After a brief hiatus, we welcome you back to CSG’s CannaBiz Law Blog. The August 31st RFA deadline was challenging, but I am pleased to report that an all hands on deck effort on behalf of our clients made for a successful application process.

With the deadline now behind us, and a fresh perspective on the challenges and opportunities future rounds of cannabis licensing in New Jersey may present, I was invited to author another guest column for NJ.com’s weekly NJ Cannabis Insider report (huge thank you to their editor, Justin Zaremba).

This time around, I thought it would be best to outline practical insights and takeaways gleaned leading up to August 31 since it has already been reported that there will be additional rounds of licensing available in the future — and a vote for recreational legalization may come as soon as this month. Both will undoubtedly present opportunities for those looking to service, operate or invest in the cannabis sector.

So, what should these aspiring entrants keep in mind as new opportunities emerge? The three factors detailed in my guest column include:

  • Now is the time to prepare for the next application round.
  • Legal counsel and/or a general consultant will be integral to finding a willing host community, as well as a properly zoned locale.
  • If there are underserved areas in the Northern, Central or Southern regions of New Jersey, applicants should consider locating there first.

I encourage you to read the full article here, and stay tuned for further updates from CSG’s Cannabis Law Group.

On June 7, 2018, Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) introduced the Strengthening the Tenth Amendment Through Entrusting States Act (“the STATES Act” or “the Act”) in the Senate. That same day, Representatives Earl Blumenauer (D-OR) and David Joyce (R-OH) introduced a companion bill in the House of Representatives. Notably, the Act enjoys bipartisan sponsorship in both chambers.

The STATES Act would amend the Controlled Substances Act to exempt from its reach any person acting in compliance with state laws relating to the manufacture, production, possession, distribution, and delivery of marijuana. To alleviate financial concerns regarding marijuana sales, the Act states clearly that conforming transactions do not constitute trafficking and do not generate proceeds from an unlawful transaction. Additionally, the Act retains the prohibition against employing persons under the age of eighteen in any marijuana operation, and prohibits the sale of marijuana to persons under the age of twenty-one.

The day after its introduction, Governor Phil Murphy and eleven other governors from both parties signed a letter to congressional leaders calling for the Act’s passage. In the letter, the governors noted that the current “one-size-fits-all federal prohibition is incongruent with reality” and “impedes states’ ability to be effective laboratories of democracy.” The governors went on to say that “[t]he STATES Act is not about whether marijuana should be legal or illegal; it is about respecting the authority of states to act, lead and respond to the evolving needs and attitudes of their citizens.”

While the likelihood of the passage of the STATES Act in Congress, as well as President Trump’s signing it into law, remains uncertain, the Act nonetheless represents a watershed moment in lawmakers’ changing approach to this issue.

Senator Nicholas J. Scutari, D-Union, recently introduced a new bill that seeks to simultaneously legalize recreational marijuana for adults and provide broader patient access to medical marijuana under New Jersey’s Compassionate Use Medical Marijuana Act. This is the first bill to jointly address access to medical and recreational marijuana in New Jersey. Scutari’s comprehensive bill allows for a total of 218 marijuana dispensaries throughout New Jersey: 120 recreational and 98 medical. Other provisions of the bill include a requirement that municipalities opposed to marijuana sales within their borders must pass an ordinance prohibiting sales within 180 days of the law’s enactment, a provision permitting recreational marijuana dispensaries to create a “consumption area” where customers can use marijuana onsite, as well as a phase-out plan for the 7% tax currently imposed on medical marijuana.

Introduced just three weeks before the Legislature’s budget deadline, the bill faces an uphill battle. However, it has received vocal support from two other legislators. Senator Joseph Vitale, D-Middlesex, has signed on as co-prime sponsor of the bill, and Assemblyman Jamel Holley released a statement pledging his support for the bill.

Governor Murphy’s administration is considering a phased-in tax rate for recreational marijuana following talks with Senator Nicholas Scutari, D-22nd District, according to state treasury spokesperson Jennifer Sciortino.

In his budget proposal address in March, the governor announced that the state stands to realize upwards of $80 million in annual revenues from taxing legal marijuana sales in 2019: $60 million from recreational marijuana and $20 million from the expansion of the state’s medical marijuana program. However, in its recently released tax revenue projections for 2019, the state treasury lowered the anticipated tax revenue from marijuana by $11 million, bringing the overall projected tax revenue down from $80 million to $69 million. For 2019, the treasury expects to garner $49 million – rather than $60 million – from taxing recreational marijuana, while the projected tax revenue from the newly expanded medical marijuana program remains at $20 million. The administration’s contemplation of a phased-in tax plan might explain the downward revision of the projected marijuana-related taxes in 2019.

Senator Scutari’s proposed recreational marijuana legislation – Senate Bill 830 – envisions a phased-in tax rate over five years: 7% in the first year, 10% in the second year, 15% in the third, 20% in the fourth and 25% in the fifth and following years.

