Former state Attorney General Christopher Porrino, now a partner at Roseland’s Lowenstein Sandler, recently wrote an Op-Ed for NJ.com decrying the existence of a gray market for cannabis sales. Porrino described his experiences in both New York and New Jersey, which suggested to him that unlicensed and untaxed retail establishments were evading the regulatory requirements to the detriment of public safety and the legal businesses that go about their business the right way, following all the rules.
Porrino recently sat down with NJBIZ to talk about his concerns and renew the call he made in the piece for law enforcement to crack down on the unlicensed sellers.
“If you walk into a storefront they’re literally selling to just about anyone,” he said. “And that is not what I believe the Legislature intended. I don’t think that’s what the voters believed was going to happen when the referendum passed. And so I thought it was appropriate to give a heads-up, frankly, to the local – not just county, but city prosecutors and law enforcement – to start taking a look at their own communities to see how rampant this really is.”
What follows is an abridged version of that discussion. The questions and answers have been edited for length and clarity. A video of the full interview is available at njbiz.com/njbizconversations.
NJBIZ: What got you interested in this issue? Were you hearing from dispensary owners? Were you hearing from local officials, from law enforcement? What prompted you to go public with this call?
Christopher Porrino: Well, there are a couple of things that happened, and initially it was because of an experience I had in New York state. I walked into a gas station and went to buy some Tic Tacs and I looked up at the counter and there was a selection of intoxicating cannabis products. And I asked the clerk, “What is this?” And she says “I’m not really sure, but it’ll get you high.”
And then in Manhattan I noticed, there were literally these weed trucks driving around and I said, “Oh, my goodness.” Of course, in Manhattan you walk down the street in Midtown, and it smells like you’re back in college.
Then I started poking around a little bit in New Jersey and asking around and doing a little bit of just sort of stopping in to local bodegas and gas stations and I saw a lot of the same thing. And I said, “Wow this is really rampant.” And there is very little enforcement – not no enforcement, there’s definitely been some – but not much. It just it struck me as you know, when I was attorney general, medical cannabis was legal in the state, and we were dealing with regulating that business. We knew recreational cannabis would be legalized based on the polling and at the time, I was kind of undecided, to be honest about what the right policy was.
Now, after it’s having been legalized, I’ve got some real doubts, because the truth is it’s not being regulated in the way that I anticipated it would be. When you walk into a dispensary today, dispensaries are very, very careful about checking ID. They’re writing down names, they’re not selling to underage people.
Q: Well there’s a lot to unpack there, I wanted to start with, first of all, you mentioned the weed trucks, seeing them in New York. But you’re also saying you’re seeing the same kinds of things that you saw in New York and New Jersey. That sort of practice exists now, in this state. Did I hear you correctly?
A: So I walked into a storefront yesterday, knowing that we’d be chatting, in Westfield, N.J., and I said I want to buy weed. And the person reached behind the counter and handed me this [a white cannister] and I took the packaging off because I don’t want to get sued by the store owner, but they sold me this and they sold me this [another cannister]. Both different labels, but both appear to be the same. From what I have been told, and from what the packaging said, this is marijuana.
The interesting thing is that I heard this about how they do it in New York. They said, well you can’t buy it—it’s a gift, the marijuana is a gift. And I said OK. But you have to donate $70. And then I proceeded to donate $70 to this store and in exchange I got two canisters of marijuana.
I don’t understand why that is not easy pickings for the Union County prosecutor or law enforcement in Westfield.
And the difficulty I have with it is not that I can go in and buy marijuana. The difficulty I have is they’re not regulated. I don’t know whether this product is safe or not. It’s not been tested. I don’t know this, but I would suspect that they’re being less vigilant with respect to IDs than the licensed dispensaries are. And it’s not taxed.
And aside from the risks that concerned me – to people, adults and to kids – it’s also unfair. The legal businesses have spent hundreds of thousands of dollars, in some case, millions and millions of dollars, to go out and get licenses and stand up stores and deal with the really heavy and very careful regulation of the [Cannabis Regulatory Commission], which oversees cannabis sales and cultivation in New Jersey, and these stores are just operating outside of that regulatory framework. As I said in the Op-Ed, if I wanted to go out and sell beer out of my garage the ABC would be on me in two seconds.And there’s reasons for that. It’s safety. And also, it’s not fair to the restaurants and to the bars and to the packaged goods stores that sell alcohol legally. And with marijuana it’s no different.
Q: Now how openly is this happening, I mean you mentioned a storefront – it doesn’t say “illegal marijuana for sale here”? I mean, I don’t want you to get anybody in trouble, but these are places that would have just a general clientele—people coming in and doing their normal business. Or is it that you have to know someone, that there is some indication that you can do this?
A: Look, I haven’t done a full-scale review. It’s been more of a casual sort of armchair exercise for me. But what I will say is that they come in different shapes and sizes. There are the vape shops, some of which will also sell marijuana or cannabis products. There are convenience stores, liquor stores that are selling cannabis or cannabis products. And there are gas stations, maybe not the large franchise gas stations, but gas stations that are selling cannabis or cannabis products. So I think it’s only going to continue to proliferate unless or until law enforcement catches up.
