On December 27, 2020, the Garden State passed “The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act,” better known as the CREAMM Act, which legalized recreational marijuana. It came in response to overwhelming voter support in favor of legalization, making New Jersey one of 18 states to legalize recreational cannabis. Yet, a year later, it still feels like there’s a long road ahead.
The cannabis industry remains a tricky one; it’s still getting its footing, there are many regulation hoops to jump through, and after all, weed is still federally illegal. But despite how it may seem, progress is being made in the Garden State, and significant developments can be expected in 2022. In the following, we’ll take a look at what got us to this point, important information you need to know, and what can be expected as far as the impact and arrival of the New Jersey cannabis industry.
How Did We Get Here?
It seemed the Garden State was destined to legalize recreational marijuana for over 10 years now. Medical marijuana was legalized back in 2010, but the matter was largely stalled and not entirely sufficient for several years after the fact. However, Governor Phil Murphy quickly addressed the issue not long after taking office in 2018 when he signed the “Jake Honig Compassionate Use Medical Cannabis Act.” The act essentially overhauled the previous medical marijuana operations, significantly improving access and distribution for medical cannabis. Since then, recreational legalization seemed only a matter of time, but the “why” behind doing so had to be correct.
One of, if not the primary motivation for recreational cannabis legalization in New Jersey, was the social justice impact. An ACLU study on 2018 New Jersey arrest data found Black residents were arrested at a 3.5 times higher rate for marijuana possession than white residents. Statistics like these and an undeniable track record of injustice ultimately pushed Governor Murphy to support legalization. He outlines this influence and the impact he expects New Jersey’s legalization plans will have in social justice matters in the following video.
The legislative process isn’t exactly the easiest to follow. When was the last time you actually read a new law? Probably never. Even so, we must know the essential details of new legislation, especially ones as groundbreaking as the CREAMM Act. With that being said, let’s look into the need-to-know information.
Regulation and What Legalization Means
A critical element of the CREAMM Act was the creation of the New Jersey Cannabis Regulatory Commission (CRC). The primary function of the CRC is to “establish rules and regulations governing the sale and purchase of recreational cannabis.” They also oversee the New Jersey medicinal cannabis program and the licensing process for the entire cannabis industry in the state.
As for what legalization actually means, adults 21 years old and above will now be allowed to possess up to six ounces of cannabis. Of which they can legally purchase from licensed New Jersey dispensaries. The smell of marijuana is no longer acceptable grounds for law enforcement to search individuals. However, you cannot drive under the influence, smoke on public property, or grow your own plants. Only private property consumption is permitted under the new law.
Of course, weed is also still federally illegal. But that doesn’t present much of an issue for everyday citizens. Instead, law enforcement’s focus will shift slightly, with greater emphasis on keeping cannabis away from minors and criminal organizations, not allowing it to cross state lines, and strictly keeping it off public and federal property. The obscurity of this legal dynamic is more of a concern for law enforcement than it is for us regular folk.
The licensing process determines who can grow, sell, and distribute cannabis in New Jersey, as determined by the CRC. There are essentially seven classes of licenses: cultivators, manufacturers, wholesalers, distributors, retailers, delivery, and conditional. The latter is a temporary license that gives an interim window to operate for 120 days but requires the entity to find a space, secure municipal approval, and apply for a license in that timeframe.
As of December 15, 2021, the CRC began accepting licenses for cultivators, manufacturers, and testing laboratories. They will start accepting retail licenses starting March 15, 2022. Wholesale, distribution, and delivery licenses aren’t currently being accepted, and a timeline for such has yet to be provided.
All licenses will be accepted on a rolling basis, but only a total of 37 cultivator licenses can be accepted until February of 2023. The CRC will prioritize applications from microbusinesses, conditional license operators, and social equity applicants. A microbusiness must have 10 employees or less and 2,500 square feet or less operation space. Such businesses will receive 25 percent of the total licenses issued across classifications.
As previously mentioned, the social justice impact was a significant priority item with recreational legalization. The CRC will give specific attention to social equity, diversely-owned, and impact zone businesses. Social equity businesses are those “owned by people who have lived in an Economically Disadvantaged Area.” Diversely-owned companies must be “certified minority-owned, woman-owned, or disabled veteran-owned.” And lastly, impact zone businesses are those either located in impact zones, owned by people from impact zones, or employing residents of impact zones.
The financial element of cannabis legalization is always interesting. Throughout the legalized states, it’s common to see expensive start-up costs and heavy tax margins. But in return, business owners get to operate a business with booming demand and massive growth potential. It’s the trade-off all future cannabis business operations have to consider. New Jersey, however, isn’t all too bad cost-wise.
To get set up for business, between licensing fees, application fees, and a whole lot of ‘other fees,’ operations can expect to spend tens of thousands of dollars. And that’s just for this process and doesn’t include what it costs to acquire space and other expenses. All money from these expenses, penalty payments, and tax revenue on cannabis will be deposited into the “Cannabis Enforcement Assistance and Marketplace Modernization Fund.”
The fund will mainly be used to provide much-need support to “impact zones” in the form of investments, grants, loans, reimbursements for expenses, and financial assistance to qualifying individuals residing within the territories. According to the CRC, 70 percent of the fund will be directed in this way. The other 30 percent, however, will pay for the operational costs of the CRC, additional reimbursements, and training costs for ‘Drug Recognition Experts.’
