‘It Won’t Happen Overnight’: What’s Next for Cannabis in NJ

Sen. Nicholas Scutari said he hopes that by spring 2021, “the medical facilities will be able to start selling to the general public. I don’t see why they can’t.”

By Suzette Parmley | November 05, 2020 at 10:18 AM

Submitted by New Jersey Criminal Lawyer, Jeffrey Hark.

The ballot initiative to legalize adult-use cannabis in New Jersey passed easily with even-higher-than-expected voter support on Tuesday, but the opening of a full-fledged market with licensed dispensaries and cultivators, among others players, could take a year or more, legal experts from other states with experience in the massive endeavor contend.

Those closely watching say a more realistic timeline following Tuesday’s results, where adult-use cannabis was passed by voters here by a 2-1 margin, will likely look like this:

• First quarter 2021: Enabling legislation enacted
• Second quarter 2021: Regulatory implementation
• Third quarter 2021: Initial Licensing
• Fourth quarter 2021: Litigation
• First quarter 2022: Commencement of Active Adult-Use Market

“There are two more steps to go: First, the Legislature has to now pass a statute,” said William Bogot, a partner and co-chairman of the cannabis practice group at Fox Rothschild’s Chicago office.

Bogot, who represents cannabis clients in states such as Illinois, where adult-use cannabis was legalized Jan. 1, 2020, said the enabling statute for New Jersey’s market will take some serious negotiation.

“There’s social equity and social justice considerations, and a lot of people … rightfully want to give some priority to license applicants who have been adversely affected by what many consider an unjust war on drugs,” he said.

“So let’s say we can get that through the [New Jersey] Legislature by the spring, then you have to have the agency that’s going to enact the regulations, then you have to figure out an application-licensing process. So you’re really looking at a year for all that stuff,” added Bogot. “A good year.”

With the New Jersey Senate holding a quorum Thursday, there is a possibility, though remote, that the enabling legislation to provide the framework for a new cannabis industry could be introduced, said Senate Judiciary Committee Chairman Nicholas Scutari, D-Union.

“It’s possible we might drop the bill tomorrow or we might have to wait until Monday,” Scutari said in a phone call on Wednesday. “We’re still working on it, but we’re getting close. We had a couple long Zoom calls about it today. We’re talking with the [Assembly/Senate] leadership, the Governor’s Office. Just getting the finishing touches on enabling [legislation].”

But Scutari, a chief architect of both the 2009 medical marijuana legislation and last year’s failed adult-use marijuana bill who moved to have adult-use cannabis placed on Tuesday’s ballot, said the enabling legislation more likely would get introduced on or after Nov. 16, after the election results are certified.

As of late Wednesday, the nation was still waiting for its presidential race results as the contest between incumbent Republican Donald Trump and Democrat Joe Biden was still too close to call, with ballots yet to be counted in key battleground states.

“Don’t forget—the election’s not certified yet,” said Scutari, a practicing lawyer. “It might not be certified until Nov. 18. So we may be a couple days premature thinking we were going to get [the enabling legislation] voted on Nov. 16. We might have to wait another week or so.”

Scutari said the enabling legislation will mirror much of what was in the massive marijuana bill that collapsed in spring 2019 when it failed to get a Senate floor vote. The new Senate bill would have to be reconciled with the Assembly version, amended, passed by both houses, and then sent to Gov. Phil Murphy to sign.

“The truth of the matter is, buying illegal marijuana today, tomorrow and next year, is still going to be illegal,” Scutari said. “But it won’t be if you buy it from a legal, licensed dispensary.

“It won’t happen overnight. But there’s a near-future solution which will allow our medical dispensaries to gear up and start selling as soon as they can.

“I’m disappointed that they’re not already ready for the first of the year,” added Scutari. “I’d be out in the backyard planting if I had one of those licenses. They better plant, plant, plant!”

Scutari added, ”It’s a simple micro-macro economics class. Supply versus demand. We have a big demand and not enough supply. As soon as we have enough supply, we’ll allow it to be purchased by anyone over 21.

