NJ: Embracing and Prepping for Recreational Cannabis Sales

On August 21, 2021, the New Jersey Cannabis Regulatory Commission (CRC) adopted and published its first set of rules and regulations that will govern the state’s adult-use cannabis industry.

Those interested in the adult-use cannabis industry are ready. They’re developing businesses and connecting with commercial real estate professionals, attorneys, growers, and others in the sector to ensure their plans align with regulatory requirements imposed by the state. The industry is also preparing for the licensing process, which should begin in late September.

While over 100 New Jersey municipalities have opted out of some or all aspects of the cannabis industry, other towns — like Jersey City and Atlantic City — plan to update their ordinances to allow the businesses.

Suburbs including Highland Park, Neptune, and Somerville, have also passed or advanced ordinances supporting the adult-use cannabis industry. These suburbs have busy downtowns or are located along large business corridors, which positions them well to take advantage of legal cannabis sales.

Currently, the state is home to only 20 operational medical dispensaries all owned by 12 operators. New Jersey will need to expand its existing medical program while also launching the adult-use program or risk seeing massive shortages (and high prices) for patients who rely on medical cannabis. The new law caps the number of cultivators at 37 during the first two years of the adult-use program.

In the past, patients experienced sticker shock with $500+ price tags and significant product shortages. New Jersey’s medical marijuana program has over 117,000 patients enrolled currently — mostly in Camden, Monmouth, and Ocean counties.

Ready for Adult-Use

Many people are eager to purchase weed for recreational use. They’ve been waiting a long time. In July, experts felt the best opportunity for the state to launch its weed market this year was through the existing medical dispensaries — but only if the towns in which they’re located have passed ordinances to allow sale of recreational weed.

Once available, adult-use cannabis will carry several taxes including a municipal tax (at the municipalities’ option), social justice excise fee, and sales tax. These taxes will add a 60% mark-up on any purchases. Taxes generated from adult-use sales will be distributed among the following areas:

  • Impact zones ($24.57 – $68.29)
  • Underage deterrence ($2.09 – $3.68)
  • Local government ($7 – $3.98)
  • General Fund ($3.55 – $6.25)

Current Guidance from the CRC

Formed just a few short months ago, the CRC has released requirements on what’s needed to cultivate, process or deliver, and obtain a license to dispense cannabis.  Their regulations, approved on August 19, include a variety of components including flexible application requirements for those applying for conditional licenses and micro-businesses.

Application fees start as low as $100. Rules prioritize applications from social equity businesses and diversely owned businesses. Applicants planning to operate in an Impact Zone or economically disadvantaged area will also have priority.

Other requirements and guidelines include:

  • Restricting access to anyone under 21 and ensuring marketing campaigns use ads targeting people of legal age to use cannabis.
  • Dispensaries making available various consumer education materials including information about safe use, potential side effects, and substance abuse indicators.
  • Including warning labels on packages and forbidding designs of candy, cartoons, food, trademarked images, and anything else children might find attractive.
  • Constructing childproof packages both before they’re opened and when they’re resealed.
  • Prohibiting additives proven harmful to users.

Market Guidelines for Entrepreneurs

The CRC also developed rules designed to support and nurture a competitive market delivering value and an appropriate prioritization structure for customers. Certain license applicants will receive priority over others. The intention behind this process ensures business owners and staff in historically underrepresented markets within the very regulated cannabis industry will benefit from timely access to the market. According to the final rule summary, “the CRC’s licensing process empowers businesses to put their plans to the test and empowers consumers to choose which local entrepreneurs to support and what they want the market to be.”

These rules establish and prioritize microbusinesses and will help create a pathway for new entrepreneurs within the cannabis industry. Microbusinesses may hire no more than 10 employees; premises may be no more than 2,500-square-feet. The CRC also created a graduated structure for application fees, which start at $100. Annual licenses range from $1,000 for a microbusiness to $50,000 for cultivators with up to 150,000-square-feet of capacity.

Municipalities as Partners

Municipalities retain the right to make decisions best for their own communities, while also playing a critical role in the state’s budding cannabis industry. To receive a license, businesses must prove municipality support and zoning approval. These businesses must also show they’ve received verification to operate in compliance with municipal restrictions.

The CRC gives municipalities the power to determine:

  • Hours of operation.
  • The number and type of licensed businesses in operation within its borders.
  • Whether to enact a 2% transfer tax on sales conducted between cannabis businesses.
  • Whether to require compliance with codes and ordinances similar to those applicable for other business types.

This fledgling industry is poised for flight. According to the law, the CRC must set a date within the next six months for legal sales to begin. Entrepreneurs exploring options on how — and where — to open their dispensaries and other operations, apply for licensing, and ensure compliance with requirements at state and municipal levels may find it helpful to connect with someone familiar with the latest regulations and law.

Coming this fall to CREA United is a new group specifically formed to address legal cannabis sales in New Jersey: The CREA United Cannabis Group. Led by Cole Schotz attorney, Robert DiPisa, the group will include members connected to all areas of commercial real estate and familiar with the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act and its implications.

Related Articles