces; infestation by pests that are not multigenerational or on contact surfaces; and failing to properly use sanitizer as required.
There are six (6) potential penalties for a category IV violation. For the first violation the fine is for not more than $5,000. For a second violation within 3 years the penalty is a fine of not more than $10,000 and/or a suspension for not more than 7 days. A third violation within 3 years results in a fine of not more than $20,000 and/or a 10 day suspension of a license. For the fourth violation in 3 years the fine is increased to $40,000 and/or a suspension up to 20 days. The fifth violation in 3 years results in a fine of not more than $80,000 and a suspension for up to 30 days. The sixth violation in 3 years will result in a revocation of a license or cannabis establishment agent registration card.
CATEGORY V VIOLATIONS:
Category V violations are the least severe violations and include: Failing to submit monthly tax or sales reports or payments; failing to notify the board or Board Agents of a temporary closure; failing to post any required signs; making a payment with a check returned for insufficient funds; and failing to comply with any other requirements not described in another category of violations. This final category appears to be a form of “catch all” category that allows the NCCB to bring a claim against a licensee for anything the NCCB might consider to be a violation of statutes or regulations, even if the alleged action is not identified in categories I through IV.
While at first glance the penalties enumerated above do not appear to be extreme, the fact that the regulations allow for the imposition of a monetary penalty on a “per violation” basis could result in a substantial fine and loss of business licenses . For example, on July 21, 2020, the NCCB conducted its first public meeting. During the first board meeting the NCCB considered claims against a Las Vegas marijuana dispensary that had been accused of keeping large quantities of marijuana off the books, destroying evidence, and not paying its employees. The NCCB approved a settlement with the accused dispensary that included the suspension of six licenses and the payment of a fine in the amount of $1.25 million. The fine appears to be the largest fine against a cannabis licensee in Nevada.
The Cannabis Compliance Regulations are complicated and even the most minor violations can carry severe penalties. The Wright Law Group, P.C. has more than 28 years of experience defending licensees in administrative procedures and is well equipped to assist you in handling your case. If you have been served with a complaint or need representation before the Cannabis Compliance Board please call us at 702-405-0001 to schedule a consultation or email us.