EXECUTIVE ORDER 2019-03

ORDER ESTABLISHING THE GOVERNOR’S ADVISORY PANEL FOR CREATING A NEVADA CANNABIS
COMPLIANCE BOARD

WHEREAS, the people of the State of Nevada have declared both medical and retail marijuana
(“cannabis”) legal under State law. The success of the general cannabis industry in the State is vitally
important to the economy of Nevada and to the State’s capacity to fund critical educational reforms,
among other public programs. The continued success of Nevada’s cannabis economy is dependent upon
public confidence and trust that certified distribution, cultivation, production, and laboratory testing of
cannabis are conducted with transparency and integrity and that such businesses do not unduly impact
the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of creditors of
cannabis certificate holders are protected, and that the cannabis industry is free from corrosive criminal
and corruptive elements.[1]

WHEREAS, public confidence and trust is best maintained by strict regulation of all persons, locations,
practices, associations and activities related to the operation of medical and retail cannabis distribution,
production, cultivation, and laboratory testing establishments.[2]

WHEREAS, all operational cannabis establishments must, therefore, be certified or licensed and
controlled to protect the public health, safety, good order and general welfare of the inhabitants of the
State and to protect the reputation of the State of Nevada and ensure the development of a legal
cannabis economy that captures some—if not most—of the illegal cannabis trade. The federal
government should view Nevada’s cannabis industry as adhering to the following policy mandates:[3]

preventing the distribution of cannabis to minors;

preventing revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;

preventing the diversion of cannabis from Nevada, where it is legal under state law, to other states;

preventing state-authorized cannabis activity from being used as a cover or pretext for the trafficking of
other illegal drugs or other illegal activity, especially financial crimes that are the lifeblood of large-scale
criminal enterprises, gangs, and cartels;

preventing violence and the use of firearms in the cultivation, production, and distribution of cannabis,
unless used by trained security staff to protect the health and safety of cannabis establishment patrons,
property, and employees; and

preventing drugged driving and the exacerbation of other adverse public health consequences
associated with cannabis use.[4]

WHEREAS, the development of Nevada cannabis law and policy has been incremental and is still
maturing, as described here:

On November 7, 2000, Nevada voters approved Ballot Question 9, a constitutional amendment titled
The Nevada Medical Marijuana Act, which authorized the possession, use and appropriate methods of
supply of cannabis to certain individuals upon advice of a physician for the treatment or alleviation of
certain illnesses. The constitutional provision touched upon “medical use marijuana” exclusively.
 In June of 2001, the Nevada Legislature passed Assembly Bill 453—enabling legislation for the State
constitutional provision enacted Ballot Question 9—decriminalizing possession and use of medical
cannabis in certain circumstances and under State law. The legislation authorized the Nevada
Department of Agriculture to create a system of issuing and cataloging medical cannabis registry
identification cards and authorized the Health Division of the Department of Human Resources to
classify certain chronic or debilitating medical conditions for treatment by medical cannabis. Governor
Kenny Guinn signed the legislation, which was codified as Chapter 453A of the Nevada Revised Statutes
(“NRS”). The law did not specify the way qualifying patients and their caregivers were to obtain
cannabis. Consequently, no State-approved medical cannabis establishments were licensed under this
original constitutional and statutory framework.

In June of 2013, the Nevada Legislature approved Senate Bill 374, which Governor Sandoval signed it
into law. The provisions of the bill amended NRS 453A extensively, defining medical cannabis
establishment to include dispensary, production, and cultivation facilities and independent testing
laboratories. The statutory amendment further set out the way one could apply to obtain a registration
certificate to operate a medical cannabis establishment, including enumerating the merit-based criteria
the Health Division of the Department of Health and Human Services (“Division”) would use in awarding
a limited number of medical cannabis establishment registration certificates. The bill enacted antitrust-
similar limits on market concentration for establishment registration certificate holders. Critically, the
bill established a tax structure for the Nevada medical cannabis economy.

In August of 2014, the Division opened the first filing period for applications for medical cannabis
establishment certificates. In November of 2014, the first provisional certificates to operate a medical
cannabis establishment were issued. In March of 2015, a single medical cannabis cultivation
establishment and a single testing laboratory were granted final certificates to operate, with the first
medical cannabis dispensary opening in Sparks in July of 2015.

