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NJ Cannabis Strides Highlight Nearby States' Need To Legalize

By Matthew Smith, Ruth Rauls and Jonathan Havens · Nov 24, 2020, 4:57 PM EST

Matthew Smith
Matthew Smith
Ruth Rauls
Ruth Rauls
Jonathan Havens
Jonathan Havens
Over the past three weeks, commentators have declared marijuana the clear winner of the Nov. 3rd election. They aren't wrong.

In a sweeping set of victories across five states, every marijuana ballot initiative this election passed. In four states — New Jersey, Arizona, South Dakota and Montana — voters approved initiatives to legalize recreational marijuana. South Dakota and Mississippi also voted to approve medical marijuana.

In New Jersey, lawmakers wasted no time putting the wheels in motion after New Jersey voters approved a referendum to legalize adult-use marijuana in the Garden State beginning Jan. 1, 2021. Just days after the vote, state lawmakers introduced legislation to provide a framework for recreational marijuana legalization in New Jersey.

The legislation has advanced through New Jersey Senate and Assembly committee meetings, but thus far the full Senate and Assembly votes have been scheduled, rescheduled and postponed by the New Jersey Legislature. Whether the state can agree on specifics and hit the ground running in 2021 on an adult-use cannabis program remains to be seen.  

The legalization of adult-use marijuana in New Jersey puts significant pressure on other states in the region, including Pennsylvania, New York and Connecticut, to follow suit quickly or risk missing out on significant revenue from adult-use marijuana sales.

The governors of each of those three states recently made statements about the need for their states to legalize recreational marijuana, particularly in an effort to aid economic recovery from COVID-19 and to prevent their residents from driving to New Jersey to buy legal marijuana instead.

How New Jersey Got Here

While recreational marijuana use was always illegal in New Jersey, the state has allowed medical marijuana since 2010, when the state's Compassionate Use Medical Marijuana Act was signed into law. However, it was not until early 2018, after Gov. Phil Murphy took office, that the state's medical marijuana program received its first kick-start.

In January 2018, Murphy issued Executive Order 6, ordering the New Jersey Department of Health to, within 60 days, "undertake a review of all aspects of New Jersey's medical marijuana program, with a focus on ways to expand access to marijuana for medical purposes." At that time, the state had only five operational medical marijuana alternative treatment centers, or ATCs, serving what were then New Jersey's 15,000 registered medical marijuana patients.

In the nearly three years that followed, New Jersey's medical program expanded significantly, although it has still struggled to keep up with demand. By July 2019, there were over 49,000 registered patients in the state's medical marijuana program. On July 2, 2019, the governor signed the Jake Honig Compassionate Use Medical Cannabis Act, aimed at expanding the state's medical marijuana program.

At the same time, the DOH sought applications for licenses to operate up to 24 new medical marijuana ATCs. Applications for those permits were due in August 2019 and approvals were expected to be issued shortly after. However, to date those applications remain tied up in litigation after a lawsuit was filed disputing the manner in which certain applications were rejected.

New Jersey lawmakers attempted to push legislation to legalize recreational marijuana, but after those efforts failed to gather enough support to pass in 2019, legislators put the task in the hands of the voters. This month's election in New Jersey included a ballot question that asked voters whether they approve amending the New Jersey Constitution to legalize a controlled form of marijuana for adults 21 years or older.

Unsurprisingly, based on poll results preceding the election, the referendum passed with nearly 67% of the vote. By last count, there are roughly 95,000 enrolled patients in the state's medical marijuana program.

Recent Events in New Jersey Following the Vote to Legalize Adult-Use Marijuana

Things have been moving quickly in New Jersey on the heels of the vote to legalize recreational marijuana. Below are a few key events and updates that have taken place in New Jersey over the past three weeks on the road to adult-use marijuana legalization.

Adult-Use Marijuana Enabling Law

To put into effect the voters' decision to amend the New Jersey Constitution to allow adult-use marijuana, the Legislature needs to pass enabling legislation. The amendment is to take effect on Jan. 1, 2021, so the Legislature is on a tight timeline to do so.

Fortunately, before the vote even took place, legislation was already in the works. Just days after the vote, Sen. Nicholas Scutari, D-Union, and Senate President Stephen Sweeney, D-West Deptford, introduced S.21 and A.21, dubbed the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, which aims to provide a framework for recreational marijuana legalization in New Jersey.

Committee meetings on the bills took place on Nov. 9, and the Senate Judiciary Committee and the Assembly Oversight Reform and Federal Relations Committee both released the legislation.

However, several issues and criticisms of the bills were raised during and after the meetings. One key issue is taxation, fees and tax revenue allocations under the bills. Another issue relates to workplace protections; specifically, the New Jersey Business Industry Association sought clarifying amendments related to workplace drug policies and critical infrastructure employers.

Additionally, several commentators criticized the initial draft bills for not going far enough in promoting social justice and equity. The bills were scheduled for further committee meetings on Nov. 12, and they were scheduled for a vote before the Senate and Assembly on Nov. 16.

