It was a Long Hard Road but we have Finally Arrived: Overview of New Jersey Cannabis Legalization
By Fruqan Mouzon
Cannabis has, in one form or another, been legal in New Jersey for over ten years. The Compassionate Use Medical Marijuana Act was signed into law in January, 2010 by Governor Jon Corzine on his last day in office. The law allowed qualified patients to purchase medical cannabis from one of six non-profit Alternate Treatment Centers (ATCs) licensed by the State. All six ATCs were “vertically integrated,” meaning each was permitted to grow, process and sell cannabis and cannabis-derived products to end-consumers.
Throughout the ensuing eight years of oversight by Republican Governor Chris Christie, the medical marijuana program remained stagnant. The state had only 12,500 medical marijuana patients by the end of 2016, which was far lower than the number of registered patients in other states that allowed medical marijuana. The low participation rate was caused by strict regulations and a small list of qualifying conditions. Moreover, patients were required to be reassessed every 90 days and prescribing doctors were required to register and take a course. Even after all of the hoops were jumped through by both doctor and patient, the reward was the right to purchase the most expensive marijuana in the country, making the program unavailable – at that time – for many patients.
Hope for expansion of the medical program – and even talk of making cannabis legal for adults over age 21 – arrived when Democratic Governor Philip Murphy took office in 2018. One of Governor Murphy’s first comments on the subject was that “the system we have inherited can be best described as medical marijuana in name only.… With a hostile administration tugging the strings of state bureaucracy, the ability of dispensaries to open has been slow-footed. Doctors have faced stigmatization for participating. And non-smokable and edible products that could benefit patients have been blocked from the market.”
Under Governor Murphy’s leadership, the program underwent a major expansion. Patients can now qualify for a medical marijuana card if he or she suffers from:
- Amyotrophic lateral sclerosis
- Anxiety
- Cancer
- Chronic Pain
- Dysmenorrhea
- Glaucoma
- Inflammatory bowel disease, including Crohn’s disease
- Intractable skeletal spasticity
- Migraine
- Multiple sclerosis
- Muscular dystrophy
- Opioid Use Disorder
- Positive status for Human Immunodeficiency Virus (HIV) and Acquired Deficiency Syndrome (AIDS)
- Post-Traumatic Stress Disorder (PTSD)
- Seizure disorder, including epilepsy
- Terminal illness with prognosis of less than 12 months to live and
- Tourette Syndrome
In addition to expanding the number of qualifying conditions, the Murphy Administration also increased the amount of cannabis a patient could legally possess. These significant changes has resulted in the number of registered patients more than quadrupling since the dark days of Christie.
And, with the increase in number of patients, there has been a concomitant increase in the number of ATCs. Due to a Request for Applications (“RFA”) issued by the New Jersey Department of Health (“DOH”) in 2018, the number of licensed ATCs were quickly doubled to twelve. Like the initial six – the additional six are also vertically integrated. But with the number of patients steadily rising, twelve ATCs were clearly not enough. Thus, the DOH issued a new RFA in August 2019, seeking to license an additional four vertically integrated ATCs, five cultivators and fifteen retail dispensaries. A legal dispute erupted, with several losing applicants filing their grievance with the New Jersey Superior Court, Appellate Division. The legal dispute resulted in a stay being granted by the Court, which halted issuance of any new cannabis licenses for more than a year. Just recently, however, the industry received good news when the Court issued a ruling lifting the stay and giving the DOH the ability to finally issue the 14 additional licenses promised 18 months ago.
Even more good news came in November, 2020 when voters overwhelmingly approved a State Constitutional Amendment permitting the legalization of cannabis for adults over the age of 21. Voter approval was followed a few months later by State legislation creating a Cannabis Regulatory Commission and providing the framework for establishment of a vibrant new cannabis industry in New Jersey. By virtue of the constitutional amendment and enabling legislation the State will award six classes of licenses for: 1) cultivation; 2) manufacturing; 3) wholesaling; 4) distribution; 5) retail and 6) delivery. For the first two years of legal adult-use cannabis sales, the number of cultivation licenses will be artificially limited by statute to 37 statewide. This limit does not apply to “microlicenses,” which will be smaller grow sites of less than 2,500 square feet, fewer than 10 employees and made up of 100% New Jersey ownership.
Each type of license class holds a particular place in the cannabis industry supply chain. Cultivators will be allowed to grow cannabis flower, while manufacturers will be permitted process the flower into tinctures, lotions and edibles. Retailers will be authorized to sell to the end-users and delivery license holders will be allowed to bring cannabis and cannabis-items to customers in their homes. Wholesalers and distributors will be permitted to perform functions just as those names imply.
The statute was written with an eye towards discouraging the industry takeover by huge out-of-state vertically integrated corporations. For a 24 month period beginning after retail sales begin, limits will be placed on the number and classes of licenses any one entity can hold. During this two year period, a cultivator, manufacturer, wholesaler or distributor will be prohibited from also having an interest in the ownership of a retail establishment. Dispensary owners will similarly be restricted from growing, processing or distributing. Such restrictions will not apply, however, to the existing medical ATCs.
The future for the cannabis industry appears bright. New Jersey Medical cannabis sales rose even while Governor Christie was in charge, growing roughly 70% and 50% in 2016 and 2017 to hit an estimated $30 million in 2018. Sales reached almost $100 million in 2019.
By way of optimistic example, Colorado, cannabis legalization trailblazer, collected more than $302 million in taxes and fees on medical and recreational marijuana in 2019, with sales totaling more than $1.7 billion. Overall, US sales reached $12.2 billion in 2019, and, according to Arcview Market Research and BDS Analytics, sales are projected to increase to $31.1 billion by 2024. Experts believe that New Jersey can have a $3 billion matured cannabis market, and that’s just in terms of sales. Let the good times—and the cannabis- roll.