Some Background On License
Nevada passed a constitutional amendment in 2000 legalizing marijuana use for medicinal purposes. This constitutional amendment expressly stated that a valid MMJ card-holder would be exempted from most marijuana related crimes if the MMJ card-holder was using MMJ in accordance with Nevada state law. However, it was not until 2013 that the Nevada Legislature finally got their act together and passed the enabling legislative framework that would allow the amended Nevada Constitution to function as intended. The 2013 addition to the Nevada Revised Statutes was contained in NRS 453A – medical use of marijuana.
NRS 453A (2013) and its associated Nevada Administrative Code (NAC 453A) was widely criticized upon its enactment for being poorly written and impossible to administer properly because of several gaping holes the legislature either intentionally omitted or accidentally overlooked. Part of this problem was caused by the delay between the enabling legislation, i.e. NRS 453A, and the administrative rules (NAC 453A) that interpreted the law in areas like licensing, transfers, and sales. In fact, the rules for independent testing laboratories were not completed until 2015 and still contain some gray areas even as revised.
The Law as it Was
Under the original 2013 iteration of Nevada’s medical marijuana law, Nevada required some pretty onerous conditions to obtain a medical marijuana establishment (MME) registration. Most notably was a requirement that the applicant control at least $250,000 in liquid assets to cover the initial expenses of opening the proposed MME and complying with the provisions of Nevada law. Further, in Clark County no more than 40 MME registration certificates (licenses) would be issued and applications would only be accepted for 10 business days in any given calendar year. Moreover, the law did not allow transfers of the MME license, the penalty of which was forfeiture of the license (NRS 453A.334).
NRS 453A.340 states the “Grounds for immediate revocation of [your] registration certificate… [is] Violating a regulation of the division…” Clearly, to challenge the poorly written, and yet legally functioning, Nevada medical marijuana law when it was first written could have serious administrative, civil, and/or criminal ramifications.
The associated Nevada Administrative Code (453A.302) clarifies the “no transfer” rule to apply to any owner with an interest of 5% or more. However, under that same section, if the Division determines it is in the public interest, then even owners with less than a 5% interest can be regulated.
For example, under the original 2013 iteration, transfers of MME licenses were not allowed. The easiest way to see how this was problematic is to imagine a medical marijuana firm with multiple partners who Nevada has approved to share in the medical marijuana license. So far so good, right? Well, consider what happens when one of the partners dies or is some other way restricted from his or her partnership interest in the medical marijuana firm. If transfers are not permitted, then the deceased partner’s interest cannot pass more than 10%, per NAC 453A.326 (2014), to the other members of the firm and that interest is effectively inaccessible without reapplying for a new MME license during the next available application period. Or, consider perhaps, the scenario where a MME licensee for one reason or another wants to sell that license to an outside party or take on third-party investors. Obviously, the inability to sell or transfer a business license is not good business or public policy. However, this restriction remained in effect until the legislature amended the law in 2015 with Senate Bill No. 276 to allow transfers with permission.
Moreover, a MME license was tied to a specific location that had been approved by the Division in connection with the license application. Any new locations that were “more than 5 miles from its original approved location” were not permitted – NAC453A.326 (2014) – and would result in revocation of the license.
Since licenses, licensees, and locations were all firmly tied together under the previous law, transfers or sales of the license were problematic and almost impossible to monetize easily.
The Law is it reads today
The revision to NRS 453A.334 reads:
“A medical marijuana establishment may transfer all or any portion of its ownership to another party, and the Division shall transfer the medical marijuana establishment registration certificate issued to the establishment to the party acquiring ownership…”
There are some restrictions to this transfer, however, namely:
- the new certificate/license holders must possess, in the aggregate, $250,000 of liquid assets per certificate. (A medical marijuana dispensary and a medical marijuana cultivation facility must hold two separate certificates. This would bring the liquid asset requirement up to $500,000 for that business model).
- the new owner(s) must submit and pass the background check requirements for the license.
- The transfer or sale of the license will not create a monopoly as defined under the relevant medical marijuana statutes.
Further, per NAC 453A.324 (2014) provisional MME licenses issued in 2014 must be “fully operational within 18 months after the date on which the Division issued the medical marijuana establishment [license]”. The failure to meet this requirement could end up with the Division revoking the MME license.
So, what does this “18 months” requirement mean? The Division has issued a clarification letter that indicates:
The Division expects all MMEs holding a provisional certificate [license] to be fully operational by May 3, 2016. However, if a MME submitted the renewal form on time and continues to make significant progress towards opening, the Division intends to take no action on the MME certificate at the 18-month, May 3, 2016 deadline. (emphasis added)
The Division goes on to indicate 7 points that are elements for establishing “significant progress.”
- Paid initial fee
- Have started construction
- Have zoning approval
- Have you applied for business license
- Submitted renewal (in combination with others)
- Applied for and paid for agent cards
- Submitted operational plans, policies and procedures.
What If You Want a MME License?
So, what does that mean if you want to purchase a medical marijuana license? Essentially, because the law now provides an avenue for legally transferring an interest in a MME license, a lucrative and viable market for those license sales exist. Particularly taken in the context of MME licenses that are still in provisional status and are floundering because of one reason or another. Those licenses are potentially good targets to purchase because the availability of fresh licenses are scarce. The transfer or purchase of an existing license may be a better option for a third-party investor or medical marijuana entrepreneur.
To do so, you will need to organize your medical marijuana outfit with the proper corporate formalities, do a transfer with the State which includes proof of liquid assets appropriate for the license type, show the transfer will not become a monopoly under the statute, and submit and pass the appropriate background checks. Further, you may or may not need to change locations because previous locations went through a rigorous process with state and local governments for compliance but were often lost due to under-capitalization, unpaid leases, or other external factors due to non-operation. However, under the new revisions to the law, after obtaining the proper permissions from the State Government and receiving new special use permits from the Local Government location changes are permitted with no distance restrictions.
A medical marijuana establishment may move to a new location under the jurisdiction of the same local government as its original location and regardless of the distance from its original location if the operation of the medical marijuana establishment at the new location has been approved by the local government. NRS 453A.350(2)
The Wright Law Group, P.C.
Transfers and sales of a medical marijuana license can be confusing. Speak to a marijuana attorney today to ascertain how they can help in obtaining the best outcome possible with any of your marijuana issues – from licensing to criminal defense. But don’t let just any law firm handle your case – THE WRIGHT LAW GROUP, P.C., is a highly experienced and respected law firm specifically dedicated to representing persons with marijuana objectives or defending those criminally charged with marijuana offenses in Las Vegas and throughout Clark County, such as possession, trafficking, manufacture and sale of all cannabis derived substances.
Presently in his 25th year of practice, founder John Henry Wright, Esq., is peer rated A/V by Martindale & Hubble as “Preeminent” in the fields of Criminal Law and Litigation, but it is also our unique perspective and experience that sets us apart. THE WRIGHT LAW GROUP, P.C. is up to date to on all the current laws, statutes, and regulations involving medical and recreational marijuana in Nevada. We have extensive experience in both Criminal and Civil litigation.
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