The bills subsequently stalled and were rescheduled while lawmakers worked to address criticisms of the bills. On Nov. 19, amended versions of S.21 and A.21 were considered and released by the Senate Budget and Appropriations Committee and Assembly Appropriations Committee, respectively. The bills were scheduled for a vote in the Senate and Assembly on Nov. 23, but both voting sessions were cancelled.

Presently, the amended versions of the separate Senate and Assembly bills no longer match, including differences in the number of cultivator licenses that would be permitted. Further negotiations and revisions are needed to align the bills before final approval. Once approved by the full Senate and Assembly, the bills would go to Murphy for signature.

More is to come on what the final New Jersey law will entail and what amendments may be considered or added. Although the bills were initially fast-tracked, it now remains to be seen whether the state can agree on specifics and meet its Jan. 1 deadline to pass enabling legislation.

Marijuana Decriminalization Bill Passed by Senate — Still on Hold in Assembly

Separate from the adult-use marijuana enabling legislation discussed above, the New Jersey Senate passed legislation, A.1897/S.2535, on Nov. 16 that, among other things, decriminalizes possession of up to six ounces of marijuana and includes certain expungement-like provisions. The decriminalization bill has been held in the Assembly, which has not yet voted on the bill.

The delay in the Assembly was reportedly due, at least in part, to disagreement over an amendment that would lower penalties for possession of psilocybin mushrooms. It is unclear whether additional changes will be made to the bill before passing the Assembly, which could require further review by the Senate.

That legislation could potentially provide a bit of a Band-Aid — effectively ending arrests for minor marijuana possession charges — while the recreational legalization enabling bills work their way to passage.

Several Members Appointed to Cannabis Regulatory Commission

Another recent development included that long-awaited appointment of the first members of the state's Cannabis Regulatory Commission, or CRC, which will oversee and regulate both the state's medical and adult-use programs.

On Nov. 6, Murphy finally announced the appointment of several members of the CRC including Dianna Houenou, a senior policy adviser in the governor's office and former counsel of the American Civil Liberties Union of New Jersey, as chair of the CRC; and Jeff Brown, the current assistant commissioner of the Department of Health in charge of the Division of Medicinal Marijuana, as the CRC's executive director.

The governor also appointed Krista Nash, a social worker and the program director of the PROMISE program at Volunteers of America Delaware Valley, as a member of the CRC, upon the recommendation of Sweeney. Two spots on the five-person commission remain unfilled.

While the commission was supposed to be up and running some time ago, the recent momentum following the legalization vote indicates that the final two members will likely be named soon and things may move quickly for the adult-use program in the coming months.

State Regulators Form Cannabis Regulators Association

On Nov. 12, state cannabis regulators from 19 states across the country — including New Jersey, New York and Delaware — announced the formation of a nonpartisan organization, the Cannabis Regulators Association to better share institutional knowledge and regulatory best practices. Brown commented that, "[a]s New Jersey moves forward with enacting the will of the voters to legalize cannabis, and continues to expand our medical cannabis program, membership in [the Cannabis Regulators Association] will help our state learn from best practices in other states."

What Is Next in New Jersey?

Recreational Marijuana Not Yet Legal

It is important to remember that recreational marijuana is not yet legal in New Jersey. First, the amendment permitting recreational marijuana does not take effect until Jan. 1, 2021. Second, only regulated marijuana will be permitted — in other words, "street pot" that is grown and sold without a permit is not legal. Indeed, in an interim guidance to prosecutors and law enforcement, Attorney General Gurbir Grewal advised that the amendment "neither legalized, nor decriminalized, the sale or possession of 'unregulated' marijuana."

Final Passage of Enabling Legislation

As far as enabling legislation, some lawmakers were initially optimistic the bill would pass both the full Senate and Assembly this month, but that is no longer the case. As noted above, meetings on the bill took place on Nov. 9, and the Senate Judiciary Committee and the Assembly Oversight Reform and Federal Relations Committee both released the bills.

After being stalled for about a week, the Senate Budget and Appropriations Committee and Assembly Appropriations Committee each considered and released amended bills on Nov. 19.

The bills were posted for a vote in the Senate and Assembly on Nov. 23, but both votes have been postponed. The Senate's next voting session is not until December. Further revisions are needed to address the criticism to the bills discussed above and iron out the differences between the current versions of the bills before the Senate and the Assembly.

Cannabis Regulatory Commission Rules 

The remaining two members of the CRC still need to be named. Once that happens, the CRC will need to dig in and quickly create regulations and rules for the adult-use marketplace before it can begin issuing licenses.

More Supply

It will be a while before new operators will be licensed to provide recreational marijuana, and current medical ATCs will likely get first crack at selling recreational marijuana. However, finding a sufficient supply of product to do so is going to be a big hurdle.

Before they can consider opening their doors to potentially 1 million recreational buyers, New Jersey's medical marijuana ATCs must ensure that they can first meet the supply demands of the current 95,000 medical marijuana patients — something the limited number of ATCs are already struggling to do.

