Proposed Licensing Structure Under NJ Cannabis Bill 3195

Proposed Licensing Structure Under NJ Cannabis Bill 3195

New Jersey Senator Nicholas Scutari recently introduced Senate Bill 3195 to decriminalize the recreational use of cannabis and legalize its manufacture, distribution, and sale in New Jersey.

Basics of NJ’s Cannabis Legalization Bill

Senate Bill 3195 would legalize the possession and personal use of small amounts of cannabis for individuals age 21 and over. Individuals would be allowed to possess up to 1 ounce of cannabis, 16 ounces of infused solid products, or 72 ounces in liquid form. Notably, New Jersey residents could not grow cannabis at home, which most other recreational cannabis laws allow.

Under the proposed legislation, a tax will be levied upon cannabis sold or otherwise transferred by a cannabis cultivation facility to a cannabis product manufacturing facility or to a retail cannabis store. The tax rate would start low and increase over time in an effort to foster early adoption and cut out the black market. It would start at 7 percent in the first year and increase to 10 percent in the second year; 15 percent in the third; 20 percent in the fourth and 25 percent in the fifth.

The bill also retains local oversight over cannabis businesses. Under SB 3195, local governments would be authorized to enact ordinances dictating the time, place, manner and number of cannabis establishment operations within their borders.

A local governmental entity may also expressly prohibit the operation of cannabis cultivation facilities, cannabis product manufacturing facilities, cannabis testing facilities, or retail cannabis stores through the enactment of an ordinance. However, the failure to enact an ordinance prohibiting the operation of a cannabis establishment will permit the operation of a cannabis retail establishment within the local governmental entity for five years. At the end of the five-year period, the municipality again is permitted to prohibit the operation of a cannabis establishment.

Proposed Cannabis Licensing Scheme 

SB 3195 creates the Division of Marijuana Enforcement within the state Department of Law and Public Safety, which would be tasked with adopting rules and regulations to implement the bill. It also establishes several different classes of licenses. Below is a brief summary:

• A cannabis producer must have a Class 1 Cannabis Cultivation Facility license issued by the division for the premises at which the cannabis is produced.
• A cannabis processor must have a Class 1 Cannabis Product Manufacturing Facility license issued by the division for the premises at which the cannabis is processed.
• A cannabis wholesaler must have a Class 2 Cannabis Wholesaler license issued by the division for the premises at which the cannabis is warehoused.
• A cannabis retailer must have a Class 3 Cannabis Retailer license issued by the division for the premises at which the cannabis is retailed.
• A cannabis transporter must have a Class 4 Cannabis Transportation license issued by the division.

All prospective licensees must complete application requirements, meet residency requirements, and undergo a criminal history record background check. While the Division of Marijuana Enforcement is authorized to establish criteria for licensure, the bill provides that licenses may not be issued to:

• A person under the legal age to purchase cannabis items;
• A person doing business as a sole proprietor who has not lawfully resided in the state for at least two years prior to applying to receive a license;
• A partnership, employee cooperative, association, nonprofit corporation, or corporation unless formed under the laws of New Jersey, and unless all of the members thereof are qualified to obtain a license; and
• A person whose place of business is conducted by a manager or agent, unless the manager or agent possesses the same qualifications required of the licensee.

In good news for existing businesses, the bill provides that a currently operating medical cannabis facility operating in good standing can immediately apply for a license to operate to distribute cannabis to a person who is not a medical cannabis patient. Under the proposed bill, the Division of Marijuana Enforcement must approve or deny any fully completed application for licensure within 90 days. Following approval of an application, a license must be issued within 30 days.

What’s Next?

Sen. Scutari has stated that his goal is to have SB 3195 approved and ready for the next governor’s signature within the first 100 days of the new administration. Democratic candidate Phil Murphy favors the full legislation, while Republican Kim Guadagno has stated that she would support some level of decriminalization.

We will closely monitor developments regarding SB 3195 in the coming months and will post updates as they become available. For more information about the proposed marijuana bill or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

For more information about SB 3195 and related legal issues, please contact Dan McKillop.

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.

• How Could This Marijuana Bill Impact New Jersey Municipalities?
• What Does The Future Hold For The Legal Marijuana Industry?
• Legalizing Retail Sale & Recreational Marijuana Use In New Jersey – Lessons From Colorado