Not so fast

Voters enabled the creation of a multi-billion industry, but a lot of work remains before recreational marijuana can start moving

Gabrielle Saulsbery//November 9, 2020//

Not so fast

Voters enabled the creation of a multi-billion industry, but a lot of work remains before recreational marijuana can start moving

Gabrielle Saulsbery//November 9, 2020//

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Not all results took until after election day to assess. New Jersey voters voted overwhelmingly to legalize adult use cannabis last Tuesday, creating the opportunity for a $2.5 billion market in a state that abuts no other adult-use states.

Two-thirds of New Jersey voters approved the measure, making it the most successful adult use ballot initiative in the country, according to NJCAN Campaign Manager Axel Owen, who noted the previous high was 57% approval four years ago in California.

The support was bipartisan, said Scott Rudder, founder and president of New Jersey CannaBusiness Association, who’s a Republican and a previously elected official of 16 years. Since starting the NJCBA four years ago, an increasing number of his fellow Republicans have gotten engaged in what was previously seen as a Democratic issue.

Scott Rudder
Scott Rudder –

“More and more people have gotten to realize it’s a ridiculous scenario to have cannabis illegal when those much more dangerous are legal, meaning alcohol and opioids,” Rudder said.

But Attorney General Gurbir Grewal was quick to remind people in a Nov. 4 announcement that individuals can still be arrested and held accountable for cannabis-related charges until the plant is decriminalized by enabling legislation. Such legislation, according to Sen. Nick Scutari, D-22nd District, at an NJ CannabisInsider panel in October, could be approved as soon as the end of November.

So what comes next?

“Several times over the past couple years we’ve said, ‘now the hard work begins.’ We said this when the medical licenses came out, when the Jake Honig law passed expanding [the medical program], and now again. [Now] we have to build the plane before we fly it,” said Foley Hoag Counsel Mike McQueeny, a cannabis attorney.

Sen. Nick Scutari
Sen. Nick Scutari –

“We have the medical framework, but when you talk about opening it up to the whole population … one thing that differentiates New Jersey from [other states] is we’re not a state that’s allowing things like home grow or transfers between people. We have a ballot measure that passed literally only because there’s a promise within it that it would be a safe, secure and regulated industry,” McQueeny said.

The enabling legislation will create a blueprint for the industry; and when that’s done, the Cannabis Regulatory Commission—which has yet to be selected, save one member—will take the reins and guide it from there on.

Dasheeda Dawson, a national cannabis industry strategist and cannabis program supervisor for the city of Portland, Ore. who has helped craft cannabis regulations all over the country, said that one of the biggest mistakes states make is staffing their own cannabis regulatory commissions with people without “a proven history of cannabis competency and a lack of cultural competency.”

With a bevy of cannabis equity advocates and decade-old medical program, New Jersey isn’t starting from scratch and would benefit from staffing its CRC with “leaders who have taken the stage time and time again,” specifically with backgrounds in science, business, and equity.

Attorney General Gurbir’s announcement about the continuation of cannabis-related arrests drew ire on Twitter and in the media, but ACLU-NJ Campaign Strategist Ami Kachalia said it calls attention “to why it’s so essential and that we pass decriminalization in a way that’s all-encompassing, that makes sure people are being protected and that it has to happen right away.”

If the experience of the 11 states that came before New Jersey is any guide, legalization infrastructure takes time to fully implement. On the short end, Illinois took six months; Maine took nearly four years. New Jersey has the dubious distinction as the state with the third-highest number of cannabis arrests, arresting someone on average every 22 minutes, according to the ACLU. That’s nearly 100 a day, with more harm on average going to Black and brown communities. Usage among whites and Blacks is similar, yet Blacks are 3.5 times more likely to get arrested for it.

Speak up

According to Jessica Gonzalez, cannabis attorney at Bressler Amery & Ross and general counsel for Minorities for Medical Marijuana, now is the time for people to get louder about how they want the industry crafted.

