Nevada’s Secondary License Market: Ready, Steady, Go!

Nevada is one of the most interesting medical markets in the country right now. The state is still refining the rules of what will be the first real national medical marijuana mecca even as it also prepares for a massive boost by what many expect to be recreational legalization after 2016.

“There is a measure on the ballot, that is scheduled to be voted upon in late 2016, which will permit the state to develop regulations around marijuana that are intended to be similar in many respects to alcohol,” said Gordon Katz, a managing partner in Electrum Partners which helps businesses find investors and investors find opportunities within the cannabis space. “If this passes and is effectively implemented, revenue potential may increase manifold,” he said.

As a result of its singular market focus—developing an industry that is friendly to medical users also known in this case as tourists—the state industry is taking innovative paths and creating interesting entrepreneurial opportunities unseen in any other state. Sen. Tick Segerblom made headlines when he introduced a bill proposing medical marijuana use for pets.

While this may sound silly, it is not. Tourism, and all of its associated niche markets, is one of the most dynamic drivers of the medical marijuana industry here because Nevada has a system of reciprocity, enabling medical marijuana cardholders from other legal states to make purchases as state licensed dispensaries. As of now there are almost 10,000 medical patients registered in Nevada. The tourist market is creating a wild card in terms of market creation unseen in any other legalizing state so far.

Hawaii seems destined to be the only other state that is so enthusiastically picking up the mantle of Nevada’s lead by creating reciprocity language in its initial legalization efforts. That said, there is clearly a lot of work left to do.

Nevada is now trying an additional tactic to bolster the state’s medical marijuana market. In June, Gov. Brian Sandoval signed a bill that enables marijuana licenses to be fully transferable. As a result, both existing and provisional licenses have become a hot property—and it is expected to stay that way for some time to come. The rules are not yet finalized, and the law authorizing them does not take effect for another six weeks. That said, the move has clearly perked up investor interest in an already rapidly expanding state market which seems determined to avoid pitfalls seen in other states as it develops its own locally sourced green rush.

“Based upon our research, we believe there is a substantial market for the purchase of ownership interests in medical marijuana businesses developing in Nevada,” said Katz. “According to the Las Vegas Convention and Visitors Authority, Las Vegas and its surrounding area have averaged approximately 40 million visitors per year over the past several years. Under these circumstances, where both medically authorized residents and visitors may have access, our belief is the potential for revenue is significant,” he said.

The fact is that those who are in place with a license before what many expect to be the real bonanza—the passage of full recreational legalization—will be well positioned to profit in both directions.

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