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Legal medical marijuana sales in Nevada launched seven years ago, which has led to the opening of cannabis lounges and dispensaries, but any integration with the licensed gaming industry remains off limits due to the federal government classifying it as an illicit drug.
Cannabis has been classified as a Schedule 1 controlled substance by the U.S. Drug Enforcement Administration (DEA) since the passage of the Controlled Substance Act of 1970 putting it on the same level as LSD and heroin.
That federal classification led the Nevada Gaming Control Board (NGCB) in 2014 to issue a notice informing licensees that they could not invest in the cannabis industry or host their events on property, that was followed in 2017 with the state's Department of Taxation banning delivery to licensed gaming establishments.
In 2018, the Nevada Gaming Commission approved a recommendation by the state’s Gaming Policy Committee that prohibited any cannabis activity, including trade shows, on a gaming property, as well as banning the financing of cannabis businesses.
The Nevada legislature then passed a law requiring 1,500-foot separation distance between cannabis businesses and properties with an unrestricted gaming license, which remains in force even with a 2021 bill allowing for cannabis consumption lounges.
“Really what it comes down to, is what the regulators tell you, you are going to do,” Jennifer Roberts said during a seminar last week on the potential integration of both regulated industries hosted by the University of Nevada, Las Vegas’ Cannabis Policy Institute and International Gaming Institute.
Roberts, who was speaking in her role as an adjunct professor in the UNLV William S. Boyd School of Law and not as general counsel with WynnBet, said regulators have long said that cannabis and gaming should not mix.
“We’ve followed that directive,” Roberts said. “The position has been since they first issued the memo … that it is a violation of federal law to allow for the use and consumption and distribution of cannabis. They cannot sanction a violation of federal law.”
Bob Hoban, strategic advisor to the Cannabis Industry Group at Clark Hill in Denver, said there was a potential business opportunity in Nevada from combining both industries but stressed that it would potentially undermine the integrity of gaming and the gaming establishment.
“It is probably not worse, maybe even better, than alcohol consumption, which is rampant, of course,” Hoban said of cannabis use. “But at the same time, I think that to keep these things separate is important at least from maintaining the integrity of gaming.”
Hoban said there are three places regulators and lawmakers had integrity concerns, including banning cannabis deliveries to resorts on the Las Vegas Strip, which is inconvenient for people visiting, banning licensees from investing in cannabis businesses and restricting the locations of lounges and dispensaries.
“So, if you keep those two things separate, in theory, it maintains the integrity of two distinct ‘Gold standard,’ if you will, regulatory programs,” he said. “There is a lot of public policy fear, not just here in Nevada, but all over the world about mixing these two things together.”
Hoban told attendees that keeping them separate does not make market sense, or business sense, but he understood the reasons for it.
Brett Abarbanel, executive director of IGI who hosted the event with Rianna Durrett, of the policy institute, asked Hoban what he meant by integrity because when most people hear the word integrity, they think of crime.
“The way I look at integrity of a regulatory program is … does it establish fair rules by which operators need to operate. In other words, does everyone play by the same rules,” Hoban said. “And can you own a businesses if, in fact, you are connected to some sort of past or current criminal behavior.”
He stressed that integrity means the process is transparent and fair to the consumer, and the integrity of the regulatory model will protect the vulnerable, or those who could potentially be harmed.
Hoban and Roberts were joined by Tick Segerblom, a member of the Clark County Commission and sponsor of the initial medical marijuana legalization bill, Senate Bill 374, in 2013. Segerblom made it clear the casino industry cannot ignore the tourism associated with cannabis.
“It’s inevitable that gaming will get involved,” Segerblom said.
Roberts compared the early days of Nevada’s gaming industry to the cannabis industry, noting that when Grant Sawyer was governor and created the modern regulatory structure, it was one under threat of FBI raids and shutting down casinos.
Sawyer, who served as Nevada governor from 1959 to 1967, was responsible for getting the Gaming Control Act of 1959 passed that created the state’s two-tiered regulatory system.
Nevada established a similar regulatory structure for cannabis in 2016 after voters legalized marijuana for recreational use. The industry is licensed and regulated by the Nevada Cannabis Compliance Board.
The Biden administration announced plans earlier this year to reclassify marijuana, easing restrictions but not outright legalizing cannabis. Even if the federal government rescheduled cannabis to a Schedule III drug, Roberts believes that presents new problems for casinos.
“It has been clear that the [gaming industry] have said that it’s clearly a violation of federal law and we can’t allow that,” Roberts said. “We can’t sanction it. I think that would have to change.”
Roberts compared the federal position on cannabis to the Wire Act enacted by Congress in 1961, which prohibits the transfer of bets across state lines and has had several interpretations by the U.S. Department of Justice in recent years.
“The Wire Act is equally antiquated,” said Roberts, adding that it was passed before the internet and modern technology.
But Roberts did not see any movement on gaming regulator’s acceptance of cannabis unless they changed the federal law.
“But the problem is,” Roberts said, “they haven’t changed the Wire Act and that’s still around.”