Scutari commented last month that he hoped the existing medical marijuana dispensaries would begin to sell recreational marijuana to the public immediately after the bill became law, but that forecast was likely too optimistic. Indeed, Brown responded that medical dispensaries do not have the necessary supply and "opening up sales even a few months after the election would be a disaster and would really hurt access for patients who need this as medicine."

By comparison, in last year's Biennial Report, the DOH observed that every ATC in New Jersey suffered supply shortages, and the department estimated that roughly 90 medicinal marijuana dispensaries would be needed to serve New Jersey's growing patient population, assuming full enrollment in the medical program reaches 180,000 patients.

Currently, there are only 12 ATCs, and the next 24 medical licenses remain roadblocked by litigation that has completely stalled those additional permittees for roughly a year. That blockage may further delay the approval of much-needed additional ATCs.

Pressure on Nearby States to Legalize or Be Left in the Dust

New Jersey's legalization of adult-use marijuana could have a ripple effect on recreational legalization in surrounding states, including Pennsylvania, New York and Connecticut. If nothing else, New Jersey's legalization puts significant pressure on those states to follow suit quickly or risk missing out on significant revenue from adult-use marijuana sales.

While most likely it is just a matter of time before those states follow in New Jersey's footsteps toward legalization, residents of Pennsylvania, New York and Connecticut should probably not expect adult-use legalization in their states to happen tomorrow.

Pennsylvania

Pennsylvania has allowed medical marijuana since 2016.

Since that time, legalization of recreational cannabis has gained further support among Pennsylvania residents, as evidenced by Lieutenant Gov. John Fetterman's 2019 listening tour across Pennsylvania, in which he visited Pennsylvania's 67 counties to hear residents' thoughts on legalizing marijuana. Around that same time, Pennsylvania Gov. Tom Wolf announced that he would support legalizing recreational marijuana in Pennsylvania.

On Sept. 25, 2019, Wolf and Fetterman released a report of the listening tour and simultaneously: (1) asking the Legislature to get a bill to the governor's desk that decriminalizes nonviolent and small cannabis–related offenses; (2) seeking a path to restorative justice through the expungement of past convictions of nonviolent and small cannabis-related crimes; and (3) calling on the Legislature to seriously debate and consider the legalization of adult-use cannabis.

Shortly after that call to action, Pennsylvania Sens. Daylin Leach, D-Delaware/Montgomery, and Sharif Street, D-Philadelphia, introduced the Adult-Use Cannabis Act, S.B. 350, that would legalize adult-use marijuana in the commonwealth. That legislation was not the only recreational marijuana legalization bill to be proposed in Pennsylvania. Unfortunately, none of the proposed legislation garnered enough support to make much progress in the Legislature, due in no small part to the opposition in the Republican-controlled state Legislature.

Recently, however, Wolf has been revamping his call to action on legalization, particularly in light of the COVID-19 pandemic and the economic relief that legalization might bring. Prior estimates noted that recreational legalization would generate $500 million in annual tax revenue for Pennsylvania after just the first year of adult-use sales.

It remains to be seen whether New Jersey's legalization will provide the much-needed catalyst to push Pennsylvania to adult-use legalization. However, with the legislative session ending Nov. 30, it seems less likely that anything will happen in Pennsylvania in that time.

New York

In New York, the majority of residents reportedly favor legalization as well. Gov. Andrew Cuomo recently commented that legalizing marijuana represents a key means for the state to achieve economic relief from COVID-19, at a time when "the state is going to be desperate for funding." He stated that they would legalize marijuana "soon."

Legalization of recreational marijuana made some progress but ultimately stalled in New York's Legislature last year. Cuomo reportedly intends to try again to legalize in early 2021 and plans to once again include legalization in his 2021 budget proposal. Like Pennsylvania, New York will likely lose out on significant revenue to New Jersey as residents will undoubtedly flock to the Garden State to purchase recreational marijuana once sales open in New Jersey.

Connecticut

In Connecticut, Gov. Ned Lamont recently stated that he would consider pursuing marijuana legalization in 2021. He also commented that officials have "got to think regionally when it comes to how we deal with the pandemic — and I think we have to think regionally when it comes to marijuana as well."

He also stated that he feels having residents driving back and forth to New Jersey to purchase marijuana poses a risk in terms of spreading COVID-19, and "legalizing marijuana and doing that safely … it's one way to keep people closer to home."  

Lamont's focus on a regional approach to legalization echoes the fact that just over a year ago, he and the governors of Pennsylvania, New York and New Jersey met at a "marijuana summit," where they agreed to a set of core principles for legal cannabis programs that they would aim to pursue. Those core principles involved numerous issues related to market regulation and empowerment, public health, public safety and enforcement, and vaping best practices.

Conclusion

Despite executive branch and voter support, state legislatures appear to be struggling to pass marijuana legislation, but New Jersey's ballot measure gave the state a strong head start, and surrounding states need to move quickly or they will lose out on significant tax revenue when their residents flock to the Garden State to spend their hard earned green on some legal green.



Matthew J. Smith is an associate, and Ruth A. Rauls and Jonathan A. Havens are partners, at Saul Ewing Arnstein & Lehr LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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