After NJ Voters OK Recreational Marijuana, Senate Moves to Expedite Conditional Licenses

November 12, 2020Alerts

In the wake of a successful ballot initiative, New Jersey lawmakers moved quickly to start the process of creating a regulatory framework for recreational marijuana, including a bill that, if passed, would allow the expedited issuing of conditional licenses for businesses entering the market.

Notably, the Senate bill would impose no limit on the number of recreational marijuana licenses available to businesses.

On Nov. 3, New Jersey voters approved a constitutional amendment to legalize recreational marijuana in the Garden State. As expected, the ballot question passed by a wide margin, with approximately two-thirds of the vote. The amendment specifically legalizes the possession and use of marijuana for persons age 21 and older, as well as the cultivation, processing and sale of retail marijuana. It also subjects retail purchases of marijuana to New Jersey’s sales tax.

Following approval of the amendment, attention quickly shifted to New Jersey lawmakers, who are tasked with passing legislation to establish a regulatory framework for sale and use of recreational marijuana. On Nov. 9, less than a week after voters approved the amendment, the Senate Judiciary Committee approved bills to establish a regulated market for recreational marijuana in New Jersey. The bills are on pace to be voted on by the full Senate as early as next week.

Among the bills is the Cannabis Regulatory, Enforcement Assistance & Marketplace Modernization Act, S21, which was introduced by Sen. Nicholas Scutari, who has led the legalization effort in New Jersey for nearly a decade. The law would create the Cannabis Regulatory Commission and empower it to regulate New Jersey’s medical and recreational marijuana industries, including the issuance of licenses.

Six recreational marijuana licenses under S21

  • Class 1 Cannabis Grower License – required for persons that grow, cultivate or produce cannabis in New Jersey that is sold or transported to other cannabis growers, processors, wholesalers or retailers, but not consumers;
  • Class 2 Cannabis Processor License – required for persons that process cannabis items in New Jersey by purchasing, or otherwise obtaining, cannabis, manufacturing, preparing and packaging cannabis items and selling or transporting such items to other cannabis processors, wholesalers or retailers, but not to consumers;
  • Class 3 Cannabis Wholesaler License – required for persons that purchase, store, sell and may transport cannabis items for the purpose of resale or other transfer to either another cannabis wholesaler or to a cannabis retailer, but not to consumers;
  • Class 4 Cannabis Distributor License – required for persons that transport cannabis items in bulk intrastate, from one licensed cannabis establishment to another licensed cannabis establishment, and may engage in the temporary storage of cannabis items as necessary to carry out transportation activities;
  • Class 5 Cannabis Retailer License – required for persons that purchase cannabis and related items from cannabis growers and from cannabis processors, or cannabis wholesalers, and sell same to consumers from a retail store or via a cannabis delivery service; and
  • Class 6 Cannabis Delivery License – required for persons that provide courier services for a cannabis retailer in order to make deliveries of cannabis items.

Unlike the state’s medical marijuana system, the proposed law would include no limit on the number of recreational marijuana licenses available to businesses. Further, the bill allows for conditional licenses, which are temporary licenses for the above classes, issued pursuant to an abbreviated application process, after which the conditional license holder has a limited time to become fully licensed by satisfying all remaining conditions for licensure.

The bill also establishes an Office of Minority, Disabled Veterans, and Women Cannabis Business Development within the Commission to ensure that, of the recreational marijuana licenses issued, at least 15% are issued to certified minority-owned businesses and at least 15% are issued to certified women’s and disabled veterans’ businesses. S21 explicitly requires at least 10% of the total licenses issued for each class be designated for, and only issued to, microbusinesses, and at least 25% of the total licenses issued be issued to microbusinesses. To qualify as a microbusiness, an applicant must, among other criteria, employ no more than 10 employees.

Critics of the bill argue key racial and social justice provisions need to be strengthened or are missing entirely. One particular point of contention over the bill involves home marijuana cultivation, which is not permitted under S21.

Other bills being considered in the New Jersey legislature are A1897 and S2535, which provide for decriminalization and marijuana offenses reform in the short term.

A number of factors serve as motivation for New Jersey lawmakers to move quickly through the legislative and regulatory process, including the anticipated tax revenue, job creation and social justice reforms envisioned with the legalization and regulation of recreational marijuana. Moreover, prior legislative efforts, and experience with medical marijuana, have provided lawmakers with a foundation from which to develop a comprehensive regulatory structure.

Accordingly, while it may take time for the New Jersey legislature to hash out the particulars of recreational marijuana legislation, once passed, legislation should allow for swift implantation of a regulatory structure and issuance of conditional licenses.

For more information on this topic, contact the author Marie Jiacopello Jones, at [email protected], or any other member of the firm's Cannabis Law or Gaming practice groups.