Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Is It Time to Apply for a Recreational Cannabis License in New Jersey?

Author: Daniel T. McKillop

Date: February 23, 2021

Key Contacts

Back
Is It Time to Apply for a Recreational Cannabis License in New Jersey?

After years of debate and delay, recreational cannabis is finally legal in New Jersey...

After years of debate and delay, recreational cannabis is finally legal in New Jersey. On February 22, 2021, Gov. Phil Murphy signed “The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act” (“the Act”) into law, which legalizes and regulates cannabis use and possession for adults 21 years and older. Gov. Murphy also signed legislation decriminalizing possession of small amounts of marijuana and hashish and clarifying marijuana and cannabis use and possession penalties for individuals younger than 21 years old.  

“Our current marijuana prohibition laws have failed every test of social justice, which is why for years I’ve strongly supported the legalization of adult-use cannabis. Maintaining a status quo that allows tens of thousands, disproportionately people of color, to be arrested in New Jersey each year for low-level drug offenses is unjust and indefensible,” Gov. Murphy said in a press statement. “This November, New Jerseyans voted overwhelmingly in support of creating a well-regulated adult-use cannabis market. Although this process has taken longer than anticipated, I believe it is ending in the right place and will ultimately serve as a national model.” 

Gov. Murphy’s enactment of the Act sets the recreational cannabis licensing process in motion.  Pursuant to the Act, the Cannabis Regulatory Commission (CRC) must approve implementing regulations within 180 days or within 45 days of all five members of the CRC being appointed, whichever is later.  (Three of the five members of the CRC have been appointed, and the remaining two will likely be appointed soon.)  The regulations will contain more detailed information regarding the application process, and the CRC will simultaneously develop the applications themselves and likely issue them when the regulations are adopted.  Existing medical cannabis dispensaries will have the first opportunity to obtain recreational dispensary licenses, but will only be able to do so after certifying to the State that they can fulfill the product demand of their medical cannabis patients.

Here are other important elements of the licensing provisions of the Act:

  • There Will Be Six Classes of Licenses: The Act creates six “marketplace” classes of licensed businesses: a Class 1 Cannabis Grower license, for facilities involved in growing and cultivating cannabis; a Class 2 Cannabis Processor license, for facilities involved in the manufacturing, preparation, and packaging of cannabis items; a Class 3 Cannabis Wholesaler license, for facilities involved in obtaining and selling cannabis items for later resale by other licensees; a Class 4 Cannabis Distributor license, for businesses involved in transporting cannabis items in bulk intrastate, from one licensed cannabis establishment to another; a Class 5 Cannabis Retailer license, for locations at which cannabis items and paraphernalia are sold to consumers; and a Class 6 Cannabis Delivery license, for business providing courier services for a licensed cannabis retailer in order to make deliveries of cannabis items and related supplies to a consumer.
  • The Number of Available Licenses: The Act limits the number of cultivation licenses at 37 for the first 24 months of the recreational cannabis program.  No caps for other types of licenses are included in the Act.  The CRC may set caps regarding the other licenses when it develops regulations to implement the new laws, but for now, the number of these licenses will be determined by market demand.  The CRC will be authorized to make requests for new license applications as it deems necessary to meet demand.
  • Applications Will Be Reviewed on a Point Scale: The CRC will score applications based upon a point scale, with the CRC determining the number of points available, the point categories, and the system of point distribution.  Certain required criteria will be included in the point system, such as an analysis of an applicant’s operating plan, environmental plan, and safety and security plans.  The point system will also provide greater credit to applications that include an in-State resident of at least five years who is a “Significantly Involved Person,” who is someone that holds at least a five percent investment interest or is a member of a group who holds at least a 20 percent investment interest and would have authority to make controlling decisions about the cannabis business.
  • Conditional and Microbusiness Licenses Will Be Available: At least 35 percent of the total licenses issued for each class must be conditional licenses.  Applicants need not be in compliance with every aspect of the regulatory requirements expected for full licensure in order to obtain a conditional license, but will need to provide sufficient plans for actions to be taken to eventually achieve compliance for full licensure by a certain deadline. Notably, applicants seeking a conditional license must demonstrate that the Significantly Involved Person and any other person with a financial interest in the business and decision making authority have an adjusted gross income for the immediately preceding taxable year of no more than $200,000 or no more than $400,000 if filing jointly with another.  In addition, at least 10 percent of the total licenses issued for each license class and at least 25 percent of the overall total number of licenses issued will be designated for and only issued to small-scale operations known as “microbusinesses.”
  • Impact Zones Will Be Prioritized: In addition to the awarding of points, the CRC will rank applications for licensure using several other factors.  Priority will be given to applicants who intend to locate their operations in “Impact Zones,” which are municipalities that have been disproportionately impacted by law enforcement activity, unemployment, and poverty-related to the former illegality of cannabis. The CRC will seek to prioritize at least two applications in each Impact Zone, and will particularly focus on applications that include a person who is a current resident of an impact zone and had resided therein for three or more consecutive years or that include plans to constitute 25 percent of its employee workforce of individuals who reside in an impact zone.
  • Licenses Must Be Distributed Equitably: When processing applications, the CRC must incorporate the licensing efforts developed by the Office of Minority, Disabled Veterans, and Women Cannabis Business Development designed to promote the formulation and participation in the lawful operation of cannabis businesses by persons from socially and economically disadvantaged communities. In addition, 15 percent of licenses must be reserved for minority-owned businesses, and an additional 15 percent must go to businesses owned by women or veterans. 

Next Steps in Recreational Cannabis Licensing Process

Given the delays that have plagued the cannabis legalization process, there is hope that the CRC will act expeditiously to set up the required regulatory framework. In the meantime, the Act is a good start point for assessing the requirements for cannabis license holders. For entities that are interested in entering the New Jersey cannabis industry, there are numerous legal, logistical and operational issues that must be addressed, and it is never too early to start your preparations.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!