On November 8, 2016, the voters of the State of Nevada approved Ballot Question 2: The Regulation
and Taxation of Marijuana Act (“2016 General Act”), a statutory ballot question codified as NRS 453D,
which confirmed that the “use of marijuana should be legal for persons 21 years of age or older, and its
cultivation and sale should be regulated similar to other legal businesses” and providing for the
regulation of cannabis according to the following dictates:

Cannabis may only be purchased from a business that is licensed by the State of Nevada.

Business owners are subject to a review by the State of Nevada to confirm that the business owners
and the business location are suitable to produce or sell cannabis.

Cultivating, manufacturing, testing, transporting, and selling cannabis will be strictly controlled through
state licensing and regulation.

Selling or giving cannabis to persons under 21 years of age shall remain illegal.

Individuals must be 21 years of age or older to purchase cannabis.

Driving under the influence of cannabis will remain illegal.

Cannabis sold in the state will be tested and labeled.

 The 2016 General Act designated the Nevada Department of Taxation as the regulatory and taxation
authority for implementation of the 2016 General Act, which legalized the cultivation, use, and sale of
cannabis beyond the 2001 medical applications. The law took effect on January 1, 2017.

To prepare the State for implementation of the 2016 General Act, on February 03, 2017, Governor Brian
Sandoval signed Executive Order 2017-02 establishing the Task Force on the Implementation of Ballot
Question 2: The Regulation and Taxation of Marijuana Act (“2017 Task Force”). Executive Order 2017-02
directed the “Nevada Department of Taxation to adopt all regulations necessary or convenient to carry
out the provisions of the Act, including accepting applications and issuing licenses for marijuana
establishments.” The 2017 Task Force was comprised of 15 members, including representatives from the
Nevada Department of Taxation, Department of Health and Human Services, Department of Public
Safety, Department of Agriculture, the medical cannabis industry, social service agencies, and local law
enforcement agencies.

On May 30, 2017, the 2017 Task Force issued its final report to Governor Sandoval. The 2017 Task Force
recommended that, as a first step to create consistency in regulatory oversight of both the medical and
retail cannabis industries, jurisdiction for administering the State’s medical cannabis industry be
transferred by the Nevada Legislature from the Division of Public and Behavioral Health, Department of
Health and Human Services, to the Nevada Department of Taxation.

In June of 2017, pursuant to the recommendation of the 2017 Task Force, the Nevada Legislature
passed Assembly Bill 422, which, among other things, amended NRS 453A to transfer responsibility for
regulating medical cannabis establishments from the Division of Public and Behavioral Health of the
Department of Health and Human Services to the Department of Taxation, which now regulates retail
cannabis. Governor Brian Sandoval signed the bill into law.

WHEREAS, Nevada’s world class gaming industry and the renowned regulatory structure which protects
the gaming industry, its patrons, and the State’s reputation evolved in a manner instructive to Nevada’s
medical and retail cannabis economies:

In 1931, Governor Fred Balzar signed into law a “wide open” gambling statute (“Original Nevada
Gaming Act”). As enacted, this statute provided no authority to regulate gaming. Uncertainty and
pressure from the federal government caused the Original Nevada Gaming Act to be broadened and
improved over time, including transferring regulatory authority for implementation of the Original
Nevada Gaming Act to different State agencies at various early points in the development of Nevada’s
gaming industry.[5]

In 1945, the Nevada Legislature passed law authorizing the first state casino licenses with an
accompanying gaming revenue tax. The Nevada Tax Commission became the first regulatory authority
for the gaming industry. The 1945 statutory amendment to gaming provisions granted no express
authority to the Tax Commission to truly regulate the gaming industry, however.[6]

Nevada Attorney General Alan Bible issued an official Attorney General Opinion, which argued that the
1945 gaming statute authorizing the Tax Commission to grant casino licenses transferred implied
authority to the Tax Commission to pass regulations necessary to inquire into the backgrounds and
probity of potential casino licensees.