With legalization of recreational cannabis on the horizon for New Jersey, several local governments have responded by preemptively passing ordinances banning or discouraging recreational marijuana sales or cultivation in their jurisdictions, while others have opened their doors. Because New Jersey is a home-rule state, municipalities are free to permit or prohibit the sale, cultivation and/or use of recreational cannabis within their borders. To date, twenty-six municipalities and three counties have staked their position on recreational cannabis.

Seventeen townships, including Berkeley in Ocean County, Old Bridge in Middlesex County and Wall Township in Monmouth County, have either approved a measure that imposes a blanket ban on recreational marijuana businesses or issued a resolution strongly opposing legalization of recreational marijuana. Seven other municipalities have discussed banning recreational marijuana, but have not yet done so. Monmouth, Ocean and Cape May counties have each issued resolutions opposing recreational marijuana legalization. Medical cannabis will still be fully legal for registered patients, however.

Only three of New Jersey’s 565 municipalities – Jersey City, Asbury Park and Atlantic City – have publicly indicated their support for legalizing recreational marijuana.

Senator Cory Gardner, Republican of Colorado, has struck a deal with President Donald Trump to protect Colorado’s legal marijuana industry from federal criminal investigation and prosecution. In a statement issued on Friday, April 13, 2018, Sen. Gardner said, “I received a commitment from the President that the Department of Justice’s rescission of the Cole Memo will not impact Colorado’s legal marijuana industry.” This “commitment,” of course, is not limited to Colorado’s marijuana industry, and would apply with equal force to all states that have legalized marijuana for medical or recreational use.

The “Cole memo” refers to a memorandum written by then Deputy Attorney General James M. Cole on August 29, 2013, entitled “Guidance Regarding Marijuana Enforcement” and sent to all United States Attorneys. That document sets forth the Department of Justice’s priorities regarding marijuana enforcement under the Controlled Substances Act.  The memorandum  explains that where a state’s regulation of its legal marijuana industry is robust, “enforcement of state law by state and local law enforcement and regulatory bodies should remain the primary means of addressing marijuana-related activities.” The Cole memo effectively eased the federal enforcement of federal marijuana law in states that legalized it.

But that détente was ended by Attorney General Jeff Sessions, who on January 4, 2018, issued a memorandum rescinding previous guidance on marijuana enforcement, including the Cole memo. This action prompted Sen. Gardner to block the confirmation of certain Justice Department nominations. However, with the agreement reached last week, which was confirmed by White House Press Secretary Sarah Sanders, Sen. Gardner stated that he would lift his remaining holds on those nominees.

This agreement offers hope to the legal marijuana industry across the country for a solution to the problem of divergent federal and state laws.  Indeed, in his statement Sen. Gardner noted that “[m]y colleagues and I are continuing to work diligently on a bipartisan legislative solution that can pass Congress and head to the President’s desk.”

According to a recent poll conducted by Stockton University, New Jersey residents are divided on the idea of legalizing marijuana for recreational use. Of the 728 adults who were interviewed, 49% said they would support the legalization of recreational marijuana in New Jersey, while 44% were opposed to the idea. About 5% of the respondents were unsure.

The poll also revealed that young adults and men more generally support legalization as compared to older adults and women. Roughly 64% of the respondents under the age of 50 support legalization, whereas only 41% of the poll participants over the age of 50 support the move. Similarly, 56% of men are in support, as opposed to only 44% of women.

A majority of those in support of legalizing marijuana for recreational use point to enhanced tax revenue as their main reason for supporting legalization, while opponents fear that legalization will lead to an increase in health problems and addiction.

During his campaign for governor, Governor Murphy promised to legalize the recreational use of marijuana for adults over the age of 21, framing it as a social justice issue as well as a means of increasing the state’s tax revenue. Currently, marijuana is only legal for medical purposes in New Jersey.

Complete poll results can be found here.

My colleague, Frank Giantomasi, and I published an op-ed in ROI-NJ titled, “Preparing for legalized marijuana in N.J.: A primer.” In the article, we cover everything from the key bills entering the legislative process to law enforcement’s sentiment toward the burgeoning industry and steps that entrepreneurs should take to enhance their chances of successfully operating a cannabis business or ancillary support service.

The months and years ahead promise to be exciting and potentially very lucrative for individuals and businesses interested in entering the marijuana industry. However, they cannot afford to be passive.

Based on my time overseeing the licensing and regulation of alternative treatment centers – which support the medical marijuana program – aspiring entrants should already be considering corporate form, preparing for thorough background checks and developing impregnable compliance plans and well-thought-out business models. Entrants should also be prepared to navigate a potentially hostile local zoning environment, at least in some counties and municipalities.

In short, entrants need to be well-prepared in order capitalize on the opportunities presented by the Governor and his plans to legalize recreational marijuana in New Jersey.

To read the full op-ed, please visit ROI-NJ’s website.