New Statutes and Regulations Bring a World of Change to Nevada Cannabis Compliance

Nevada Business
October 1, 2020 Publications

Used with permission from Nevada Business Magazine (NevadaBusiness.com).

In June 2019, the Nevada Legislature passed Assembly Bill 533, which restructured the regulation of the Nevada cannabis industry. This new structure has both benefits and challenges. Previous iterations of this article emphasized how critical compliance would be for the cannabis industry. That remains true today, perhaps with added complexity in light of these changes and the global impact of COVID-19.

AB 533, now codified in Nevada Revised Statutes 678A, 678B, 678C and 678D, establishes the framework for the Cannabis Compliance Board (CCB) and the Cannabis Advisory Commission (CAC). The CCB officially took the helm of regulatory authority over the industry on July 1, 2020, and immediately adopted its regulations at the CCB’s first meeting on July 21.

Currently, three of the five members of the CCB have been appointed – former Nevada Supreme Court Justice Michael Douglas, former Nevada Gaming Control Board member Dennis Neilander and Jerrie Merritt, a Senior Vice President of Bank of Nevada. The CCB has authority to adopt regulations and impose discipline, and refer disciplinary actions to the Nevada Attorney General for prosecution.

The CAC, however, was established to study issues related to the industry and provide advisory opinions. The CAC will include the Executive Director of the CCB, the Director of the Department of Public Safety, the State Attorney General and the Executive Director of Taxation. Additionally, the Nevada governor will make appointments to the CAC from those with industry experience, a licensed physician with cannabis or public health experience, a medical patient advocate, a person familiar with the impact of the war on drugs, a licensed attorney who has represented cannabis establishments or medical patients and a person with experience in public health or food safety.

NRS 678A, B, C and D made other important changes for the Nevada cannabis industry such as establishing subcommittees and studies for various areas of concern, reworking the requirements for ownership background checks and approvals, and modifying the process and criteria for issuance and renewal of licenses. Although not subject to the Nevada Administrative Procedures Act, the statutory structure for the CCB provides for the right to petition for judicial review of the agency’s actions.

The regulations of the Nevada Cannabis Compliance Board (NCCR) have the look and feel of the regulations for the Nevada Gaming Control Board. Generally, NCCR 1-3 cover the issuance of regulations and definitions, as well as the organization and administration of the CCB and CAC. NCCR 4 and 5 deal with disciplinary proceedings, licensing, background checks and registration cards. NCCR 6- 10 provide for the production and distribution of cannabis products and minimum good manufacturing practices. NCCR 7, 8, 9, 11 and 13 are specific to each of the license categories issued by the CCB – sales facility, cultivation facility, production, testing facilities and distributors. NCCR 12 contains provisions for packaging and labeling, and NCCR 14 establishes workplace requirements. Key changes in the regulations for consideration are:

NCCR 4 makes significant changes in the categories of violations for a licensee and the penalties for those violations. Some violations were increased to higher categories, carrying more serious regulatory action and fines, while a few other violations were newly added.

NCCR 5 contains the most changes from the prior NAC 453D. This regulation establishes that any license issued is a revocable privilege and that the burden is on the applicant to prove qualification. The CCB has increased its reach under NCCR 5, broadening the categories for evaluations, the types of transactions regulated, and authority relating to inspections and investigations.

NCCR 11 reflects more stringent regulations for testing facilities, echoing the CCB’s mission of addressing some of the testing issues that have arisen in the last few years.

These changes, and increased penalties for violation, underscore the significance of compliance for those operating in the industry. While Nevada’s cannabis regulatory structure has been changed, the industry remains strong as we look to 2021.

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