Paul P. Josephson – Cannabis Industry

August 2, 2024August 13, 2024 by Jim Hearon

Federal Court Affirms Crackdown on Intoxicating Substances Synthesized from Hemp

In the absence of federal enforcement action, state legislatures have stepped into the breach, enacting laws regulating products containing intoxicating substances that are chemically synthesized versions of chemicals in hemp. Those substances are referred to here as hemp-synthesized intoxicants or HSIs. Challenges to state authority to regulate HSI are being filed. In a recent decision that may foreshadow what is to come, a federal court declined to enjoin Wyoming’s hemp law.

As we have previously reported, the passage of the Agriculture Improvement Act, commonly referred to as the 2018 Farm Bill, opened the floodgates to unregulated intoxicating hemp products across the country. Though the 2018 Farm Bill authorized the U.S. Food and Drug Administration to regulate hemp-derived products intended for human consumption, the FDA has yet to promulgate rules for such products or HSIs. In the absence of federal regulations, states have begun to enact their own rules.

In Green Room LLC, et al. v. State of Wyoming, et al., a group of HSI wholesalers, retailers, and manufacturers filed a federal suit challenging amendments to Wyoming’s hemp laws and requesting a preliminary injunction. In pertinent part, the amendments expanded the definition of THC to include any psychoactive structural, optical, or geometric isomers of THC, encompassing both CBD and the popular Delta-8 THC. Because cannabis remains illegal in Wyoming, the amendments effectively prohibited the possession, sale, transport, and production of intoxicating substances synthesized from hemp. The plaintiffs argued, in part, that the amendments were unconstitutional because they were preempted by the 2018 Farm Bill, which they claim legalized all hemp substances, including intoxicating substances synthesized from hemp, for intrastate and interstate purposes.

On July 19, 2024, the federal court denied plaintiffs’ request to enjoin enforcement of the new law, finding that they do not have a substantial likelihood of success on the merits.

Specifically, the court found that the 2018 Farm Bill does not prevent states from regulating HSIs. The court found the 2018 Farm Bill did not confer any right on plaintiffs to manufacture or sell intoxicating products resulting from hemp, but merely redefined the term hemp. Most important, it held the 2018 Farm Bill contains an express “no preemption” clause permitting states to regulate hemp more stringently than federal law. The no preemption clause expressly permits a state to enact laws regulating intoxicating substances synthesized from hemp in a manner “more stringent” than the 2018 Farm Bill. The court further concluded that Wyoming’s amendments do not violate the dormant commerce clause, do not amount to a regulatory taking, and are not unconstitutionally vague or overbroad.

Green Room is not the first challenge to state restrictions on HSIs. In Bio Gen LLC et al. v. Sanders et al., the State of Arkansas appealed a trial court decision enjoining Arkansas regulations that restrict the manufacture and distribution of products that contain synthetic cannabinoids that could be intoxicating, such as Delta-8 THC. In Northern Virginia Hemp and Agriculture LLC, et al. v. Commonwealth of Virginia, et al., the plaintiffs, an HSI product manufacturer/distributor and consumer, appealed a trial court decision that denied their motion to enjoin the State of Virginia from enforcing Virginia regulations that restrict the manufacture and distribution of products that contain synthetic cannabinoids that could be intoxicating, such as Delta-8 THC.

Those pending appeals present the possibility of a federal circuit split on the question whether the 2018 Farm Bill legalized intoxicating substances that could be derived from hemp. On behalf of the American Trade Association for Cannabis & Hemp, Duane Morris filed an amicus brief in each case that asserts that the 2018 Farm Bill did not legalize hemp-synthesized intoxicants, and it reserved for states the right to regulate such substances in the interest of public safety.

As more states roll out new restrictions on intoxicating hemp products and operators, we expect to see more challenges. Though not a final ruling on the merits of the suit, the court’s decision suggests these plaintiffs and others challenging state intoxicating hemp laws have an uphill battle ahead.

July 18, 2024 by Paul P. Josephson

11th Hour Amendment Guts Garden State Attempt to Regulate Intoxicating Hemp Products; Will Gov Veto or Sign?

The passage of the 2018 Farm Bill has led to the proliferation of unregulated hemp-synthesized intoxicants (“HSIs”) flooding the market nationwide. Gas stations, convenience stores, and other retailers are widely selling these unregulated and untaxed products.