“I’m urging everybody to contact their legislators who are going to be voting on the legislation and let them know what they’d like to see in terms of licensing, in terms of local control, in terms of who can participate, because the goal of building a socially equitable marketplace is still in front of us and we must continue to move toward it,” she said, noting email is best because it’s in writing.

And don’t forget about local lawmakers.

“People often forget about their local governing bodies, but they have a big say in who is allowed in their municipality, and that’s going to be a lot more accessible to constituents than at the state level,” she said.

There will be a public comment period on the legislation as it moves forward, and Gonzalez recommends people submit written testimony to the legislature about what’s important to them. With lawmakers vocal about not steering too far from the contents of the March 2019 legalization bill that failed, she notes that speaking to officials now is the next step to ensure that the impending infrastructure “speaks to the harms caused by the criminalization of cannabis and to the entrepreneurial opportunities that didn’t exist before.”

“We are no longer talking about legalization as a hypothetical, it’s coming. Now we can have more fruitful conversations about what we’d like to see because now we have data—who voted for what in what municipality. This is going to be very difficult for legislators and councilmen to ignore,” she said.

Clock’s ticking

According to Dawson, the pressure’s on the architects of New Jersey’s adult use cannabis infrastructure because neighboring New York and Gov. Andrew Cuomo are extremely competitive.

“As soon as it became clear that this would pass on the ballot, [Cuomo] started talking about how it must pass [in New York] … right now New Jersey seems to be well-positioned [to move quickly] because there’s been a lot of previous discussions, but we have to remember that we’re here with the ballot referendum because they couldn’t get it together before,” Dawson said.

Moving too quickly could cause a backup in the market. Illinois legalized legislatively in June 2019 and began adult use cannabis sales on Jan. 1. The state’s fairly small medical cannabis program, which had 19 operators to serve approximately 80,000 patients, was grandfathered into adult use sales; and within a month from the start of sales, product had started to run out.

“Half of them had come online in 2019, so the existing medical industry had an infrastructure that was set up to meet the demand of a pretty small number of medical patients that was asked to scale up to meet the demand of a full adult use market of many million people and tourists every year,” according to Kris Krane, president of cannabis operator 4Front Ventures, former executive director of Students for Sensible Drug Policy, and a Chicago resident. “It’s just not enough time to scale up to meet those demands. It takes time and money to build out facilities, time to grow plants.”

At this point, Illinois cultivators have been able to scale up more. Though it’s not yet plentiful and abundant, according to Krane, shortages still occur.

With the broad assumption that current medical operators will be able to participate in the adult-use system, Krane predicts operators in New Jersey will have more time to scale up now that the vote has passed and the legislating and rulemaking process moves forward. In Illinois, he said, it “was not at all clear the legislation was even going to pass. From an operator perspective, it was impossible to have any real comfort” in scaling up without the official go-ahead.

Cannabis takes about four months to enter the market from seed to shelf. When shortages occur, they can’t be remedied overnight, explained Dawson, adding that the illegality of interstate cannabis commerce doesn’t help and that the shelf life of processed product limits how much surplus an operator can have in stock.

To avoid undercutting the state’s medical program, which serves more than 81,000 patients, protections need to be put in place to make sure patients’ needs are met. Regulations must direct retailers to keep a certain amount of their product for medical use only, as in Illinois, which now requires that at least 30% of inventory is preserved in case of shortages for medical patients. Taxes should be kept lower for medical patients, Krane said, and certain high-dose products should be reserved only for the medical population.

Even with an opportunity to scale up cultivation and processing moving forward, New Jersey’s medical cannabis program is still smaller than the Department of Health seemingly intended at this point, given the release of Request for Applications in both 2018 and 2019. Three operators from the 2018 class have not yet opened their retail dispensaries; and 2019’s winners and losers are all unknown and tied up due to a court ordered stay.

Currently, just 11 dispensaries are open.

Meanwhile, the ancillary market is booming, said Gonzalez, because it doesn’t have to wait. Two times the size of the plant touching business, Gonzalez expects it to triple.

“You’re not bound by the same legislation as the plant-touching business. On the ancillary side, start pivoting toward cannabis, because the opportunities are going to be bountiful. That’s something that people can really start now,” she said.