And I get it. It takes time. I was attorney general not that long ago, but this is really something that the local prosecutors, I think, have an advantage on and it shouldn’t be that difficult to crack down on.
Q: Now I was going to ask you about who these people are. If they’re store owners or store operators. They are not people who were dealing before legalization right? I mean, these are people who see an opportunity, apparently, in what is maybe not an enforcement priority right now. Am I getting that right?
A: Look, if it was happening I didn’t I appreciate it. I didn’t notice it and it doesn’t mean it wasn’t happening. But I didn’t notice it was happening, and you know it’s way more blatant in Manhattan. And as I understand it, the trucks operate the same way, they say, you can’t buy the marijuana from us, but you can buy this CD with music on it. And what kind of marijuana would you like us to give you? And then, what kind of CD would you like to purchase and then you purchase the CD and they give you the marijuana. And that seemed to be the sort of approach that this place in Westfield were sticking with me yesterday.
Q: And the stuff that they’re selling, it’s definitely illegal? Because there are cannabis products that you can buy on Amazon, if you want to. But this is stuff that they should not be selling unless they’re licensed to sell it?
A: So, there is an interesting continuum. There is the clearly labeled marijuana: Cannabis product that is no question illegal to sell without a license. Then, on the other side of the spectrum are the CBD, you know, oils and other things that are hemp products, not intoxicating and are legal. Then there are products that are referred to, I believe, as delta eight products. They claim to be hemp derived and under federal law those products, at the moment, are not illegal, although they are it appears intoxicating. There is a continuum of what is clearly legal and what is clearly illegal and some of these stores are selling products that are clearly legal.
Q: You said at the top that you had some doubts now. You have doubts about recreational legalization? Or what sort of doubts has this created in your mind?
A: From a policy point of view I, to be honest, and I was uninitiated, I think, back then and didn’t have as good a sense of what was coming and what happened in some of the other states where recreational marijuana was legalized before New Jersey. But now, having seen where this product is available again on this sort of gray market in a way that’s not regulated and not taxed, it’s not something that – to be honest – I anticipated.
I anticipated that, like liquor stores and bars and restaurants with licenses to sell liquor, would for the most part be the only establishments selling here. There are way more unlicensed stores selling cannabis than there are licensed stores, so the balance is completely out of whack.
And you know again there are the safety concerns. I worry about kids. And the industry. If you care about the industry, it’s a little difficult to compete with an untaxed unregulated store next to you because it’s cheaper. And you don’t have to worry about ID. And it’s just easier.
So I don’t think there’s a better answer than law enforcement being activated in this context to deal with it.
Q: OK. As you mentioned, there aren’t that many licensed stores now. As that changes, as the CRC gets ramped up and begins to approve more licenses and the dispensaries become more common, do you think that imbalance may change?
A: I’m not sure. I think it’s always going to be harder for kids to get through the regulatory regime that exists and how careful these legal dispensaries are. So there’s the underage factor. And I don’t know how long it’ll take for the legal businesses to become prevalent and prominent enough, but my guess is that just as they’ve had this trouble in other states, it’s always going to be cheaper because it’s not taxed and the unregulated, unlicensed store didn’t have to pay the hundreds and, in some cases, millions of dollars that are spent by the legal operations to get licensed and to stand up a store. And to have all the regulatory requirements in terms of security and cameras and everything else – testing – so it’s always going to be cheaper. And in that context, the free market I don’t think is going to solve this problem. I think it requires some enforcement activities.
Q: Now, have you heard from anybody in the industry since your piece was published? I’m curious if there’s been any reaction, because, as you say, this is essentially unfair competition for the legal side, you would think that they would be making bigger noises as you are. Although truthfully, I haven’t really heard that much about it. Maybe our own blind spot.
A: I had been sort of thinking about writing an Op-Ed on this subject, for a number of months and life kind of gets in the way. And I didn’t have a chance to put pen to paper, and I said to myself, each time it would creep into my consciousness, I would say, “You know this is going to become irrelevant very soon, because someone else is going to write about it.” But [no one did]. I’m hoping that I can help bring attention to the issue.
I don’t know whether I’ll be successful or not, but I have received a fair amount of outreach from what I’ll call either the enforcement or industry side folks who are interested in talking more about it.
Q: And, finally, of course, one of the main driving forces behind legalization was unfair enforcement or the way enforcement had been carried out, being uneven, targeting communities of color more often than not. Are you confident that this sort of enforcement activity can avoid those sorts of problems which was again, kind of the point of legalization?
A: I think that the whole point of legalization was to clean up the unfairness, to the extent it could be cleaned up. And these taxes are supposed to be collected and they’re supposed to benefit, to some degree, the communities that suffered this unfairness. Having a gray market or an illegal market doesn’t help that cause.
I would like to think that my former colleagues in law enforcement would be sensitive to those concerns. But at the end of the day, the folks against whom enforcement will take place are not going to be the person who goes in and buys the stuff. It’s going to be against the person or the entities that are selling it. And I don’t have a lot of sympathy for those individuals and those entities.