The boom in HSIs, particularly Delta-8 THC, is a direct result of an entirely unregulated market with virtually no federal oversight aside from occasional FDA warning letters when products resemble candy and snacks favored by children. Most recently, one troubling report suggests testing labs are finding that the processes for converting CBD extracted from legal hemp into intoxicating Delta-8 and Delta-9 products create a soup of mysterious compounds whose effects and dangers are presently unknown.

In response, many state legislatures are considering bills to ban or regulate intoxicating hemp products.

Senate Bill 3235 was introduced in May 2024 with the intent to grant the New Jersey Cannabis Regulatory Commission (“CRC”) broad authority to regulate the production and sale of intoxicating hemp products in New Jersey, to limit sales of intoxicating hemp products to licensed cannabis retailers and sales of intoxicating hemp beverages to certain liquor licensees approved by the CRC, and to allow municipalities to impose the same 2% tax on retail sales they apply to regulated cannabis. On June 28, 2024, the New Jersey Legislature quickly approved it and a crush of other legislation on the eve of the state’s budget deadline.

In the original draft of the bill, intoxicating hemp product meant any product “cultivated, derived, or manufactured from hemp . . . that is sold in this State that has a concentration of total THC greater than .5 milligrams per serving or 2.5 milligrams per package.” This broad definition encompassed all intoxicating hemp products sold in New Jersey, regardless of the state of origin,

But after being passed out of committee and ready for a full Senate vote, the bill was sent back to committee and amended to limit its reach to only intoxicating hemp products “cultivated, derived, or manufactured in this State[.]” By limiting the bill’s reach to only the small universe of hemp products cultivated, derived, or manufactured in New Jersey, intoxicating hemp products originating or imported from other states will remain on the market and not subject to the bill’s restrictions or any current or future regulation.

This language was likely added to address interstate commerce concerns. But the Dormant Commerce Clause of the U.S. Constitution does not prohibit states from regulating out of state companies that sell hemp products into their state; it only prohibits discriminatory treatment of out of state operators compared to in state businesses. As long as they are subject to the same rules, the state may regulate the sale and taxation of out of state products like any other industry.

The IHP bill is currently on Governor Murphy’s desk awaiting action: sign, veto or conditionally veto. If he takes no action by mid-August, it becomes law.

Industry, social equity and union advocates alike are urging a conditional veto sending S3235 back to the Legislature to restore the bill’s reach to include all intoxicating hemp products sold in the state. Others object to liquor licensees jumping to the front of the line and being allowed to sell intoxicating hemp beverages just as social equity cannabis retailers are finally opening their doors after years of effort and expense. Unions organizing the cannabis industry that have fought hard to create good jobs in a viable industry likewise seem irked by this end run around union mandates that is likely to cost members their jobs.

The last minute amendment appears to undermine the express purpose of the bill. If enacted in current form, it will likely result in New Jersey companies exclusively purchasing and selling intoxicating hemp products produced out of state to avoid the time and expense of licensure, CRC approval, and taxation.

A well-intentioned law quickly passed to address a growing problem, the cannabis and hemp industries anxiously await Governor Murphy’s action.

June 26, 2024 by Paul P. Josephson

Cases We’re Watching: Constitutionality of State Restrictions on Cannabis Advertising

By Paul Josephson and James Hearon

State cannabis advertising bans are getting their day in court, albeit before the federal Fifth Circuit, a court that has been increasingly hostile to regulation.

In February 2022, Mississippi enacted the Medical Cannabis Act, legalizing medical marijuana within the state. The Act granted the Mississippi Department of Health (“MDOH”) authority to establish and promulgate rules and regulations governing the advertising of medical cannabis.

The Act made clear that any proposed rules or regulations could not prohibit a cannabis operation from engaging in certain types of marketing and advertising, including displaying appropriate signage on the licensed premises, listing in business directories and other publications, or displaying logos or other branding materials. In promulgating its proposed regulations, MDOH prohibited licensees from advertising or marketing in any form of media (i.e., broadcast, electronic, print, etc.)

