Cannabis Regulatory Commission releases initial rules

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The New Jersey Cannabis Regulatory Commission released its initial rules Aug. 20 after several months of deliberation, paving the way for diverse business owners to partake in the state’s adult use cannabis industry.

After an hour of delays attributed to technical difficulties, Chair Dianna Houenou, Executive Director Jeff Brown and Commissioners Charles Barker, Maria Del Cid-Kosso, Sam Delgado and Krista Nash convened in a public meeting in front of nearly 1,000 New Jerseyans to introduce the CRC’s initial rules, which included the prioritization of social equity, diversely owned and impact zone businesses; easing access to the market for entrepreneurs; working with municipal partners; and laying a foundation of safety.

“Four months ago, the commission launched and we knew that we had a herculean task before us. When we started this agency, there was nothing to begin with. There was no agency, there was no infrastructure,” Houenou said.

Because the law required the CRC to establish laws by a certain date, the commission is allowed to publish its first rules without public comment. In the last four months, though, six public meetings yielded comments from 400-plus people with 2,500 attending said meetings.

“The concerns raised in these forums helped us write these rules. So thank you … to everyone who helped us understand how to do this work and do it right,” Houenou said.

The laws presented by the CRC could be in effect for up to one year. They can be amended or redacted, new rules can come into play, and Houenou said that’s a process that will go through the regular course of action that features a robust public comment period.

Highlights

There’s a priority review for social equity business applicants, diversely-owned business applicants, and impact zone business applicants.

For social equity businesses, more than 50% of the ownership interest must either have lived in an economically disadvantaged area for five of the 10 previous years and be a member a household that has a household income that is 80% or less of the state’s average median household income, or have a past cannabis-related conviction.

“In an effort to make up for past harms of cannabis prohibition, we want to [prioritize] applicants with past cannabis-related criminal offenses,” Brown said.

ACLU-NJ Campaign Strategist Ami Kachalia said the first set of regulations adopted by the CRC “makes important strides forward, especially the creation of an equity program that prioritizes people most harmed by prohibition and reasonable fees for license applications.”

Kachalia went on to “urge the CRC to build on these steps to ensure a more inclusive and diverse cannabis industry by providing additional resources for equity applicants, including access to capital, and guiding municipal officials to center equity and inclusivity at the local level.”

The rules establish and prioritize small businesses, referred to as microbusinesses, and they establish the conditional licensure process, which creates a pathway for entrepreneurs into the industry.

Conditional applicants will need to submit background disclosure information to the CRC, along with a business plan and a regulatory compliance plan. For a conditional licenses, site control or municipal approval is not needed. Those applying for conditional licenses have to have made under $200,000 of taxable income in the prior year. But once approved, they will be allowed to add new owners and financial sources and will be then required to get site control.

New Jersey CannaBusiness Association President Edmund DeVeaux said in a prepared statement following the meeting that, “[f]ocusing on microbusinesses and social equity first is the right direction to head in. The NJCBA has always stressed the importance of widening the market to allow as many cannabis entrepreneurs as possible.”

“We’ve also spoken time and again about the need to ensure that the communities hurt most by the failed War on Drugs are fairly represented in this space,” DeVeaux said. “These new rules begin to tackle both of those concerns, giving a boost to those who might not otherwise have the opportunity to own or run their own cannabis-based business.”

Application fees are as low as $100 and as high as $2,000. For alternative treatment centers, looking to expand to adult use cannabis, the cost of expansion will be $100,000 up to $1 million for vertically integrated ATCs with three dispensaries. ATCs won’t be required to submit a full application to start participating in the adult use market, but will need to notify the CRC of the their intent and prove that they have adequate supply to meet the reasonably anticipated needs of medicinal cannabis patients.

Regarding municipal partners, dozens of towns have passed ordinances in the last few months to prohibit cannabis businesses from establishing within their towns. Dozens of others have passed ordinances approving their presence, and specifying what exactly can situate there.

Brown said that the commission has “no issue with them updating their ordinances now that they get to see the full slate of what we propose and what we intend to set for the launch of this industry and this market.”

For those municipalities that continue to restrict cannabis businesses within their towns, the CRC said they can’t restrict delivery of cannabis items into their municipality, and they can’t restrict transports of cannabis routed through their municipality.

What comes next

Up next for the CRC will be to craft additional rules to establish the industry and establishing the full rules on delivery, distribution and wholesaling, which were not included in these initial rules.

The CRC also must prepare to accept applications for adult use applicants.

In the meeting, the commissioners didn’t address the thus-far undecided 2019 Request for Applications process, for which 24 business owners haven’t been announced yet.

In his statement on the meeting, DeVeaux noted that “the inaction on the possible 24 licenses is not insignificant.”