Gaming regulators consistent with message to steer clear of pot business

When Attorney General Jeff Sessions explained how and why the Justice Department would address pot smoking, for both medical and recreational purposes, it sent a wave of trepidation through Nevada, where voters in November approved legalizing marijuana consumption.

One place where it was business as usual after the announcement was within the office of the state Gaming Control Board, which in November reminded companies in the casino industry to stay away from the marijuana business because state gaming agents intend to continue to treat pot possession and distribution as a felony.

A directive from Control Board member Terry Johnson in May 2014 essentially told licensees to make a choice: Either participate in gaming or in marijuana distribution because you can’t do both. In November, after Question 2 legalizing marijuana was passed, Nevada Gaming Commission Chairman Tony Alamo repeated Johnson’s message.

The impact of that policy took center stage last month in a restricted gaming license transfer request that was approved by the Gaming Commission.

Regulators spent about an hour talking about the request from Gary Frey, who wanted to transfer his minority interest in the Santa Fe Mining Co., a tavern in northwest Las Vegas, to the Hannah Irrevocable Trust.

Frey’s intents were good, but he ended up getting a scolding from regulators over what happened in his case.

Frey’s brother, Robert, became involved in the medical marijuana business and gifted Gary a percentage of his business’s ownership.

When the Control Board emphasized its stance on pot, Gary Frey decided to get out. He told regulators he had such a minor ownership position in those businesses that he was going to exit both of them.

Frey’s gaming counsel didn’t handle marijuana distribution-related business, so he had to hire two lawyers to get out. The Santa Fe transfer went to the trust, which Control Board documents say is for the benefit of a minor, Hannah Frey, and the trustee was to be Jordan Frey, Gary’s daughter.

But through a series of communications breakdowns and clerical errors, Frey held his passive role in both businesses simultaneously for at least two months.

When it came time to face the commission on the transfer of interest, Frey was grilled.

In the end, Alamo said he and his colleagues viewed it as “a process that got thoroughly messed up.”

“It was pretty clear to us that he didn’t have any intent to hold both at the same time,” Alamo said after the meeting.

But what it does show is that regulators are serious and will be aggressive on the pot issue.

“We haven’t changed our tone at all,” Alamo said. “(Possession and distribution) is a felonious act, and our agents are going to enforce the law. It’s still a felony, and it’s still a Schedule 1 drug and until that changes, we’re going to continue to look at it the same way.”

Based on what the attorney general said, don’t count on that changing.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.