In November 2023, Tru Source Medical Cannabis, LLC challenged MDOH’s advertising restriction as a violation of the First Amendment. In January 2024, the Northern District of Mississippi federal court upheld the advertising ban and dismissed the lawsuit, entitled Cocroft, et al. v. Graham, et al., in its entirety. The district court relied extensively on the Montana Supreme Court’s analysis in Montana Cannabis Industry Association v. State of Montana, 368 P.3d 1131 (Mont. 2016), rejecting a similar challenge to cannabis ad regulations. The district court agreed that “an activity that is not permitted by federal law—even if permitted by state law—is not a ‘lawful activity’” and, thus, does not qualify for commercial speech protection. Tru Source appealed this ruling to the Fifth Circuit.

We are closely watching the Fifth Circuit’s decision to see whether antipathy for cannabis or regulatory overreach will prevail. The circuit, which embraces Texas, Louisiana and Mississippi, has been making headlines lately for rulings hemming in the authority of federal agencies. In recent cases, the Fifth Circuit rejected FDA rules permitting use of the abortion-inducing drug mifepristone (just overturned by the Supreme Court late last week), tossed out the SEC’s system for adjudicating enforcement cases, and declared the Consumer Financial Protection Bureau’s funding mechanism unconstitutional (also reversed by the Supreme Court). The Fifth Circuit has been in the legal spotlight, and its rulings have been keeping the Supreme Court busy.

The Fifth Circuit’s decision is also likely to implicate a much broader and unsettled legal question; that is, whether constitutional protections apply to state-legal, but federally prohibited, conduct. In 2022 and 2023, we saw a number of constitutional challenges to residency requirements in state cannabis regulations alleging that such requirements discriminate against out-of-state operators and violate the Dormant Commerce Clause.

Several courts, including the First Circuit and the Eastern District of Michigan, have held that discriminatory residency requirements likely violate the Dormant Commerce Clause. Other federal courts, such as the Western District of Washington and the District of Maryland, have found that, because cannabis is federally illegal, the Dormant Commerce Clause likely does not apply—the same rationale relied on by the district court in Cocroft.

The Fifth Circuit’s recent history as a venue where regulators have fared poorly suggests Mississippi’s outright ban on commercial speech by state-legal businesses will get a hard look. Briefing will be complete shortly, and we would expect oral argument and a decision before year end.

May 9, 2024 by Paul P. Josephson

Steady Hands at the Tiller – New NJCRC Executive Director Appointed

New Jersey Governor Murphy announced yesterday that current NJCRC Executive Director Jeff Brown is returning to the New Jersey Department of Health to take on the role of Deputy Commissioner for Healthcare Systems, effective May 20, 2024.

Current NJCRC Deputy Executive Director and former General Counsel Christopher Riggs will assume the role of acting Executive Director upon Brown’s departure.

Brown has served as the Executive Director since the formation of the NJCRC in April 2021, and before that as Assistant Commissioner for the Division of Medicinal Marijuana at the New Jersey Department of Health since 2018.

Despite the inevitable friction and challenges associated with this nascent field and reporting to a board of very active, full time commissioners, Brown has proven a steady hand at the tiller both at NJDOH and at NJCRC. Throughout his tenure in both agencies, Brown has been instrumental in the development and implementation of New Jersey’s medical and recreational laws and rules. He led the reinvention of New Jersey’s moribund-by-design medical marijuana program, and then stood up the NJCRC as a new agency to regulate both adult-use and medicinal cannabis. Under Brown’s leadership, New Jersey’s cannabis market has grown each year with 2024 cannabis sales expected to top $1 billion.

Though Brown will be a hard act to follow, Acting Executive Director Riggs is expected to be another steady hand at the tiller leading regulation of the market. Well-equipped to assume the role of Executive Director, Riggs has worked for the NJCRC since its inception. He initially served as the NJCRC’s first chief counsel and led the drafting and promulgation of the laws and rules that govern the industry. Before that, he was a Deputy Attorney General in the Office of the Attorney General and was assistant chief of the section representing the Department of Health and Human Services.

Well regarded among attorneys and industry veterans alike, it is expected Riggs and the NJCRC will now focus on streamlining and rationalizing regulatory processes to improve oversight and reduce bureaucratic delay and red tape. Riggs has also indicated he intends to prioritize clinical registrant applications and social equity certification process at the NJCRC.

We wish both well in their new roles.

