-To UNLV's new Cannabis Policy Institute.

The first of its kind in Nevada, officials believe the Institute will have a nationwide impact.

Among them is Riana Durrett, Director of the UNLV Cannabis Policy Institute.

She's also the Vice Chair of the Nevada Cannabis Compliance Board.

Riana, thank you for joining Nevada Week.

(Riana Durrett) Thank you for having me.

-Why is UNLV a good home for this institute?

-Many reasons.

A few of them include UNLV is an R1 classified research institute, according to Carnegie classification.

So we already have the infrastructure there to conduct research, disseminate research, so it's a good home for it.

That cannabis policy, cannabis research is-- there hasn't been as much around it as people would like.

While the industry grows rapidly and rules change rapidly, UNLV can be a place to keep up with those changes.

And then finally, I would say we're unique in that we, you know, we have tourism in Southern Nevada that no other state has.

We have unique qualities, but also, finally, UNLV has tested these concepts before of policy institutes, and we've done well: the International Gaming Institute, the Center for Business and Economic Research, Brookings Mountain West.

We're really good at developing these institutes.

-And I would imagine Nevada being one of the first states to get into marijuana helps as well, or does it?

-Exactly.

We were one of the first in that first group of states to legalize adult use, and many states did look at our regulations as a model for theirs.

Just for example, our testing regulations are looked at through various states, and we have some of the strictest in the country.

So we can help provide guidance.

-In your experience in this industry, you have several years of experience in marijuana law and policy, what is the most important public policy research needed in the cannabis industry right now?

-There's a long list.

But again, I'll start with just a few.

One of the hot topics today is rescheduling.

President Biden has advised his administration to look into rescheduling, meaning taking it from a Schedule 1 prohibition, which is alongside heroin, to a lower schedule with perhaps less penalties, less prohibitions.

The Department of Health and Human Services has recommended rescheduling to a Schedule 3.

The main changes of that would be perhaps more avenues for research and lower the tax penalties that these businesses face.

Those are some of the primary penalties.

But there's lots of questions around it, because this-- what all impacts will this have?

So that's a hot topic of the day and one that we are already looking at scheduling panel discussions, writing articles about.

That is one a lot of people should be interested in.

Even if they have nothing to do with cannabis, even if they feel like this doesn't impact us, it could in some way; for example, banking, health, universities, gaming, etc.

How does it impact all of those areas?

Another would be the financial struggles of the market, because I think it's widely believed that they are highly profitable.

There's a green rush of green-- some people, I often hear that, They're just printing money.

So I think this misconception about the financial status of these companies is very interesting.

And related to that is the illegal market and its prevalence and surprising strength of the illegal market.

And then finally, just an another one we're very interested in, is tourism, of course, because that's a natural fit for us.

-So with the financial struggles, what is the reality of the cannabis industry?

How profitable is it?

-So a report was released in the last few months from Whitney Economics stating that about 25% of them are profitable, which I think that is widely unknown.

In addition to that, there's a book I find very valuable.

It's called Will Legal Weed Win or something like that.

It's about whether the industry is even economically viable.

The entire industry, is it economically viable?

Because a lot of their costs are a lot higher than people expected.

Challenges are a lot higher than people expected.

Illegal market, it has a stronghold more so than people expected.

And there are significant taxes at the state and local level, and they pay significant, kind of, tax penalties at the federal level.

So it's not-- the margins aren't as large as people expected.

-Let's break that down a little bit.

Because the rescheduling could impact the business struggles that they're facing, how so?

If this was rescheduled from Schedule 1 to Schedule 3, how would that benefit them financially?

-There are a lot of questions around rescheduling.

One thing that could happen if it's moved from Schedule 1 to Schedule 3 is an IRS code that applies to Schedule 1 substances would no longer apply.

And so they would no longer-- they would, it would allow them to take business deductions.

Right now under Schedule 1, they can't take standard business deductions, which, especially small business owners know, that's where a lot of where your ability to make money comes in.

Those business deductions, that increases your margins.

So if it is moved to Schedule 3, that will ease up the pressures on them quite a bit.

-The illegal market-- still, is that strong?

-Yes.

Nevada has commissioned a report that will kind of help us get an idea of how strong it is in Nevada, because we don't have those numbers.

Based on what we see, it appears it's very active.

If you just go online, you can find illegal companies that appear very sophisticated, very successful.

Their channels of distribution are sophisticated.

A lot of people wouldn't even know they were illegal.

It's widely believed that a lot of illegal product comes from California.

That has a very big illegal market.

So it's very likely our illegal market numbers are going to be very high.

-That's so wild to me.

I would think now that it's legal in certain states for recreational use, you would want to go to an actual facility and be, you know, above board with everything.

But that's not happening.

-Right.

Right, some people are going to support the legal.

Some people have made that switch.

-Certainly.

-But the result of buying on the illegal market is we lose out on tax revenue and then you're consuming untested products that have been found to have heavy metals, pesticides, harmful products.

But, exactly, this is I think a surprise to a lot of people that people find their, the illegal market, to be such a-- so attractive.

But it's for a variety of reasons.

One, I think a lot of people, a lot of tourists anyway, probably they don't know necessarily the difference because the illegal market appears like a legitimate business in some ways.

-Really?

And this is from people looking just online?

-Right, exactly.

Exactly.

-And they physically go to a location that appears to be?

-No.

They have it delivered.

-Have it delivered.

-Right, yeah.

-Wow!

So these are some of the public policies you're going to be looking to explore and inform people about so that you can address them and make this industry profitable or more profitable.

