A Look Back on New Jersey’s Budding Industry

By Jessica Gonzalez, Esq posted 02-21-2019 15:22


By Jessica F. Gonzalez, Esq., 
Founding Partner of Moyeno Gonzalez & Associates PC; a female and minority owned law firm helping clients in NJ/NY navigate the legal landscape of medicinal and adult use cannabis. 

As of February 2019, 33 states and the District of Columbia have legalized Medical Cannabis and 10 states have legalized “Adult Use” cannabis (more commonly referred to as “recreational” cannabis). The difference between the accessibility of Adult Use and Medical Cannabis is akin to the difference between over-the-counter medication and prescription medication.  To obtain Medical Cannabis, a patient must: (1) have a qualifying condition, (2) obtain a recommendation from a licensed, state registered physician and (3) renew their status as a Medical Cannabis patient according to state regulations. On the other hand, a consumer living in a state that has legalized Adult Use cannabis need only be 21 years or older to purchase cannabis from a state licensed dispensary. By the end of 2017, the U.S. legal cannabis market reached a market cap of $8.5 billion and it is predicted that by the end of 2025, the U.S. legal cannabis market will become a $25 billion industry. So what role is New Jersey taking in this booming industry?

New Jersey & Medical Cannabis

New Jersey is one of the 33 states that has enacted a medical marijuana program (“MMP”) program: the NJ Compassionate Use Medicinal Marijuana Act (N.J.S.A. 24:61-1) (“CUMMA”), signed into law January 2010. Among its many protections, CUMMA provides protection for New Jersey patients registered with the Department of Health (“DOH”) from "arrest, prosecution, property forfeiture, and criminal and other penalties" related to the purchase and consumption of legally obtained Medical Cannabis. These protections also extended to patients’ physicians, primary caregivers and individuals licensed to cultivate and distribute medical cannabis.

CUMMA also called for the establishment of six non-profit vertically integrated[1] alternative treatment centers (“ATCs”) and mandated that at least two ATCs be established in Northern, Central and Southern regions of the state respectively. By the end of 2017, there were approximately 11,799 registered Medical Cannabis patients and 426 physicians registered with the state to provide Medical Cannabis recommendations. Contributing to the small number of Medical Cannabis patients was the short list of qualifying conditions that allowed an individual to be eligible to become a Medical cannabis patient. Prior to 2018 (and pre-Governor Phil Murphy), a patient had to have one of the following conditions to qualify to enter the MMP: amyotrophic lateral sclerosis; multiple sclerosis; terminal cancer; muscular dystrophy; inflammatory bowel disease such as Crohn's disease; or any terminal illness.

The MMP drastically changed once Governor Murphy took office. The MMP was expanded to include the following five qualifying medical conditions: anxiety; chronic pain of visceral region; chronic pain related to musculoskeletal disorders; migraines; and Tourette’s syndrome. As of the end of 2018, there were approximately 40,000 MMP patients registered in New Jersey—a number that continues to grow steadily. In addition to adding more “common” qualifying conditions, Governor Murphy also called for the DOH to add another six vertically integrated alternative treatment centers, to be divided regionally as were the original six licenses.

The Request for Applications for these additional six licenses opened on August 1, 2018 and closed August 31, 2018. In this thirty-day period, the DOH received 146 applications.  These applications were reviewed by a six-person committee consisting of four DOH representatives and one representative each from the N.J. Departments of Agriculture and Treasury. After months of anticipation, on December 17, 2018, the six winners of the highly-coveted vertically integrated ATC licenses were announced.[2]

Given the highly coveted status of the ATC licenses, it came as no surprise when it was revealed in early February that five applicants who had not been approved for a license filed appeals with the DOH challenging the administration’s selection. As reported by NJ.com, Health Department spokeswoman Donna Leusner declined to comment on the appeals as they are pending litigation. 

New Jersey and Adult Use Cannabis

With respect to Adult Use, New Jersey was set to become the 11th state to legalize Adult Use cannabis by then of end 2018, but as of yet no such law has passed. In November 2017, newly-elected Governor Murphy declared that he would legalize Adult Use cannabis in his first 100 days in office, but the 100 days have come and gone and as of yet, there is still no green light on Adult Use cannabis. On June 7, 2018, Senate Democrat Nicholas Scutari and Senate President Steve Sweeny introduced a bill (Senate Bill 2703) to legalize Adult Use with hopes that the bill would pass before the June 30th budget deadline. Once again, no green light.

Four months later, on November 26, 2018, New Jersey Senate Budget and Appropriations Committee and Assembly Appropriations Committee took a step towards greener pastures and approved the latest version of the 147-page Senate Bill 2703 titled the “New Jersey Cannabis Regulatory and Expungement Aid Modernization Act (Senate Bill 2703)”, that would legalize the possession and non-medical personal use of cannabis for people ages 21 and older.

Some of the key components of the bill include the following: (1) a tax rate on cannabis sales of 12%, (2) municipal discretion to allow or prohibit cannabis establishments, (3) 2% municipal tax, (4) 4 classes of licenses: Class 1 Grower; Class 2 Processor; Class 3 Wholesaler; and Class 4 Retailer, (5) home delivery services, (6) prohibition on home grow, (7) establishment of cannabis consumption areas, (8) creation of a 5 member Cannabis Regulatory Commission (9) issuance of “Micro-Licenses,” and (10) an electronic filing system for expungement for low-level cannabis convictions.

The last scheduled voting day of the New Jersey Legislature was December 17, 2018 and not one cannabis bill was present on the legislative slate. Furthering the delay for the legalization of Adult Use Cannabis, among other things, was the lengthy tug of war game between Sweeney and the Murphy administration regarding taxes; Senate Bill 2703 contemplated a cannabis sales tax of 12% while Governor Murphy preferred a 25% cannabis sale tax. Neither side seemed to budge until mid- February when it was reported that Governor Murphy, Senator Stephen Sweeney and Assembly Speaker Craig Coughlin had reached an agreement regarding the taxation of cannabis. The agreement provides for a flat tax rate of $42 per ounce on the sales of cannabis and would allow Governor Murphy to appoint three of the five members of the Cannabis Regulatory Commission without senate approval.

Further details of the agreement are slowly trickling into the public eye and it has been reported that the Senate Bill 2703 is currently being rewritten. Given that the bill is currently under revision, it is not likely the bill will reach the voting floor for the February 21st session, delaying a vote on SB 2703 until March 25, 2019, assuming no additional delays.

[1] Vertical integration means the co-location or combination of the following activities related to the production of usable marijuana for qualifying patients within a single corporate entity: cultivation, manufacturing, and dispensing.

[2] In Northern N.J.: NETA NJ LLC in Phillipsburg and GTI New Jersey in Paterson; Central N.J.: Verano NJ LLC, with a planned dispensary site in Elizabeth and cultivation site in Rahway and Justice Grown in Ewing; Southern N.J. MPX New Jersey, with a dispensary planned in Atlantic City and cultivation site in Galloway and Columbia Care New Jersey in Vineland.