June 28, 2023June 28, 2023 by Paul P. Josephson

Expanded Equity Funding for NJ Licensees Heads to Governor’s Desk

A sea change in the funding of New Jersey cannabis businesses has been approved by New Jersey’s Legislature and is pending on Governor Murphy’s desk awaiting his signature. Duane Morris attorneys assisted in the conception and drafting of this legislation.

That legislation, A4151, will allow far greater levels of investment in minority, women and disabled veteran owned adult use cannabis businesses by those best positioned to invest in them on equitable terms – current licensees and cannabis funds. The bill will increase the equity stake a licensee or investment fund may have in these diversely owned businesses from 5% to 35%, and allow them to invest in up to 7 diversely owned licensees. This will also allow capital stacks to rely more heavily towards equity, reducing the debt component at high interest rates that burn cash flow new operators need to get their businesses on solid footing. To date, these terms have only been available to New Jersey small universe of diversely owned medical cannabis licensees.

The bill protects against predatory conduct by preventing investors from acquiring a majority interest in the diversely owned business, even in cases of default. In the event of default, majority ownership by diverse interests must be maintained. Terms must be commercially reasonable as determined by the Cannabis Regulatory Commission.

Context: Hundreds of New Jersey conditional licensees are struggling to raise the $250,000 to $1 million initial investment they need to fund even a simple dispensary given high real estate, labor, tax and compliance costs in New Jersey. Without funding, they simply cannot complete the steps needed to convert to annual licensure (i.e., secure real estate and municipal approval and complete their operational plans and SOPs) and open for business.

Without funding, many of those conditional licensees will be forced to abandon their efforts and in many cases wipe out their personal investments to date, which often are funded out of 401(k) and other savings accounts.

Diversely owned cannabis businesses and equity investors alike interested in learning more about this opprtunity should contact Paul Josephson, Tracy Gallegos, or Michael Schwamm.

November 4, 2022November 7, 2022 by Duane Morris

Paul Josephson Named to Insider NJ’s Insider 100: Cannabis Power List 2022

“Paul Josephson has been one of New Jersey’s top pot lawyers for a very long time. The longtime policy and regulatory counsel for New Jersey Cannabis Industry Association, Mr. Josephson leads the Cannabis Industry Group at Duane Morris, an international law firm with strong roots in New Jersey…”

Read the full article on InsiderNJ.com:

October 17, 2022 by Paul P. Josephson

Biden Statement on Cannabis Scheduling: Be Careful What You Wish For …

On October 6, 2022, President Biden issued perhaps the
biggest shift in federal policy on cannabis since enactment of
the Controlled Substances Act, issuing a Statement on Marijuana Reform that:
– Pardons all prior federal offenses of simple possession or use of
marijuana;
– Urges all Governors to pardon all prior state offenses of simple
possession or use of marijuana; and
– Requests that the Secretary of Health and Human Services and the
Attorney General initiate an administrative review of marijuana’s
scheduling under the CSA.

This unexpected but welcome shift in Administration policy led to the usual bump in prices of publicly-traded cannabis companies, as investors seized on any legalization news as good news.

But this may well be one of those be careful what you wish for moments.

Many commenters presume this move presages the federal legalization of cannabis. But astute observers understand that the devil is in the details when it comes to so-called federal legalization – and that there are many shades of legalization with very different outcomes for the current industry, legacy operators, and the various noncannabis industries waiting for a break in federal policy that will allow them to enter the cannabis space.

Notably, President Biden did not instruct his agencies to deschedule or even to reschedule cannabis. Instead, he “ask[ed]” HHS and DOJ “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”

The President noted that “… even as federal and state regulation of marijuana changes, important limitations on trafficking, marketing, and under-age sales should stay in place.” Reading the statement closely, it would seem that descheduling is an unlikely result, unless done in tandem with federal legislation creating a federal regulatory regime or authorizing states to regulate the business.

And rescheduling is not necessarily good news for the industry, either. Rescheduling could result in FDA regulation of products that would all but require cannabis companies to operate like pharmaceutical companies.

If cannabis is descheduled or rescheduled, existing state regulatory schemes that feature or include local protectionist measures would likely fall as substantial burden on interstate commerce. The only sure way to preserve existing state-based markets will be an act of Congress authorizing the states to continue to discriminate in favor of local operators and local cultivation.

