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After Legalization Vote, New Jersey Congress Lays Down Cannabis Market Rules

December 29, 2020

Following last month’s referendum voting to legalize adult-use cannabis, state lawmakers in New Jersey have approved legislation that will launch the cannabis business in the state. The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act passed the state assembly by a comfortable 49 to 24 margin and the senate by the narrower vote of 23 to 17. It now goes to Governor Phil Murphy, who has advocated for legalization and is expected to sign.

With the bill set to become law, New Jersey can officially start the process of staffing its Cannabis Regulatory Commission to perform the review and approval work necessary to begin licensing growers, manufacturers, distributors, and retailers. The market will not be up and running at full speed in the near future, however.

Based on the example of the other 11 states that have legalized, it would be reasonable to expect about a year to pass before dedicated adult-use dispensaries are selling to recreational consumers. The state’s 13 extant medical dispensaries will be able to begin selling to the general population much sooner than that—but only once they certify that they have enough cannabis in reserve for New Jersey’s nearly 100,000 registered medical consumers. With fewer than 15 cultivators able to supply them, even this step will take time.

Once established, the law places no limits on the number of cannabis retailers, though the Regulatory Commission may impose a cap at some point. The number of cultivation licenses is capped, however. Two main compromises helped push the law over the finish line, one of which places a limit of 37 growing licenses for the first two years of legal sales. That’s not counting microgrowers, which are defined as companies with 10 or fewer employees and less than 2,500 square feet of canopy space. One noteworthy provision guarantees that cities choosing to ban cannabis operations won’t be able to block delivery within their borders. That issue has been a flashpoint in California.

The other compromise concerns the allocation of cannabis tax revenue. Ultimately, 70% of the state sales tax on cannabis will go to restorative programs for legal aid, healthcare, mentoring, and other initiatives in communities that were disproportionately hurt by prohibition and its legal penalties. Similarly, the bill outlines the system that will help regulators direct business licenses toward those previously affected by the war on drugs that now want to participate in the new economy. —Danny Sullivan

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