New Jersey Senate Bill 4509: Reconstructing the State’s Regulatory Framework for Intoxicating Hemp Products

New Jersey Senate Bill 4509 represents a comprehensive legislative effort to replace the State’s prior intoxicating hemp statute with a revised framework designed to survive constitutional scrutiny and align more closely with new federal hemp law. The bill is best understood as a corrective measure. It responds directly to the federal district court decision in Loki Brands, LLC v. Platkin, which invalidated key provisions of the 2024 intoxicating hemp law and significantly curtailed the State’s ability to regulate hemp-derived intoxicating products, by establishing a detailed licensing, compliance, taxation, and enforcement regime for intoxicating hemp products, placing primary regulatory authority with the New Jersey Cannabis Regulatory Commission.

Background: The 2024 Intoxicating Hemp Statute and the Loki Brands Decision

In 2024, New Jersey enacted P.L.2024, c.73 to address the rapid proliferation of hemp-derived intoxicating products, including delta-8 THC and similar cannabinoids, that were widely available outside the regulated cannabis market. That statute sought to bring intoxicating hemp under CRC oversight, impose age restrictions, regulate sales channels, and restrict distribution.

Shortly after enactment, multiple provisions were challenged in federal court. In Loki Brands, LLC v. Platkin, the United States District Court concluded that significant aspects of the statute violated the Dormant Commerce Clause and conflicted with federal hemp law under the 2018 Farm Bill. The court found that the statutory definition of intoxicating hemp products effectively discriminated against out-of-state products that were lawful under federal law, the law impermissibly burdened interstate commerce by restricting the shipment and transportation of federally lawful hemp products through New Jersey, and certain enforcement provisions would result in disparate treatment of similarly situated in-state and out-of-state businesses.  While the court allowed the prohibition on sales to individuals under 21 to remain in effect, it enjoined enforcement of most other provisions. As a result, the CRC publicly acknowledged that it could not implement or enforce the statute beyond the age restriction. This created regulatory uncertainty and left much of the intoxicating hemp market effectively unregulated.

Legislative Response and Purpose of S4509

Senate Bill 4509 is the Legislature’s response to the Loki Brands decision. The bill reflects a deliberate attempt to cure the constitutional defects identified by the court while preserving the State’s policy goals of consumer protection, product safety, and market oversight.

The bill pursues these objectives by aligning statutory definitions more closely with new federal hemp law, removing provisions that favored in-state production or restricted interstate commerce, creating a licensure pathway for out-of-state producers, and clarifying the State’s authority without interfering with federally lawful hemp transportation.

Core Regulatory Framework Under S4509

S4509 revises the definition of hemp to mirror the federal standard. Hemp is defined as cannabis and its derivatives containing no more than 0.3 percent total THC on a dry-weight basis. At the same time, the bill establishes a distinct regulatory category for “intoxicating hemp products,” which are subject to regulation regardless of whether they meet the federal THC threshold.

The manufacture, distribution, and retail sale of intoxicating hemp products are placed under the authority of the Cannabis Regulatory Commission. Businesses engaged in these activities must obtain licensure as intoxicating hemp product establishments and comply with CRC regulations governing operations, labeling, testing, and recordkeeping. Businesses must also abide by several restrictions, including limitation of sales to only those at licensed physical premises, prohibition of online sales, direct-to-consumer shipping, and vending machine sales, and prohibition of public distribution and sampling.

Treatment of Out-of-State Producers and Interstate Commerce

One of the most significant changes from the prior statute is S4509’s explicit accommodation of interstate commerce. The bill permits out-of-state manufacturers and distributors to apply for New Jersey licensure, provided their home state regulatory standards are substantially equivalent to those imposed by New Jersey. This approach addresses the constitutional concerns raised in Loki Brands by eliminating discriminatory barriers to market entry. The bill also clarifies that it does not prohibit or interfere with the transportation or shipment of federally lawful hemp through New Jersey, reducing the risk of federal preemption.

Alcohol Licensees and Intoxicating Hemp Beverages

S4509 continues to recognize the presence of intoxicating hemp beverages in the marketplace but places them squarely within the CRC’s regulatory authority. Holders of plenary retail or wholesale alcoholic beverage licenses may sell intoxicating hemp beverages only if they obtain CRC approval and comply with all applicable intoxicating hemp regulations. This approach replaces the more tentative and temporary allowances in the prior statute with a clearer and more enforceable framework.

Taxation and Revenue Allocation

The bill establishes a structured tax and fee regime for intoxicating hemp products, including an excise fee of $30 per ounce on intoxicating hemp products transferred from manufacturers to retailers, an excise tax of $5.50 per gallon on intoxicating hemp beverages, and continued application of the State sales and use tax.  Revenue generated under the bill is divided between the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Fund and a special non-lapsing account within the State General Fund. Municipalities retain authority to impose local transfer taxes consistent with existing cannabis law.

Licensing Integrity and Enforcement

S4509 authorizes criminal history background checks for applicants seeking intoxicating hemp licensure. The CRC may deny licensure based on certain serious offenses, including fraud, embezzlement, and exploitation of minors. At the same time, the bill limits disqualification based solely on prior cannabis-related offenses, reflecting policy choices consistent with New Jersey’s broader cannabis framework. The bill also clarifies that it does not alter employers’ rights to maintain drug-free workplaces, existing laws governing impaired driving, and prohibition of sales to individuals under 21.

Path Forward

S4509 was reported out of the Senate Budget and Appropriations Committee on December 15.  If enacted, S4509 will constitute a significant recalibration of New Jersey’s approach to intoxicating hemp regulation. The 2024 intoxicating hemp statute was enacted rapidly in response to market conditions and relied on definitions and restrictions that proved constitutionally vulnerable. In contrast, S4509 aligns definitions with federal hemp law, eliminates in-state favoritism and discriminatory effects, expressly accommodates interstate commerce, and provides a clearer and more enforceable licensing framework. Businesses operating in the hemp, cannabis, beverage, and retail sectors should closely monitor the bill’s progress and be prepared for substantial compliance obligations if the legislation is enacted.

For guidance on how Senate Bill 4509 may impact your business or to prepare for potential compliance obligations, contact Daniel T. McKillop to discuss your specific circumstances and next steps.