The big questions following this Statement:
– Will DEA/DOJ/HHS drag their feet yet again?
– Will marijuana be declassified altogether?
– Will it be re-classified as a Schedule II, III, IV, or V controlled substance?
– Will it remain a Schedule I controlled substance?

Any of these outcomes are possible. And where you stand on this review very much depends on where you sit.

March 12, 2021 by Paul P. Josephson

More to Clean Up? NJ Adult Use Law Prohibition on Incentives May Make It Even Harder to Plant Your Garden

New Jersey’s landmark adult use statute, signed by Governor Phillip D. Murphy on February 22, 2021, has already set off a land grab. Prospective applicants searching for viable properties are discovering that viable real estate is hard to come by. New Jersey’s warehouse/industrial market remains red hot notwithstanding the pandemic thanks to ecommerce, making it hard to find attractive properties suitable for cultivation facilities. Institutional ownership and financing of these properties prevail in the market, making it harder still to find landlords or lenders willing to deal with cannabis tenants.

New Jersey’s famously difficult and time consuming land use process makes siting almost any business in its 560+ towns a considerable challenge. A dispensary will almost assuredly attract even more than the usual number of objectors. Though 2/3ds of New Jersey voters approved legalizing cannabis, there remains a distinct view that dispensaries should be located in some other town, not in my backyard. It remains to be seen whether the up to 2% municipal tax on retail sales will soften these views.

Add another challenge to this list: Section 37 of the adult use law prohibits any entity issued any cannabis license from receiving any state or local economic incentive. In addition, the issuance of any cannabis license to a “person or entity that has been awarded” a state or local economic incentive “shall invalidate the right of the person or entity to benefit from the economic incentive as of the date of issuance of the license.”

What is a state or local incentive? For these purposes, any “financial incentive” awarded by the state, county or local government or any of their authorities “for the purpose of stimulating economic development or redevelopment in New Jersey, including, but not limited to, a bond, grant, loan, loan guarantee, matching fund, tax credit, or other tax expenditure.”

That appears to mean a cannabis company cannot take advantage of any incentive or financing from the Economic Development Authority, for example to rehabilitate a closed or contaminated property or to develop innovative technologies. Cannabis companies may not be eligible for a clean energy grant or loan for sustainable energy, or, it seems, even a routine local tax abatement.

This provision has its genesis in the desire to ensure that those granted the privilege of a valuable cannabis franchise not take advantage of New Jersey’s Farmland Tax Assessment program, by which property owners who operate farms receive generous allowances from New Jersey’s typically sky high local property taxes. The Farmland Credit is intended to encourage the preservation of farms and open space, especially in the face of suburban development.

But recent well-publicized concerns that state economic incentives had been improperly issued by state agencies or abused by recipients appears to have expanded this notion. The intent seems to be to prevent incentives, which are intended to spur economic development that wouldn’t otherwise occur “but for” the state or local incentive, from being directed toward cannabis licensees, who arguably are highly incented to build without the need for public largesse.

While this proposition is plausible enough on its face, we question whether cannabis companies should be treated differently from any other business operating in a high cost state like New Jersey. If New Jersey wants to leverage its pharma strength and attract the capital investment in cannabis technology and cannabis therapies it needs to be a national leader in cannabis, this provision will most assuredly inhibit the establishment of these high value businesses in the state.

But the biggest problem for cannabis companies hunting for property arises from Section 37’s draconian consequences for property owners who rent to cannabis companies:

- “a property owner, developer, or operator of a project to be used, in whole or in part, by or to benefit” a cannabis license “shall not be eligible for a State or local economic incentive during the period of time that the economic incentive is in effect.”
- the issuance of a cannabis license “at a location that is the subject of a State or local economic incentive shall invalidate the right of a property owner, developer, or operator to benefit from the economic incentive as of the date of issuance of the license.”

If siting a cannabis business will invalidate any economic incentive on which a developer relied, property hounds will find those properties to be off the table.

It seems likely this well-intentioned portion of the legislation will:

- raise the retail price of cannabis,
- discourage cannabis cultivators from adopting sustainable, low carbon energy solutions, and
- worst of all, inhibit siting facilities in urban and urban-adjacent towns, where redevelopment zones and tax abatements are prolific.