I looked at some of the numbers from the Nevada Department of Taxation.

And for taxable sales 2021, they surpassed a billion dollars in Nevada.

But then the next fiscal year, only 965 million.

And then the 2023 fiscal year, 848 million.

What is behind this decline in sales do you think?

-Yeah.

You definitely want to see those numbers going up if you're a business owner.

And if you, if you have, you know, tax revenue coming in from this, you want to see your tax revenue going up.

It could be a variety of factors.

I've heard a theory that when the businesses were shut down during COVID, people reverted back to the illegal market.

Another one could be that prices have compressed, and they haven't gone back up.

So you'll see less, the sales amounts being lower, tax revenue being lower as a result.

Several states have seen quite a drop in tax revenue after time because, like I said, sales being compressed-- -So inflation has not impacted the cannabis industry?

-Oh, gosh, you'd have to ask an economist about that.

[laughter] -But there's a variety of theories.

And it is a big concern for those that are, you know, invested in it and for the, I would imagine, for the state that makes projections on these numbers and expects to see them growing, not declining.

-Not declining.

It's interesting.

And this always seems to get brought up on the topic of education funding in Nevada: Where is the marijuana money?

Why hasn't that taken care of the woes in education funding in Nevada?

And your answer to that would be?

-Yeah.

The funding that was indicated that it would be sent to public education funding, it was sent to public education funding.

There was an additional amount that was sent to the rainy day fund, but a statute has now reverted that back to public education.

So all the funding is going to public education.

It's not an amount that would vastly overhaul our current education budget.

It's not-- it's not something to sneeze at or, you know, take for granted, but it's not something that would completely change the face of public education.

-Some people looked as it's going to solve everything.

But yeah, when you look at-- so if it's a billion dollar industry in the state and you're taxing these companies I think about between 10 and 15%, that's going to be about $100 million a year in tax revenue for education, which this year's fiscal budget for education was $6 billion.

So it's just a small part of it, you know?

-Right.

Again, it's-- I think it's helpful to the state, especially because given the fact that these sales are occurring, people in every state consume cannabis.

It's the number one intoxicant around the world.

As long as people are going to be making these purchases, let's regulate it.

Let's collect the revenue on it.

Let's collect as much of the revenue on these sales that are going to take place anyway as we can.

But exactly, that amount will never be $6 billion.

-And for those who say, Well, then tax those marijuana businesses more; let's get more education funding, what would you say?

-Think they're tax, they're maxed out on their tax level.

There's a-- there's a 10% tax, a wholesale, or 15%.

There's another 10% at retail.

It's a significant amount of taxes that most businesses couldn't survive if they paid that amount of taxes.

The rate is as high as it can, and we have to look at other ways to increase that revenue other than increasing the rate.

-Okay, another area that you'll be researching.

The social equity aspect of the cannabis industry, the state in the 2021 legislative session set aside a certain number of social equity applicant licenses for cannabis consumption lounges.

The social equity applicant definition the state broadly defined as, quote, An applicant that has been adversely affected by previous laws that criminalized activity relating to cannabis.

This is in reference to the war on drugs, which disproportionately impacted people of color.

A'Esha Goins, who is an expert in cannabis policy and particularly in this area, helped explain this on our show last year.

Let's listen.

-The war on drugs was really a war on people, right?

And what it was, was an initiator to lock up people of color.

It gives me great disdain to even talk about it, because I'll always feel like I'm trying to justify the importance of a body of people, right, their importance of having to be in this industry or given the option to be in this industry.

The reality of it is, is we should not be making millions of dollars and just completely wipe away what happened to a generation of people, generations of people, because it's been 30 something years.

So.... -All right.

So the question that the state faced was, how do we make up for these past wrongs, and these social equity applications were part of their answer, even offering them at a reduced rate, a discount of 75%.

How well do you think that addresses social equity in the cannabis industry?

-She's great.

I have her teach my cannabis law class every semester.

I defer to her often on these issues.

I think the consumption lounges are, unfortunately, not the panacea.

I think she would agree.

I think-- there has already been quite a bit of research in this area, a lot of data collected on what various states are doing, and Nevada certainly has room for improvement.

One of the struggles is licensing may not be the answer, because the licensing doesn't necessarily bring you the resources you need to make it successful.

A lot of people who have, who already have financial backing have not been successful.

So if you are entering the market when you don't have the financial backing, it's a big struggle.

I think there are some groups that will do well.

They have.

They're incredibly smart.

They put so much work into it.

So I think there's some that will do well.

I look forward to, potentially, some sort of hybrid way to get into the industry but have support and not be responsible for all the overhead and the success of, of these big-- of a bigger company.

So something like a joint venture agreement, a micro licensing.

This needs to be worked out, but I very much look forward to the people who will be at the table working out something like that.

-Last thing.

We're running out of time.

When might we see a cannabis consumption lounge in a casino?

The first one in Nevada not on tribal land is set to open later this year, but that's not in a casino.

When might we see one in a casino?

-There are opinions on either end of the spectrum.

Some people believe that will happen soon and that some gaming companies are just-- are just busting at the seams ready to do this.

I lean towards the more conservative side of they've shut down those conversations.

I don't think that's going to happen for a while.

But I do think today we need to start talking about when will it happen and what will it look like so we're well prepared and so we can be, as we have been in many ways, the jurisdiction that people look to, to do it successfully.

-And that is because currently they cannot.

Gaming operators cannot be in this industry.

Riana Durrett, thank you so much for coming on Nevada Week.