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Nevada is losing out on $80 million in annual marijuana tax revenue by imposing rules that have created strict barriers between the state’s cannabis and gaming industries, according to a new report. And that policy choice has also driven consumers to purchase “unlicensed, unsafe” products in the illicit market.
At the University of Nevada Las Vegas (UNLV) Cannabis Policy Institute and International Gaming Institute’s 3rd Annual Gaming & Cannabis Policy Discussion late last month, lawmakers and officials discussed the impact of regulations that have kept the licensed marijuana industry from fully integrating with the state’s storied gaming sector.
Specifically, they pointed to rules highlighted in the UNLV cannabis institute’s report that prevent marijuana deliveries to most hotels and gaming properties, ban retailers from operating within 1,500 feet of gaming establishments in major counties and broadly restrict gaming licensees from dually participating in or profiting from the licensed cannabis sector.
“The separations act as severe constraints on capital mobility, tourism synergy, and public-revenue growth, without any corresponding economic, public health or safety, or risk benefits to market participants in either market,” the authors wrote.
The report—titled “The 1,500 Foot Wall”—estimates that marijuana businesses are missing out on $750 million in revenue each year due to the onerous regulations. That includes lost revenue from retail sales ($540 million) and wholesale ($210 million).
With respect to unrealized tax revenue from those missed sales opportunities, the forced separation amounts to approximately $80 million that Nevada could be adding to its coffers every year if the two industries were freed up to more closely integrate.
Marijuana is legal in Nevada for adults, including tourists, 21 years or older. But because licensed cannabis businesses are effectively pushed outside of main commercial gaming hubs such as the Strip in Las Vegas, illicit businesses that aren’t playing by the rules in the first place are taking advantage of the state regulations, the report found.
“The cannabis-gaming barriers are currently preventing millions of Nevada consumers from accessing legal cannabis,” it said. “All of the cannabis sold [in gaming areas such as the Strip] is unlicensed, unsafe cannabis from the illegal market.”
“Another result of the barriers is that many of the state’s legal cannabis businesses are struggling to survive as a result of their severely limited access to tourists,” the authors said. “The original separation between cannabis and gaming was a rational precaution in 2014. A decade later, it is an economic and policy anachronism.”
“Convergence is not deregulation—it is optimization.”
At the policy discussion earlier this month, Nevada Sen. Rochelle Nguyen (D) echoed that point, stating that the “idea that we’ve limited one aspect of our tourism economy is ridiculous.”
“To think the cannabis industry is outside of our other tourism industry is naive, inaccurate and not what’s happening out there in the tourism corridor,” she said, according to The Las Vegas Review-Journal. “We got this wrong in some areas. We had good intentions, but as we move forward, this industry is changing.”
The report comes about a year after UNLV’s Cannabis Policy Institute released a poll finding that about seven in ten American adults say they’re in favor of having designated marijuana consumption areas at casinos and resorts—and two in five would be more inclined to visit casinos if cannabis use was allowed.
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Nevada’s first legal marijuana consumption lounge officially opened it doors in February 2024, marking the culmination of years of rulemaking to allow the latest license type.
Tyler Klimas, who served as executive director of the Nevada Cannabis Control Board (CCB) from 2020 to late 2023, said in a podcast that the cannabis consumption lounge development represents the “next frontier” for the industry.
The law—which was enacted under legislation from Assemblyman Steve Yeager (D) and signed by then-Gov. Steve Sisolak (D) in 2021—also allows for businesses that couple cannabis with yoga, serve infused food, offer THC-aided massage therapy or incorporate marijuana in other ways.
Sisolak touted Nevada’s lounge law in a 4/20 op-ed for Marijuana Moment in 2022, writing: “The idea isn’t new, but no one is doing it like we are in Nevada.”
“While most of the consumption lounges in other states don’t offer food, beverages or other entertainment options,” he said, “Nevada’s lounges will be a one-stop entertainment shop to create jobs, grow the industry and boost our economy.”
As consumption lounges started to open, the state’s marijuana laws also changed in another meaningful way at the beginning of 2024, with an updated policy put in place that more than doubled the amount of cannabis that a person can buy and possess to 2.5 ounces.
Tom Angell is the editor of Marijuana Moment. A 25-year veteran in the cannabis and drug law reform movement, he covers the policy, politics, science and culture of marijuana, psychedelics and other substances. He previously reported for Forbes, Marijuana.com and MassRoots, and was given the Hunter S. Thompson Media Award by NORML and has been named Journalist of the Year by Americans for Safe Access. As an activist, Tom founded the nonprofit Marijuana Majority and handled media relations, campaigns and lobbying for Law Enforcement Against Prohibition and Students for Sensible Drug Policy.
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