The provision effectively prohibits landlords who have received any form of state or local incentive from leasing any portion of their property to cannabis businesses, at the risk of losing the entire incentive on which their project was financed. This will limit the number of available properties for growing and selling cannabis. In turn, this will drive up the rents and selling prices of the few remaining properties. Inevitably, increased property costs will be reflected in higher cannabis pricing that will be borne by patients and adult use consumers alike. If incentives remained intact despite a cannabis tenant, input costs and retail prices will be lower.

On its face, it seems that clean energy and angel investor incentives all other businesses enjoy may also be off the table for cannabis businesses. This would fly in the face of the need and desire of the power-hungry cultivation segment of the cannabis industry to adopt sustainable and low-carbon energy practices. We remain hopeful a favorable interpretation or creative lawyering can solve this problem.

But worst of all, this provision will make it especially difficult to locate cannabis businesses in urban redevelopment areas like Jersey City, Newark, Camden and elsewhere, where local payments in lieu of tax arrangements are typically required to spur small and large projects, whether mixed use, retail, office, or industrial. In most cases, the most profitable urban retail locations will be in redeveloped areas benefitted by incentives. The most available urban cultivation sites will be contaminated properties requiring significant investment to rehabilitate and bring back on the tax rolls.

Given the need to ensure that communities ravished by the war on drugs share in the upside of a legal cannabis market, we are hopeful that legislators will revisit this provision. We need to reconsider and recalibrate this language to ensure we do not discourage cannabis businesses in urban areas or inhibit the adoption of clean energy strategies that will reduce carbon emissions that disproportionately affect urban areas.

New Jersey’s lawmakers have historically been open to clean up measures to fix the unintended consequences of well intentioned legislation. Here’s hoping they do.

In the meanwhile, if you are hunting for New Jersey property, be sure to inquire early on about the existence of incentives that may take that shiny new warehouse off your list.

July 1, 2019July 2, 2019 by Paul P. Josephson

On Your Mark, Get Set, Go: Revised New Jersey Medical MJ RFA Details Announced

It’s official: if you’re seeking a medical cannabis license in New Jersey, cancel your summer vacation plans. July and August promise to be very busy months. Today, the NJ Department of Health materially revised its current Request for Applications. Details below.

Although the number of permits to be issued this round has shrunken considerably, tomorrow, July 2, Governor Phil Murphy will be signing a major medical cannabis bill that substantially increases patient access, establishes a new regulatory overseer for the cannabis sector, and promises a much larger round of licensing (integrated and stand alone) this fall.

Key takeaways for the pending RFA round revised today:

