Kara Holm
- Apr 17, 2017
- 4 min read

Cannabis & Casinos

As of Canada Day next year (July 1, 2018 for our American and international readers), cannabis will be legal in Canada, if the Cannabis Act, which was introduced in Parliament last week, receives Royal Assent. What will this mean for businesses in Canada, particularly casinos, and what can we learn from other jurisdictions that have already started down this path?

Legalizing Cannabis in Canada

Most of the day-to-day factors related to implementing the Cannabis Act will be the responsibility of the provinces.

Where will the products be sold? Drug stores, liquor stores, or somewhere else like dedicated marijuana dispensaries?
At what price point and tax rate?
Where will people be allowed to smoke? (Edibles are still being investigated and are not included in the Cannabis Act).
What is the appropriate age to access marijuana? The federal government has set the minimum age at 18 but provinces are free to adjust upwards.

These are just some of the many questions provinces will need to address. This blog is not the place to explore the significant concerns many of the provinces have about legalizing cannabis and the timelines outlined by the Federal Government to make these changes, or the serious issues raised by the medical community, particularly mental health advocates. Cannabis is being legalized, so our focus is on what businesses need to do to adapt and prepare.

Impacts for Businesses

The legalization of cannabis will create challenges for businesses in just about every sector, but it presents some serious issues and concerns for casino operators. Thoughtful planning will be necessary to identify the potential issues and plan policies to address them. There should be some best practices and learnings from other markets. We noted that the National Indian Gaming Association’s conference and tradeshow earlier this month in San Diego offered a track on cannabis policy.

Cannabis Legalization in the United States

States began legalizing marijuana in 2012 and the number of American states where cannabis is now legal is growing quite quickly. This is not to suggest that the legalization of marijuana has broad public support. It is still a divisive social issue.

The legalization of cannabis is complicated in the United States by the federal/state dynamic. Unlike Canada after July 2018, in the United States marijuana possession is a federal felony. This is a significant concern for casino operators. In fact, the Nevada Gaming Control Board - a 2016 vote to legalize marijuana in Nevada landed on the “yes” side of the argument- has expressly forbidden its licence holders to have anything to do with the marijuana business.

The disconnect between federal and state laws in the USA causes further issues for casino operators who are not permitted under federal anti-money laundering laws to profit from the drug trade. This raises operational considerations such as, should casino operators in the US be required to exclude people who work in the cannabis industry from betting?

Around the World

Internationally, cannabis is decriminalized for possession of small amounts – which is not the same as legalized – and/or permitted for medical purposes in many countries including the Netherlands, Belgium, Germany, Italy, certain Australian states, and Mexico, to name a few.

It is legal, with restrictions in South Africa (home use only), Spain (in private places) and Uruguay.

Does Cannabis Fit with Casinos?

This is a question we need to explore as an industry. Operators in North America are focused on attracting new audiences, beyond the traditional casino customer. Casino product offerings have been expanding and the focus is not just on games of chance but also on other amenities like food, beverage, hospitality, shows, spas, and more. Most people in the industry know that on the Las Vegas Strip only 35% of revenue is generated by gaming activities. While cannabis is an issue for the regulated gaming space, is it a problem outside of the casino itself?

John L. Smith writing a commentary for CDC Gaming Reports in November 2016 noted: "It’s hard to imagine the casino industry taking a genuinely hard-line stance against it."

Advice for this week:

Canadian Crown Corporations, casino operators and VLT host sites in every province need to think about the business implications of this shift in public policy, as do many private American operators in states where marijuana is legal or will be soon. Issues to consider are:

Cannabis becomes an important corporate social responsibility practice for gaming operators: striking a balance by supporting other legal, regulated adult activities, and ensuring casino guests are not too impaired to be accountable for their decisions needs to be a priority.
There are other practical considerations too, such as will smoking marijuana be permitted on the property and if so where?
Obvious HR considerations related to ensuring staff with sensitive, regulated positions are able to perform their duties will likely result in increased drug testing for casino employees.
Along with the business risks, are there opportunities present? The cannabis industry is big business and growing. Depending on the market and political realities, can or should operators leverage their expertise in offering restricted and regulated products in this new sector?

The legalization of cannabis in North America is an issue that reflects a change in social beliefs and norms – much as the changing relation to gender identity (see my article “Identity Crisis” in Canadian Gaming Business). Businesses need to determine how they can maintain their security and integrity and preserve social licence, while looking for market-appropriate opportunities to leverage this shift into something positive for their businesses.