In 1949, the Original Nevada Gaming Act was amended to require fingerprinting of casino employees.
 In 1950, Tennessee U.S. Senator Estes Kefauver empaneled a federal committee with the charge of
reviewing the influence of organized crime in America. Kefauver chaired the committee, which became
known as the Kefauver Committee. This group soon began intense scrutiny of Nevada’s early gaming
industry and was critical of Nevada’s thin gaming regulatory apparatus. While Nevada’s federal
delegation pushed back on Kefauver and federal efforts to quash the gaming industry, State leaders
realized that they must strengthen the controls of the Original Nevada Gaming Act.[7]

In 1955, the Nevada Legislature passed the Gaming Control Act of 1955, which created a two-part
regulatory structure with a full time Gaming Control Board acting as the administrative agency,
reporting the findings of its investigations into gaming applicants to the Nevada Tax Commission, which
had ultimate authority to approve casino licenses.[8]

Problems with the gaming industry persisted. Governor Grant Sawyer, who won election in late 1958 on
the slogan that “Nevada is not for sale,” pursued legislation during the 1959 Legislative Session to move
regulatory authority for the gaming industry from the Nevada Tax Commission to an independent
agency, the Nevada Gaming Commission.[9] Nevada’s current gold standard gaming regulatory
structure, the Nevada Gaming Control Act, with authority divided between the Gaming Control Board
and the Nevada Gaming Commission, issued directly from Governor Sawyer’s 1959 efforts.

WHEREAS, the historical parallels between the development of Nevada’s legal gaming industry—the
result of the genius and initiative of the industry’s most important figures and the active management of
the industry by Nevada’s world class regulatory structure, often responding to considerable pressure
from federal law enforcement agencies—and the early history of Nevada’s nascent medical and retail
cannabis industry, subject to similar federal law enforcement scrutiny and pressure, suggests that the
latter, if properly managed, could follow a similar trajectory as Nevada’s successful gaming industry.

WHEREAS, among the 2017 Task Force’s recommendations was that the Nevada Legislature create,
when feasible, a Cannabis Compliance Board to provide direct oversight and accountability to the retail
and medical cannabis industries. The 2017 Task Force suggested that the structure of such a Cannabis
Compliance Board be based on the gaming regulatory structure contained in NRS Chapter 463 of the
Nevada Gaming Control Act.

WHEREAS, the thoughtful and informed development of a Cannabis Compliance Board is a significant
priority for the cannabis industry, the State of Nevada, and its people; and

WHEREAS, the 80th Session of the Nevada Legislature begins on February 4, 2019 and establishing a
Cannabis Compliance Board requires that the Legislature pass enabling legislation for creation of the
Cannabis Compliance Board and its associated Executive Branch agency, together with a legislative
appropriation to fund the creation and operations of the new agency, with an effective date after
November 22, 2019.

WHEREAS, Article 5, Section 1 of the Nevada Constitution provides: “The supreme executive power of
this State, shall be vested in a Chief Magistrate who shall be Governor of Nevada.”

NOW, THEREFORE, by the authority vested in me as Governor by the Constitution and laws of the State
of Nevada and the United States, it is hereby ordered as follows:
SECTION 1: The Governor’s Advisory Panel for Creation of a Cannabis Compliance Board (“Advisory
Panel”) is established within the executive department, Office of the Governor.

SECTION 2: The scope of items for Advisory Panel consideration include, but are not limited to, the
following:

A. studying the Nevada Department of Taxation’s current cannabis regulatory structure and licensing
procedures; review of Nevada’s gaming regulatory apparatus and other similar regulatory structures,
identifying elements necessary to create an exemplary Cannabis Compliance Board;

B. review of potential banking solutions for Nevada’s cannabis industry;

C. review of potential cannabis consumption lounges;

D. review of current advertising restrictions applicable to the cannabis industry;

E. review of the current confidentiality provisions employed by the Nevada Department of Taxation in
licensing and regulation of the cannabis industry, which have resulted in claims of opaque application
grading and certificate award processes;

F. review of current enforcement mechanisms and practices for current cannabis establishment
certificate holders;

G. review of antitrust provisions concerning market concentration of cannabis establishment ownership

groups;

H. review of Nevada cannabis law, policy, and compact status for federally recognized tribes in the
State;[10] and

I. review of other items as directed by the Governor.

SECTION 3: The Advisory Panel shall report to the Governor on the items outlined in Section 2

and work with the Legislative Council Bureau to prepare enabling language for a Cannabis Compliance
Board for the Legislature’s consideration during the 80th Session of the Nevada Legislature.

SECTION 4: The Advisory Panel shall be comprised of seven (7) members, unless the Governor
otherwise amends the size of the Advisory Panel. Moreover, each member shall be designated by and
serve at the pleasure of the Governor and, unless specifically named, meet the qualifications of one of
the categories below.