Book It: Application forms will be released on July 15, 2019, and are due on August 21, 2019 at 3pm for dispensaries and August 22, 2019 at 3 pm for cultivation and integrated applications.
How Many? In total, the Department will seek up to 4 vertically integrated permits, up to 5 cultivation endorsements, and up to 15 dispensary endorsements.
In each of the three regions (North, Central, South) the Department will seek to issue up to 2 cultivation endorsements, 5 dispensary endorsements and 1 vertically integrated (cultivation, processing and dispensing) permits.
A fourth vertically integrated permit will be issued, with the region to be determined based on quality of application and patient need. “Because the patient population is expanding so quickly and is expected to accelerate, the Department anticipates that this flexible approach for up to 1 vertically integrated permit will allow for 1) the most qualified applicant to be chosen and 2) that the award can most adequately respond to real time changes in enrollment.”
No processing permits will be issued this round.
Initial Cultivation Canopy Limits: To provide opportunities for different sized businesses to participate in the RFA, the Department will seek to issue cultivation endorsements in the following tiers of canopy size:
– Up to 5,000 Square Feet: up to 1 cultivation endorsement.
– 5,001 square feet to 20,000 Square Feet: up to 2 cultivation endorsements.
– 20,001 square feet to 30,000 Square Feet: up to 2 cultivation endorsements.
According to NJDOH, these cultivation tiers “represent the ranges of starting cultivation canopy at the ATCs awarded as part of this RFA. The maximum initial canopy for any of the awardees is 30,000 square feet. Vertically integrated applicants may choose any of the canopy tiers.”
Limits on Number and Combination of Applications:
Entities and individuals may seek up to three total permit endorsements as part of this RFA. Applicants may only apply for one cultivation endorsement and may only submit one application per region. A separate application is required for each endorsement. An applicant for a vertically integrated permit may submit one application because all endorsements will be located within the same region. Therefore, the only applicants eligible to submit an application for more than one endorsement per region in this RFA are applicants for vertically integrated permits.
Applicants cannot submit for both vertically integrated permits and individual endorsements.
Applicants submitting for individual endorsements can submit applications for up to three endorsements, but they can’t be in the same region(s).
No applicant shall be awarded more than one permit pursuant to this RFA, and no applicant shall hold more than 1 cultivation endorsement, 1 manufacturing endorsement, and 1 dispensary endorsements as a result of the awards made pursuant to this RFA.
Except for the vertically integrated permits, no other entity shall be awarded both a cultivation endorsement and a dispensary endorsement pursuant to this RFA.
Current ATC permit holders (including awardees from December 2018) are not eligible to participate in this RFA.
Get Your Legal Documents Ready: NJDOH has substantially increased the disclosure requirements (of interested parties and documentation of virtually all business deals underlying an application) this round to ensure all parties interested in an application are known to the NJDOH at the time of application.
Questions, Comments and Further Information: NJDOH will accept questions on the RFA until July 26, and will conduct a preapplication webinar on August 2. Potential applicants are strongly encouraged to present any concerns, objections or suggestions relating to the substance of the RFA by July 26, if not sooner.
No Deadline for Award: NJDOH has not announced a deadline for making awards.
No License Squatting: Applicants awarded the right to complete the ATC permitting process must complete facility build out and be ready to commence operations within 18 months (cultivation endorsements and vertically integrated permits) or 12 months (dispensary endorsements). If an awardee is not permitted at the end of the above timeline, or the materials submitted with the application are found to be not accurate or truthful, as applicable, the award may be rescinded.
Criteria, Weighting and Page Limits:
Applicants must observe a strict 100 page limit per endorsement sought. Criteria weighting is as follows:
Criterion 1. Ability to meet the overall health needs of qualified patients and safety of the public. 30 pts
• Measure 1, Security plan: 10 pts
• Measure 2. Environmental impact plan: 10 pts
• Measure 3, Quality control and quality assurance plan: 10 pts
Criterion 2. History of compliance with regulations and policies governing government-regulated marijuana programs. 20 pts
• Measure 1, Experience of principals, officers, and owners, in operating a regulated cannabis business, or operating a business in another highly regulated industry, such as healthcare, insurance, financial services, pharmaceuticals, or energy. 20 pts
Criterion 3. Ability and experience of applicant in ensuring an adequate supply of marijuana. 20 pts.
• Measure 1, Financing plan: 20 pts.
Criterion 4. Community Support and Participation. 20 pts.
• Measure 1, Ties to the local community: Applicants shall provide a list of all owners, officers, board members, and principals that have resided in NJ for at least 2 years, and supply proof of their residency. 20 pts.
Criterion 5. Ability to provide appropriate research data. 10 pts
• Measure 1, Research contributions: Evidence of past contributions – in the form of cited original and published work – to expanding clinical and scientific research related to medical cannabis or the debilitating medical conditions that can be treated with medical cannabis. 10 pts
Criterion 6. Experience in cultivating, manufacturing, or dispensing marijuana in compliance with government-regulated marijuana programs. 100 pts.
• Measure 1, Cultivation plan.
• Measure 2, Manufacturing plan.
• Measure 3, Dispensary plan.
Criterion 7. Workforce and job creation plan, including plans to involve women, minorities and military veterans in ATC ownership, management and experience with collective bargaining in cannabis industries. 100 pts
• Measure 1, Labor Peace Agreement: Applicants shall provide a signed labor peace agreement that includes provisions to ensure the cultivation, manufacturing and dispensing of medical cannabis will not be disrupted by labor-related disputes. Failure to provide a signed agreement will result in a score of 0 for this measure. 30 pts.
• Measure 2, Labor compliance plan: Applicants shall provide a plan to comply with labor laws and an overview of their experience related to collective bargaining and/or accommodating the rights of workers. 20 pts
• Measure 3, Minority-owned, women-owned or veteran owned business certification: Applicants shall provide a copy of certification(s) issued by the Department of the Treasury, Division of Revenue which verifies MBE/WBE certification or VOB certification, or evidence that the applicant would otherwise meet the MBE/WBE certification or VOB certification requirements once generating revenue. Applicants with a certification will receive the full 30 pts. Applicants that provide evidence of meeting the criteria in the future shall receive partial credit, based on the strength of the evidence. The selection committee shall take into account related entities for this measure. 30 pts.
• Measure 4, Workforce and job-creation plan: Applicants will be scored on the extent to which they will involve individuals from socio-economically disadvantaged communities, individuals disproportionately impacted by enforcement of drug laws, and people with disabilities in the ownership, management and staffing of the proposed ATC. 20 pts
Scoring criteria reflect strong union (50 out of 300 total points), MBE/WBE (30 of 300 points) and social justice (20 of 300 points) preferences.

