Researcher: It’s Time for Casinos to Prepare for Federal Cannabis Policy Changes

Senate Majority Leader Chuck Schumer (D-NY, foreground) and Sen. Cory Booker (D-NJ, background) reintroduced the Cannabis Administration and Opportunity Act earlier this month. Are casinos paying attention? (Image: Tom Williams/Sipa USA/Alamy)

The Biden Administration took steps toward decriminalizing marijuana two weeks ago when the Drug Enforcement Agency announced its intent to reclassify the drug from a Schedule I controlled substance to a Schedule III. 

This means legally, on the federal level, the DEA wants to treat pot like ketamine, steroids and tylenol with codeine – not like heroin, peyote and ecstasy. It will mark the biggest change to DEA drug scheduling in 50 years. 

This doesn’t mean you’ll be able to blaze up at a blackjack table any time soon, or inside a Nevada casino hotel room, or even outside in a smoking area currently bearing a red slash through a pot leaf.

The policy shift does, however, signify major changes for the cannabis industry in states like Nevada with legal recreational pot. And that has a leading researcher on cannabis policy (with a background in gaming law) saying it’s time for land based casinos and gaming regulators to rethink their stance on marijuana. 

“The gaming industry should start reassessing their positions,” Riana Durrett, director of the Cannabis Policy Institute at UNLV, told Casinos.com. “The last time there was serious and deliberative public discourse on this issue was in 2018, and a lot has changed since then. We should dust off that conversation.”

Durrett, who also serves as vice chair of the Nevada Cannabis Compliance Board and previously sat as executive director of the Nevada Dispensary Association, notes that the gaming industry has maintained a zero-tolerance view since 2018 on casino licensees doing business in the regulated cannabis space even as the federal government’s position has evolved. 

“As rescheduling moves forward, when are we going to allow gaming licensees to participate in this industry?” Durrett asks. “As the federal government inches closer, as banks inch closer after rescheduling happens, gaming should at least be keeping an eye on these matters and evaluating its position, instead of just relying on the 2018 decision from the Gaming Policy Committee.”

Just-Say-No Standard

The Gaming Policy Committee she refers to is a 12-member advisory board assembled by the Nevada governor to discuss matters related to gaming policy. They make recommendations to the Nevada Gaming Commission and Gaming Control Board, but their suggestions have no binding authority.

In 2017 and 2018 – at the behest of gaming license holders who wanted to buy into the cannabis industry – the committee hashed out a resolution that would become the standard that all Nevada gaming licensees have had to adhere to since then.

The resolution stated unequivocally that Nevada casino licensees should be nowhere near cannabis. (Consuming it, of course, was legal and fine. But attempting to profit from it wouldn’t fly.) 

“Nevada gaming licensees should not contract with or maintain business relationships with individuals or entities engaged in the sale, cultivation or distribution of marijuana.”

– Nevada Gaming Policy Committee, March 5, 2018

According to Durrett, two questions are relevant to gaming license holders: Could the owner of a gaming establishment also have ownership in a cannabis business? And could a gaming establishment have cannabis-related activities on their premises? 

“The 2018 resolution made it clear the answer is absolutely no to both,” she says.

Other states with legal gambling and pot followed suit. Colorado, for example, adopted a similar statute that prohibited a variety of cannabis-related activities among gaming licensees, and specifically forbade anyone from holding both a gaming and marijuana license simultaneously. 

Financial Shakeup Coming

The medical and recreational marijuana industry is currently worth about $22.2 billion and growing, according to IBISWorld. Yet many in the cannabis industry struggle with profitability, often due to punitive taxes, which can run as high as 70 percent or more when dealing with a Schedule I product. 

Durrett says the most immediate beneficiaries of rescheduling cannabis will be industry operators, who no longer will be subject to IRS Code 280E, which means they will (finally!) be able to deduct operating expenses from their taxable income. 

“If [cannabis businesses] get this tax relief from the federal government, for many of them it will make their businesses much more viable,” Durrett says. “It also could mean a resurgence of investment. Even with just the news of this rescheduling, there’s a lot more optimism.”

Nevada’s leading expert on cannabis policy says the gaming industry is doing itself a disservice if they ignore federal moves to make marijuana more legal. (Image: courtesy of Riana Durrett)

Jim Meservey, a principal owner of the ShowGrow dispensary in Las Vegas, agrees, and welcomes the news about coming changes. 

“I look forward to being taxed as a normal citizen,” he says.

When that will happen still isn’t clear. The DEA declaration kicks off a necessary process for hearing public commentary before officially entering a new policy in the Federal Register. But no dates for a transition have been set, yet.

“We’re all trying to figure out when it will be going into effect,” Meservey says. “But it’s a huge step forward, 100 percent welcome.”

In addition to reducing the tax burden for operators, moving marijuana to Schedule III will also make life easier for cannabis researchers, as authorized clinical studies on Schedule I substances are far more difficult to conduct.

Acts of Congress Required?

Shortly after the DEA’s April 30 announcement, the US Senate (re)introduced the Cannabis Administration and Opportunity Act, which would go even further to protect operators and researchers in states where cannabis has been legalized. It also would expunge criminal records for many non-violent marijuana offenders. 

The bill, originally floated in 2022, was referred to the Senate Finance Committee this time, on May 1. It couples with the SAFER Banking Act (Secure and Fair Enforcement Regulation), which would allow the cannabis industry to use the American banking system in ways they currently can’t, and someday, maybe, accept credit cards..  

Senate Majority Leader Chuck Schumer (D-NY) has said he intends to make cannabis banking reform a priority in 2024, in part because rescheduling marijuana won’t go far enough.

“While this rescheduling announcement is a historic step forward, I remain strongly committed to continuing to work on legislation like the SAFER Banking Act as well as the Cannabis Administration and Opportunity Act, which federally deschedules cannabis by removing it from the Controlled Substances Act,” Schumer said on May 1. 

“Congress must do everything we can to end the federal prohibition on cannabis and address longstanding harms caused by the War on Drugs.”

Thinking Ahead of the Game

Durrett isn’t counting on legislation to alter the gaming industry’s or anybody’s current state of affairs before rescheduling occurs. But she is asking what it will take before gaming and cannabis can work together.

"What federal trigger do you need to let them participate? Does cannabis need to be completely descheduled and taken off the controlled substance list? Because that could be 10 years down the road, and in the meantime there may be all kinds of institutions allowing it. Is banking going to go forward but gaming is not? Cannabis legalization is complex so we should not wait for policy changes and react to them.” 

While plenty is still uncertain when it comes to cannabis policy, what’s clear is that the legal and financial structures guiding it are changing. And that’s why Durrett says Nevada regulators and gaming industry leaders should be having this conversation now.

In August, the Cannabis Policy Institute will host a panel discussion on gaming and cannabis at UNLV’s Boyd School of Law. Durrett says it's important “to understand where gaming operators stand on different issues and where these two industries and their legal landscapes intersect and will potentially intersect in the future."

Perhaps surprisingly, no current gaming regulators accepted Durrett's invitation to participate. But she hopes they may be listening. “It will be the first time having experts in both cannabis and gaming together discussing these issues,” she says.