What Happens If New Jersey Legalizes Adult-Use Cannabis?: Legalization Watch

What Happens If New Jersey Legalizes Adult-Use Cannabis?: Legalization Watch

Greenspoon Marder’s Rachel Gillette offers her predictions on whether the state’s adult-use referendum has the support it needs to pass on Election Day, as well as what comes next.

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October 15, 2020

New Jersey has grappled with the idea of adult-use cannabis legalization for a while now, especially since Gov. Phil Murphy took office in 2018 with the promise of cannabis policy reform.

When a legalization bill stalled in the legislature last year, lawmakers placed an adult-use legalization question on the state’s 2020 ballot.

With just over two weeks until Election Day, many are surely wondering how the election will shape cannabis policy in the U.S.

“I’m excited to see what happens in New Jersey,” Rachel Gillette, partner and chair of Greenspoon Marder’s Cannabis Law Practice, tells Cannabis Business Times and Cannabis Dispensary. “I’m also excited to see what happens in states like Arizona and to see how many more states choose to legalize cannabis in this election.”

RELATED: UPDATE: 5 States Voting on Cannabis Legalization This November

Here, Gillette offers her predictions on whether New Jersey’s adult-use referendum has the support it needs to pass on Election Day, as well as what comes next, from how the law will be implemented and its potential impact on existing medical cannabis businesses to how cannabis policy reform in New Jersey might affect neighboring states that have yet to legalize.

Melissa Schiller: How likely is it that New Jersey voters approve adult-use cannabis legalization this November?

Rachel Gillette: I haven’t seen any recent polling, so this is pure guessing, but my guess is that we’re going to see more and more states pass adult-use, either through ballot initiatives or through the legislative process, which just brings to the forefront the fact that the federal government is going to have to address the issue of federal legalization at some point. I’m relatively confident, given that New Jersey already has medical marijuana, that it will pass [adult-use]. I think that people have moved past this [idea] that marijuana is the devil’s weed and should be prohibited in the United States. I think generally, more people favor the legalization of it, having seen what has happened in other states like Colorado, California, the Northwest and other states that have chosen to legalize. It can be done in a very safe way and can lend itself to providing significant tax revenue for the state, and, also, the more states that legalize, the more the black market gets squashed. I think the only reason the black market survives is because of federal prohibition and other states that have chosen not to legalize cannabis.

MS: What are your predictions for how New Jersey will implement the referendum and regulate adult-use cannabis in the state? What key provisions do you expect to see in New Jersey’s cannabis law?

RG: The ballot question seems relatively basic. It [asks if voters] approve of amending the Constitution to legalize a controlled form of marijuana for adults at least over 21 years old, and there would be a state commission created to oversee the state’s medical program and the new personal-use cannabis market.

My hope is that a state like New Jersey will not follow other states like Florida [and] New York, [which are] what I call “competitive licensing” states, which create these, for lack of a better word, very limited marketplaces that don’t allow for free market competition. It’s this merit-based application system, which lends itself to corruption and, frankly, the state getting sued every time.

My hope is that New Jersey will follow states like Colorado, California, Oregon [and] Washington that have more opened-up licensing, allowing for local jurisdictions to have some input in the time, place and manner of cannabis businesses within their jurisdictions, but not having the state have the ultimate control to limit the number of licenses or have a select few compete for these licenses. Those types of systems just don’t work, first of all. It’s very arbitrary to basically say, “Oh, here’s what you have to put in the application. Now you have to compete and we’re going to grade you.” Then the businesses that lose by .001 or the first loser are going to end up suing the state because they think it was arbitrary and they should have been granted a license. Not only that, it leaves all of these smaller mom-and-pop models behind, and it doesn’t give real people an opportunity to get into this marketplace.

My hope is that it will be a better system that what we’ve seen in other states. We’re now seeing other states that have done this competitive or merit-based licensing being sued—Florida, Maryland, Arkansas, Illinois is now a complete mess [and] Missouri has a whole bunch of people upset. I just don’t think that those systems work, and I wish states would avoid it.

MS: How might adult-use legalization impact the state’s economy, especially in the wake of the COVID-19 pandemic?

