After Cannabis Regulatory Commission releases regs, some questions remain

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After the Cannabis Regulatory Commission introduced and passed the initial rules that will govern New Jersey’s adult use cannabis industry on Aug. 19, some questions remain, including when people can start participating in it.

The CRC has yet to announce when applications to run cannabis businesses – including dispensaries, grow facilities, manufacturing and processing facilities, delivery operations, and wholesalers – can be submitted for consideration. The Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act signed by Gov. Phil Murphy in February gives the CRC 30 days to start accepting applications, and if they are to follow that timeline, they must release the application first.

It’s also unknown if there will be a cap on licensing, noted Sean Mack, co-chair of Pashman Stein Walder Hayden’s cannabis and hemp practice.

“If they really want the marketplace to dictate who the winners and losers are, it’s up to the groups to prove themselves in the marketplace. It wouldn’t surprise me if there are no caps,” Mack said. “The reality is, we had so many towns opt-out. And for some of those towns [that opted in], unless the towns did something like Jersey City which was reduce their zone to 200 feet [from a drug-free school zone], in a lot of towns there’s not a lot of options. Town-by-town restrictions are going to limit the number of locations that are viable.”

Before Jersey City changed its limit for cannabis businesses from 1,000 feet from a school to 200 from a school, Mack noted “there was almost no place not within 1,000 feet of some school.”

The CRC’s initial rules focus mostly on the requirements for owning and operating a business. They didn’t provide much clarity for towns looking for guidance to determine if they were going to”yay” oy “nay” cannabis businesses inside their borders.

“Towns that were waiting for guidance received very little today, except the regulations appear to ban host agreements and their local licensing fees must be reasonably based on the administrative cost for the issuance of the permit,” Mack said.

Social equity is a key pillar of the CRC’s initial rules. Applicants who have lived for five of the last 10 years in economically disadvantaged areas and come from a household with 80% or less of the state’s average median household income, or have a past cannabis-related conviction, will be pushed to the front of the line.

Fruqan Mouzon, chair of the cannabis practice at McElroy, Deutsch, Mulvaney & Carpenter LLP in Newark, said the CRC “did an excellent job with social justice, exactly what they said they wanted to do,” but questioned the logistics of how the aforementioned folks would be prioritized.

“To target it to the people who are below average income and living where everyone has a below average income … It’s going to be difficult for someone who lived their whole life in a poor part of Newark to find a group of millionaires, get those people to give them their money, and then let them have 51% of the business to maintain the social equity status,” Mouzon said. “I’m hoping the state will step in to make sure those people can compete in the market once they get their license.”

Also up in the air are the results of the still incomplete 2019 Request for Applications process. About 150 applicants from the 2019 RFA are still waiting to find out if they’re one of 24 awardees due to a lengthy court process that held those licenses up for more than a year. CRC Executive Director Jeff Brown told reporters Aug. 19 that the CRC is “pushing to get that out the door.”

“I can tell you that we’re close. We want to get those out and issues as much as the folks that are waiting,” he said.