New Jersey’s Legal Cannabis Framework Creates Economic Opportunity with an Eye to Social Justice

On February 22, 2021, Governor Murphy signed into law The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, regulating cannabis use and possession for adults 21 years and older. The ratification of the bill follows a protracted legislative logjam since Election Day, when New Jersey voters overwhelmingly approved a mandate to provide the infrastructure for the legalization of cannabis in the state. The legalization immediately decriminalizes certain amounts of marijuana and hashish statewide. Meanwhile, the recreational production and sale remains subject to regulatory schemes not yet enacted.

The new law constitutes a major step toward social justice in combating the disproportionate effect that the war on drugs has had on underprivileged communities. Indeed, the law explicitly notes that “Black New Jerseyans are nearly three times more likely to be arrested for marijuana possession than white New Jerseyans, despite similar usage rates.” Recognizing such, it aims to remedy these past disparities. The law requires the prioritization of license applications on the bases of “impact zones,” defined as any municipality – “based on past criminal marijuana enterprises” – contributing to higher concentrations of law enforcement activity, unemployment, and poverty within parts of, or throughout, the municipality. The law also incentivizes individual applicants who are impact zone residents, as well as the hiring of new employees from within impact zones.

The law establishes six different classes of cannabis licenses: Class 1 (cultivators); Class 2 (manufacturers); Class 3 (wholesalers); Class 4 (distributors); Class 5 (retailers); and Class 6 (deliverers). The law is conservative in its initial approach to the long-awaited roll-out – allotting a total of only thirty-seven licenses to be awarded within the next twenty-four months. At least nine of these licenses have already been awarded to cultivators of medical marijuana, who have been operating under the State’s pre-existing medical use law. Thus, opportunities are somewhat scarce – at least for the time being – and the licensing process will likely be highly competitive.

The State’s Cannabis Regulatory Commission (CMC) will oversee the license application process. Noticeably absent from the new law are detailed specifics concerning the license application and award process. Rather, the law notes that the bill spelling out such details is still pending before the State Legislature. Also absent from the bill is any plan or indication of potential enlargements of the number of allotted licenses. The CMC is expected to address these issues throughout 2021, and ultimately plans to launch New Jersey’s recreational cannabis marketplace in early 2022.

Missing from prior iterations of legalization bills was employment protection for individuals who partook in conduct made legal under the proposed laws. The Legislature has remedied this issue. Subject to certain (currently undefined) exceptions, individuals may not be denied any right or privilege, including but not limited to civil liability, disciplinary actions by a business, or adverse employment action, solely for conduct permitted under the new law. Similarly, students and school employees may not face adverse action for conduct permitted by the law, unless failing to sanction the conduct would result in the violation of a federal contract or loss of federal funding. Additionally, hospitals may only discriminate based on a patient’s legal cannabis use when it comes to “evidence-based clinical criteria” that may negatively impact or skew a study.

Municipalities have been granted wide discretion in controlling cannabis production, distribution, and retail within their borders. A municipality may prohibit the operation of any one or more classes of cannabis licensees, other than Class 6 delivery services, through the enactment of an ordinance. If, however, the municipality fails to enact such a limiting ordinance by August 21, 2021, subject to its pre-existing ordinances, Class 1, 2, 5, and 6 licenses may be awarded throughout the municipality, and Class 3 and 4 licenses may be awarded in industrial-zoned areas.

Tax revenue from the new programs, as well as fees and penalties collected by the CMC for violations of the law, will be deposited into a non-lapsing fund known as the “Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Fund” (the “Fund”). The Fund will be used primarily to oversee the development and regulation of activities associated with recreational marijuana use and to reimburse counties and municipalities for training costs associated with the program’s implementation. Funds remaining thereafter will be distributed – pursuant to a bill currently pending before the Legislature – to impact zones to provide direct, financial assistance to qualifying persons, as determined by the CMC, and to create, expand, and promote educational and economic opportunities and activities, as well as the “health and well-being of both communities and individuals.”

New Jersey’s recreational marijuana program has the potential to be a budding success. With Governor Murphy’s signature, New Jersey became the fourteenth state to legalize recreational marijuana, in addition to Washington D.C., and the third largest economy to do so behind California and Illinois. Still, New Jersey is poised to become a leader in the industry. Not only will recreational sales likely be bolstered by residents of New York City and Philadelphia – two of the nation’s most populous and most visited cities, both of which happen to share a border with New Jersey – but New Jersey is proving itself a pioneer in race-conscious legalization. It would be a great service to the nation if more states would follow New Jersey’s lead in using the economic opportunity, and tax revenue, presented by legal cannabis to combat past racial inequities while garnering and managing a fund to improve the lives of all New Jerseyans.