A. Chris Giunchigliani, former member, Clark County Commission, former member, Nevada State
Assembly, past president, Clark County Education Association, and past president, Nevada State
Education Association;

B. J. Brin Gibson, General Counsel to Governor Steve Sisolak and the Office of the Governor and former
Chief, Gaming Division, Office of the Nevada Attorney General;

C. Arlan D. Melendez, Chairman, Reno-Sparks Indian Colony;

D. Professor Jennifer Roberts, Associate Director of the International Center for Gaming Regulation,
UNLV;
E. one member nominated by the Speaker of the Nevada State Assembly;

F. one member nominated by the Majority Leader of the Nevada State Senate; and

G. a representative of a Nevada county with a population of less than 200,000.

SECTION 5: J. Brin Gibson is appointed Chair.

SECTION 6: The Governor shall appoint a Vice Chair.

SECTION 7: The Chair shall have the authority to issue guidelines for operation of the Advisory Panel
and to amend such guidelines as necessary. The Advisory Panel Chair may form working groups, in
consultation with the Office of the Governor, chaired by one or more members of the Advisory Panel
and comprised of individuals with subject matter expertise pertinent to the focus of the particular
working group. The Chair of the Advisory Panel shall identify and approve matters for review by any
working group.

SECTION 8: The Office of the Governor, the Office of the Attorney General, and the Department of
Taxation will provide support staff, facilities, and resources to the Task Force at the Chair’s request and
in consultation with the Office of the Governor.

SECTION 9: Members of the Advisory Panel shall serve in a volunteer capacity and without
compensation.

SECTION 10: The Advisory Panel shall meet at regular intervals and at the discretion and call of the
Advisory Panel Chair.

SECTION 11: All meetings of the Advisory Panel and any working groups of the Advisory Panel shall
comply with the Nevada Open Meeting Law, as codified in NRS Chapter 241.

SECTION 12: All records documenting the Advisory Panel’s discussions, deliberations, and
recommendations shall be retained and transferred to the Nevada State Library and Archives for
retention pursuant to State retention policies.

SECTION 13: This Order shall be effective upon signature and remain in effect until the Advisory Panel,
working with the Legislative Counsel Bureau, (1) completes enabling language for the Legislature’s
consideration, not later than March 15, 2019, and (2) reports to the Governor on the items outlined in
Section 2, not later than May 1, 2019, unless the Advisory Panel is terminated earlier or extended
beyond that date by further Executive Order.

IN WITNESS WHEREOF, I have set my hand and caused the Great Seal of the State of Nevada to be
affixed at the State Capitol in Carson City, this 25th Day of January, in the year two thousand nineteen.

_______________________________________

Governor Steve Sisolak

_______________________________________

Secretary of State

_______________________________________
Deputy Secretary of State

[1] See Nevada Revised Statutes Chapter 463.0129.

[2] See id.

[3] See id.

[4] See Memorandum from Thomas W. Cole, Deputy Att’y Gen., U.S. Dep’t of Justice, to All U.S.
Attorneys (Feb. 14, 2014), [hereinafter Cole Memo] (outlining federal civil and criminal enforcement
priorities for cannabis-related violations of the federal Controlled Substances Act in State’s with legal
and regulatory mechanisms regulating cannabis). While Attorney General Jeff Sessions rescinded the
Cole Memo in January of 2018, the logic of the Cole Memo as a federal law enforcement resource
allocation guide remains instructive.

[5] See Robert D. Faiss and Gregory R. Gemignani. “Nevada Gaming Statutes: Their Evolution and
History,” Occasional Paper Series 10. Las Vegas: Center for Gaming Research, University Libraries,
University of Nevada Las Vegas, 2011.

[6] See id.

[7] See id.

[8] See id.

[9] See id.

[10] See Memorandum from Monty Wilkinson, Deputy Att’y Gen., U.S. Dep’t of Justice, to All U.S.
Attorneys and Certain U.S. Dep’t of Justice Staff (Oct. 28, 2014), [hereinafter, Wilkinson Memo]
(outlining U.S. Dep’t of Justice policy regarding cannabis issues in Indian country). The Wilkinson Memo
cites extensively to the Cole Memo, which was rescinded; still, as with the principles governing resource
allocation contained in the Cole Memo, similar notions, as they apply to Indian country, contained in the
Wilkinson Memo, though it does not constitute law or even necessarily current policy, are instructive.