RG: There’s no doubt that cannabis can contribute to the tax base. The problem is, you have to tax it in a way that diminishes the black market and allows the regulated market to thrive—more people [have] to go to the regulated market and get away from the black market. The idea of how much it should be taxed on the state and the local level is a really important question, and I think states and local jurisdictions have to get that right. Otherwise, it can go the wrong way. Certainly, we have seen record sales in states like Colorado, [with] a significant amount of revenue being generated not only by special sales taxes associated with cannabis, but also, the first $40 million of the excise taxes goes to the construction of schools. I think there’s a lot of potential that the tax revenue raised can positively impact the economy.

What I would really like to see is that the tax revenue go to communities that have been disproportionately impacted by the drug war, so there’s actually some thought into why we’re legalizing cannabis or why the voters have decided to legalize cannabis and reinvesting that into community programs and things more focused on social equity. I think that’s really important, that we don’t forget about the communities and the people that have been affected by the failed war on drugs.

MS: How might adult-use legalization impact New Jersey’s medical cannabis program? In many states, patient counts start to drop when adult-use comes online—do you anticipate that happening in New Jersey, as well?

RG: Probably, and the reason that happens is because people are using cannabis both for medical use and for recreational use. If it becomes relatively easy to purchase if you’re an adult over 21, you don’t have to go through the process, even if you are using it for medical use, of getting a doctor recommendation and getting on a registry and all of that. A lot of people prefer the ability and the ease of being able to just walk into a store and buy cannabis because they’re over 21, rather than having to get their name on some register somewhere.

I do anticipate that the patient count will probably be impacted to some extent, but I hope they give credibility and resources to the medical cannabis market and medical cannabis consumers. We cannot forget about patients, even in light of adult-use legalization. They have different needs than people who consume from a recreational perspective. They may need higher THC levels or other cannabinoids in their products.

For example, in Colorado, if you’re a medical patient, you can purchase more cannabis than if you are an [adult-use] consumer, or you can purchase products that come in a higher dosage of THC than if you’re an adult-use consumer. I think that’s an important consideration. People are legitimately using cannabis for medical reasons, and they should be able to continue to do so and those products should continue to be available for them in the marketplace.

MS: With all of that in mind, how should existing medical cannabis businesses prepare for adult-use legalization?

RG: Probably, medical cannabis businesses are going to be the first that will be able to sell to adult-use consumers. I hope that there are other opportunities in New Jersey for other potential businesses, that the state doesn’t just limit it so people can only get adult-use licenses if they’re currently medical. I think they’re going to have to think about what kind of products an adult-use consumer may be taking other than a medical consumer, and [they should be] able to serve both types of customers in their facility.

I think it does get to be a diminished market as far as medical versus adult-use, once you open it up to everybody over 21, meaning you may have the same number of medical patients, but you’re going to have a lot more consumers that are over 21. I think that’s just the natural progression of legalizing for adult-use, that proportionally, you’re going to have more people buying products that are over 21 than are medical patients, so you have to play into that.

MS: How might legalization in New Jersey impact cannabis policy in neighboring states such as New York and Pennsylvania, which have also been considering adult-use legalization in recent years?

RG: I think the local authorities and legislators are going to see a bunch of people driving across the border to buy cannabis legally, and they’re going to say, “Maybe it’s time we consider legalizing, as well,” because that’s just tax revenue going to another state. It’s sort of like when I lived in Connecticut. They didn’t allow beer or wine to be sold on Sundays, of all days, when football is being played, and people used to just drive over the border to buy it. I think the same thing is going to happen, and I think, just like eventually Connecticut realized that not selling beer or wine on Sunday was not a great idea, [New York will] probably figure out that not legalizing cannabis isn’t a great idea either. They’ve already got Massachusetts there, too, in that Northeast area where people are probably driving across the border into Massachusetts to buy cannabis.

The same thing happens at a smaller level, when a local jurisdiction decides not to allow cannabis businesses. So, I think eventually, it’s going to come to the tri-state area. It’s just a matter of when.

Editor’s Note: This interview has been edited for style, length and clarity.