Cannabis industry in Las Vegas gears up for addition of consumption lounges

AP Photo/Ted S. Warren

In this file photo, Samantha Anderson, right, helps Leonard Haggerty inhale marijuana vapor just after midnight Saturday, March 2, 2013, in the upstairs lounge area of Stonegate, a pizza-and-rum bar in Tacoma, Wash.

Roger Bloss sat parked in his vehicle near a smoking area outside a prominent Strip casino resort.

Bloss, the CEO of MJ Holdings, a Las Vegas-based company that grows cannabis in Nevada, observed dozens of people inhaling and exhaling for about an hour.

“I’d say 90% of them were obviously smoking weed,” Bloss said. “I feel that’s not conducive for certain kinds of tourism and I certainly think it will impact our convention business in Las Vegas Mondays through Thursdays.”

What Bloss said he witnessed isn’t an uncommon sight for those walking the Strip, in parking garages, or downtown on or around Fremont Street. And if a person in the tourist corridor doesn’t see someone smoking marijuana, they’re likely to smell it at some point when outside of a building.

There soon could be another option.

Legislation approved by lawmakers at the recently concluded Nevada legislative session and signed into law by Democratic Gov. Steve Sisolak paves the way for marijuana consumption lounges to open in Nevada next year.

It’s now the responsibility of the state’s Cannabis Compliance Board, which regulates the industry, to approve licenses for lounges at existing dispensaries, and for free-standing independent lounge businesses.

At Planet 13 on West Desert Inn Road near the Strip — a 112,000-square-foot dispensary paradise — plans are already underway for a consumption area.

Most of the customers who come into Planet 13 are Las Vegas tourists. In the first quarter of this year, Planet 13 reported nearly $24 million in earnings at its Las Vegas dispensary, about 9% of all dispensary revenue reported in Nevada for the period from Jan. 1 through March.

Now they’ll have a place to smoke.

“It’s been kind of a dream of ours to allow for consumption within this complex,” said David Farris, a spokesman for Planet 13. “We’ve gone back and forth on ideas, just waiting for a bill to pass. Now, we’re gearing up and getting a team together to put together some solidified plans.”

The general idea, Farris said, will be to build something that could potentially cater to hundreds of cannabis users and become an attraction that “rivals the Strip itself.”

Allowing tourists — Southern Nevada welcomed over 42 million in 2019, according to the Las Vegas Convention and Visitors Authority — a place to consume cannabis was one of the driving ideas behind Assembly Bill 341, which was sponsored by Assemblyman Steve Yeager.

“Obviously, there have been some problems with people consuming in public,” Yeager said. “Soon, there will be an answer when tourists ask where they’re allowed to consume. I think that will add to the experience that tourists have. I also think we’ll get some tourists to come here because of that consumption lounge experience.”

Bloss said MJ Holdings will explore the possibilities surrounding a consumption area in Las Vegas that would “encompass the health, wellness and social side” of the cannabis market.

Since federal law still recognizes marijuana as an illegal drug, it’s doubtful that the major resort companies, and other gaming license-holders in the Las Vegas Valley, will have on-property consumption lounges anytime soon.

Citing federal law, the Nevada Gaming Control Board in 2018 required that gaming licensees “shall not participate in the marijuana industry.”

Bloss, however, said he sees possible future daylight on that front with the new Nevada law.

“There’s going to be consumption lounges, and people will be leaving the resorts to go to these lounges,” Bloss said. “Casinos will eventually have consumption lounges. It will happen when competition forces it to happen. No, you won’t be able to smoke a joint at the tables, and the smell (of marijuana) is just too pungent to be out on the casino floor, but there will be lounges.”

Layke Martin, executive director of the Nevada Dispensary Association, said officials with the organization are excited by the legislation and ready to see how the compliance board sets up the license process for lounges.

She said she hopes to see license applications available late this year or early in 2022.

“There are about a dozen dispensaries in Clark County that have the space — or are acquiring the space — for a lounge,” Martin said. “The hope is that some of these places will end up being destinations in and of themselves. Maybe it’s a video game venue with cannabis, or a comedy club, but we see some new and interesting concepts coming from this.”

The law will ban dispensary owners from operating a standalone consumption lounge that isn’t located inside an existing cannabis store. Alcohol sales will not be permitted in any consumption lounge, though single-use cannabis products will be allowed to be sold.

The compliance board is expected to issue 20 independent lounge licenses, half of which will be reserved for “social equity applicants,” which is defined as any applicant who has been “adversely affected by provisions of previous laws which criminalize activity relating to cannabis.”

The compliance board will be tasked with defining exactly who would be eligible under that set of criteria.

The drafters of the bill "really contemplated how to increase the inclusivity and diversity in the cannabis industry in Nevada,” Martin said.

Just like with dispensaries, any free-standing consumption lounge that goes up will need to sit at least 1,500 feet away from any casino establishment with an unrestricted gaming license. A lounge will also need to be 1,000 feet from a school, and at least 300 feet from a “community facility,” according to the law.

And Martin said talk of soon having a consumption lounge inside Caesars Palace or at MGM Grand is likely not as close as some think.

“We’re not there yet,” she said. “These new lounges will still have separation requirements from non-restricted gaming establishments, just like current dispensaries have to be 1,500 feet from a gaming establishment. That’s what the lay of the land is right now.”

Simon Nankervis, CEO of The Source, which has dispensaries in Las Vegas, Henderson, Reno and North Las Vegas, said the company could add a lounge space at an additional dispensary that is still in the planning stages, assuming it’s granted the appropriate green light from the compliance board.

The Source tends to cater more to local clientele, although it also sells to tourists. He said any lounge area would likely be something that would fit two or three dozen people at capacity, smaller than what Planet 13 officials have in the works.

“We should be able to have a better way of controlling how cannabis is used now,” Nankervis said. “We know that tourists are using on the Strip and on Fremont Street. I think this (legislation) will change the way we, as an industry, think about the market.”

Nankervis said industry leaders are anxious to learn more about the specifics of what the licensing process will be in Nevada.

It’s the next step, he said, for a maturing cannabis industry in Nevada, which legalized recreational cannabis in 2017.

Colorado, which legalized recreational marijuana in 2012, allows for legal consumption lounges, as does California, but the coronavirus pandemic made it difficult for the business model to flourish.

“If you look at the markets that are more developed, like Colorado and California, they’ve had consumption lounges for some time now, and that creates an environment where things are more controlled,” Nankervis said. “This law in Nevada puts us in a place as an industry where we’re on par with our neighbors.”

For Yeager, Sisolak’s signature on the legislation marked the end of a process that started with meaningful discussions on what a bill could look like about a year ago.

“What we could see here in Las Vegas could be better than Amsterdam,” Yeager said. “I can’t tell you how many people I talked to from the cannabis industry, the Chamber of Cannabis, gaming, the governor’s folks, and those looking to get into the industry. In the end, we got more support than I thought we’d get.”