“But we’re not there yet. It’s going to take time to grow it. But not today, not tomorrow, and not ever, will you be allowed to purchase or garner it from an unlicensed facility. That’s not going to be permitted, and it won’t be under any future law.”

New Jersey Attorney General Gurbir Grewal said as much in a statement.

“Yesterday, New Jerseyans approved an amendment to our State Constitution, legalizing regulated marijuana, referred to as ‘cannabis,’ for those 21 or older,” Grewal said. “The Amendment, which makes clear that it does not legalize unregulated marijuana, takes effect on January 1, 2021, and requires the Legislature to enact a law establishing a regulatory scheme for legal cannabis.

“All of the State’s criminal laws relating to marijuana continue to apply, until, among other things, the Legislature enacts a law creating that regulatory framework. It is important that residents accurately understand the current situation, so they do not inadvertently engage in criminal conduct relating to marijuana—conduct that may be legal in the future once the Legislature acts, but is not presently legal based on yesterday’s vote,” added Grewal.

“While my office will soon issue additional guidance for law enforcement and prosecutors to address this situation, we have reminded them of the broad discretion they already possess in handling low-level marijuana offenses.”

The initiative to legalize cannabis was years in the making, after a legislative effort stalled in May 2019, failing to garner enough support in the Senate. The failed legislation estimated that an adult-use market could generate $300-plus million in revenue after the first year, $500 million thereafter, and up to $1 billion by the third year. Lawmakers turned to a constitutional amendment last November.

“Stakeholders are in accord that it would be optimal to address as many issues up front with the enabling legislation [as possible], including social equity and micro license setoffs, taxes: how much, to whom or what it will be allocated to, internal taxation, i.e. from growers to manufacturers to dispensaries, licensing guidelines, establishing regulations and a regulatory regime to name a few,” said Nathaniel Gurien, chief executive officer of New York-based Fincann, which provides financial services for the cannabis industry, in an email.

“Meanwhile, the stalled initiatives to dramatically expand the medical program in the interim are expected to finally proceed after pending court challenges conclude,” he added.

Bogot of Fox Rothschild said there is a current shortage of marijuana supply in Illinois for medical patients, which is forcing prices up.

“They’re just starting to come down,” Bogot said. “Even when they get the statute and regulations done [in New Jersey], then they have to approve the medical operators to expand their facilities because now they have to double the size of their cultivation. They have to start to build that out. It will take them time to catch up on the supply.

“The only thing to get you there earlier is getting the existing medical operators up and running faster,” said Bogot.

That’s what Scutari is hoping for—that by spring 2021, ”the medical facilities will be able to start selling to the general public. I don’t see why they can’t.

“They’re going to be allowed to, their licenses will be expanded to sell to the adult-use market as long as they can service the medical folk. That’s the immediate way to get our adult market online,” Scutari said.

Robert DiPisa, co-chairman of the cannabis law group and a partner at Cole Schotz, which has offices in New Jersey, New York, Delaware, Florida, Maryland and Texas, urged caution.

“We need to be patient in permitting existing operators to ramp up their operations to meet the existing medical demand before we can open the doors to those 21 and over to come in and purchase cannabis,” said DiPisa, who bounces between the New Jersey and New York offices. “We do not want to be in a position where we do not have enough supply.”

After Tuesday’s election results, New Jersey is poised to set off a domino effect in the Northeast, predicts Ian Stewart, co-chairman of the national cannabis and hemp law practice at New York-based Wilson Elser, which has a New Jersey office in Florham Park.

“The election results bring the total number of medical marijuana states to 35, and adult-use states to 15,” Stewart said. “New Jersey, in particular, should result in a significant expansion of adult-use cannabis in the Northeast.

“New York has already announced plans to beat New Jersey to the punch by releasing its new adult-use legislation in January, with the goal of approving the legislation through the budget process no later than April 1, 2021,” said Stewart. “If that happens, New York could conceivably have its regulations in place sooner than New Jersey, which is likely to take a year before licenses are issued.

“Pennsylvania and Connecticut will also feel pressure to follow suit,” said Stewart.