A critical element of the CREAMM Act is the expungement of people’s past marijuana-related offenses. These expungements are mostly for low-level marijuana offenses. Still, they allow individuals to clear their records, and from July 1, 2021, to late September, over 360,000 cases were expunged from the New Jersey court system. Reform beyond just the low-level offenses is also underway but will take some time, although Governor Murphy seems extremely intent on righting past wrongs in this context.
Also, using cannabis can no longer be a determining factor to hire or fire someone, but employers do have the right to have a drug and alcohol-free workplace. It would be legal to use a so-called “Drug Recognition Expert” or an in-house individual to administer random drug tests to check for intoxication at work.
The Municipality Situation
The New Jersey cannabis industry gets a bit tricky with the municipalities. Each municipality can authorize and regulate licensed cannabis operations in its territory. So not only can each municipality determine the regulations, zoning ordinances, the number of and type of businesses, but they can also determine if they even want to allow cannabis businesses. The CRC can’t issue a license that doesn’t comply with local determinations, but it can permit delivery in such areas.
All municipalities had a deadline of August 21, 2021, to provide their stance on cannabis, and about 400 (71 percent), banned adult-use cannabis businesses. Roughly 100 have allowed for entire cannabis business operations, mostly in southern and central New Jersey. Others have banned recreational but still allow medical, and some have even banned retailers but allow for other operations. Though the outcomes were undoubtedly a little surprising for a state that largely supported legalization, a critical aspect here was the five-year moratorium that went into effect after August 21. If you opted in, you cannot opt-out for five years. If you opted out, you can opt in at any time. The moratorium was a massive factor in the decision-making process here, as well as a few other notable factors outlined in the video below:
The Impact of Legalization
There’s a massive shift underway in America. States across the nation have been revisiting their approach to cannabis ever since Colorado legalized it recreationally back in 2012. Over half the states have decriminalized marijuana, 35 have a medical cannabis program in place, and overall, more have legalized it outright (18) than nothing at all (12). A core driver of this cultural shift has been the undeniable impact legalization has on the economy and communities. Therefore, to understand the impact legalization will actually have on New Jersey, we must take a brief look into what we’ve seen from other states to refine our expectations.
Arguably the biggest driver of change has been the tangible outcomes cannabis legalization has delivered for economies. A study by Leafly and Whitney Economics found that in 2020, the legal marijuana industry created 77,000 jobs nationwide. They also found that as of February of 2021, there were roughly 321,000 jobs for the legal cannabis industry nationwide. For reference, that’s more jobs than the entire mining industry. From February 2020 to February 2021, when the national economy shrank by 3.5 percent during the pandemic, the cannabis job industry grew by 32 percent.
The cannabis industry brings in serious revenue as well. In 2020, the total sales of marijuana products totaled $18.3 billion, 71 percent higher than the previous year. These statistics tell us that there’s legitimate economic upside for New Jersey, particularly in 2022 as the industry becomes operational. If you’re still not convinced, check out this segment from CNBC:
Social Good Impact
It’s not just all about the money, right? Governor Murphy has made it clear that a primary goal is to right wrongs, particularly with social justice concerns. But beyond the state-specific reasons, there are lessons to be learned from states before New Jersey, both good and bad.
The marijuana business is among the least diverse in the nation, with very few minority-owned businesses. In Colorado, this is an area where the state dropped the ball, and they’re now trying to fix the matter. However, New Jersey aims to avoid that exact problem. That’s certainly part of why they have placed such significant emphasis on diversity and social good impact.
With that being said, Colorado also taught valuable lessons to other states. What they got right from the beginning was allocating tax revenue to community and social good designations. Every year, the first $40 million in tax revenue goes directly into building and supporting the public school system. In 2020, they collected a total of $387 million in tax revenue. The tax rate may be high, but the money mostly gets reinvested into the community. For the Garden State, the hope is that this revenue can do much good in restoring and uplifting disenfranchised communities.
What to Expect Moving Forward
Okay, so now what? It may not feel like much has changed, but a lot is coming in 2022. As for the dilemma with municipalities, it’s best not to get too worked up about that 71 percent opt-out rate. Similar opt-out trends were also seen in Colorado, but over time, the rate gradually decreased. Most New Jersey municipalities likely wanted to skip the logistical hurdles that come with the initial launch of legal operations. To see if your local municipality is in favor or not, check out this detailed map.
Now for the big question, “when will I be able to buy recreational cannabis in New Jersey?” There’s no official answer here; however, I would expect nothing before March of 2022. Given that March 15 is when the CRC will begin accepting retail licenses, it’s safe to say nothing will be operational until a few months after the fact. The safe bet is the second half of next year, assuming no unforeseen hiccups.
The New Jersey cannabis industry is one that’ll be dynamic moving forward, as is the case across the nation. After all, marijuana remains federally illegal, and as long as that’s the case, this industry will be tricky. All-in-all, the best bet is to be patient here; reform like this simply cannot happen overnight. But no matter what, you can expect a big year in 2022 for the New Jersey cannabis industry.
Main photo by CRYSTALWEED cannabis