This post summarizes key terms of interest. Potential applicants should review the complete terms of the RFA at https://www.nj.gov/health/medicalmarijuana/alt-treatment-centers/applications.shtml, and regularly consult the NJDOH website for ongoing updates.

March 13, 2018 by Paul P. Josephson

NJ Governor Murphy Projects Adult Use Cannabis Legalization by January 2019

In his first budget address, New Jersey Governor Phil Murphy today reaffirmed his commitment to promptly expand the state’s currently moribund medical marijuana program, and the full legalization of adult use marijuana by January 1, 2019.

In his address, Governor Murphy explained:

We must also make sure we are investing not just in individuals, but also in entire communities – particularly our long-overlooked urban neighborhoods. We must recommit to opening the doors to economic opportunity for the thousands of young men and women – especially young men and women of color – jailed for non-violent drug-related offenses. Our current system has failed them, and put a mark on them that they will carry for their entire lives, preventing them from furthering their educations or getting jobs.

It’s the principal reason I advocate for legalizing adult-use marijuana. According to research, New Jersey spends upwards of $140 million per year adjudicating low-level marijuana possession offenses. And, marijuana-related arrest rates are tilted three-to-one against African-Americans, even though rates of marijuana use are similar among races.

These resources must have a better use, whether to tackle the trafficking of illegal guns, provide stronger community policing, or to crack the back of our opioid epidemic, which was devastating our urban centers long before it made headlines.

I greatly respect those in this chamber who have proposed decriminalizing possession of small amounts of marijuana, and I thank them for recognizing the importance of doing what’s right and just for those who carry criminal records for past possession arrests. But decriminalization alone will not put the corner dealer out of business, it will not help us protect our kids, and it will not end the racial disparities we see.

If these are our goals – as they must be – then the only sensible option is the careful legalization, regulation, and taxation of marijuana sales to adults.

Legalization will allow us to reinvest directly in our communities – especially the urban neighborhoods hardest hit by the misguided War on Drugs – in their economic development, in health care and housing, child care and after-school programs, and other critical areas. These investments will pay dividends far greater than the cost of mass incarceration.

I did not come to this overnight, myself. After all, we are the parents of four children under the age of 21. But from the standpoint of social justice, and from the standpoint of protecting our kids and lifting up our communities, I could not arrive at any other conclusion.

In the Budget in Brief submitted to the Legislature today, the Administration stated that it “plans to legalize adult-use marijuana by January 1, 2019. The State will also move forward with expanding access to medical marijuana to alleviate patient suffering.”

The Budget projects $80 million in new revenue from legalizing marijuana, without specifying tax rates or the number of dispensaries the Governor anticipates. This is part of $2 billion in new revenues to meet the $37.5 billion budget that also includes a millionaires tax ($765 million), restoring the sales tax rate to 7% ($581 million) and business tax modernization ($110 million).

Next on the Governor’s agenda: the anticipated release of substantially revised regulations governing New Jersey’s medical marijuana program that currently consists of only 6 vertically-integrated, nonprofit dispensaries serving less than 15,000 patients. The Governor has promised rules by March 24 designed to increase the qualifying conditions for which marijuana may be prescribed and to increase patient access to medical marijuana.

Medical marijuana expansion can be largely accomplished by the Governor without legislation, though it is anticipated the Legislature is expected to consider changes beyond the Governor’s regulatory authority, including clear authorization to dispense edible products to medical marijuana patients.