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New Jersey Cannabusiness License Changes Bill Passes Legislature

The state legislature recently passed a bill changing New Jersey cannabusiness license ownership rules to regulate agreements. It could also increase investment in minority, women, and disabled-veteran-owned companies.

Healthy veterans are not prioritized in the New Jersey cannabis license process.

The New Jersey cannabusiness license changes bill was A 4151, “Revises certain restrictions on cannabis establishments’ owners; expands scope of review of cannabis establishment license applications and related materials.”.

However, the office of Governor Phil Murphy (D) has yet to indicate it has been signed into law.

The New Jersey cannabusiness license changes bill passed with little fanfare. No politicians nor advocacy groups sent releases announcing it, taking credit, or commenting on it.

New Jersey Cannabusiness License Changes

The primary Assembly sponsors of the bill were Verlina Reynolds-Jackson (D-Mercer), Anthony Verrelli (D-Mercer), and Benji Wimberly (D-Passaic). Mila Jasey (D-Essex) co-sponsored it.

It was referred to Assembly Oversight, Reform, and Federal Relations Committee. They passed it last September with bipartisan support 4-0-1, with one abstaining. The Assembly passed the bill last December 58-12-5-5, meaning five Assembly members did not vote on it, and five abstained.

In the New Jersey Senate, the New Jersey cannabusiness license changes bill was S 2766. But they substituted the Assembly version and ultimately passed that. NJ State Senators Troy Singleton (D-Burlington) and Shirley Turner (D-Mercer) sponsored the State Senate version.

The New Jersey cannabusiness license changes passed the NJ Senate Judiciary Committee this past March. It passed the State Senate in a bipartisan vote of 26-8 in June.

Now New Jersey cannabis license applicants must submit a copy of any service agreements they finalize.

Financial Services Agreements (FSAs) and Management Services Agreements (MSAs) are often where one finds the seedy underbelly of the cannabis industry. A seemingly small minority-owned company can be turned into a mere puppet of a larger cannabis corporation that is a type of Multi-State Operator (MSO).

The NJ Cannabis Regulatory Commission (NJ-CRC) will be able to determine after analyzing them whether the interest rates, returns, and fees, are commercially reasonable and consistent with the fair market value.

If they don’t like the terms, they will not approve the license until better terms are negotiated, which they can describe.

NJ Cannabis Company Investment Changes

Among the New Jersey cannabusiness license changes are that individual and corporate investors and companies that provide technical assistance and Intellectual Property may own up to a 35 percent interest in up to seven New Jersey cannabis dispensaries. However, the dispensaries must be certified minority, women-owned, or disabled veteran-owned.

This was done to address access to capital, or simply money, issues. The terms of their agreements must be reasonable. Conditions of performance, quality, and others to get financial and other assistance are allowed.

Agreements must be submitted to the NJ-CRC as part of their New Jersey cannabis license application. Lender and payback terms are also imposed depending on the amount of money in the initial transaction.

Transference of ownership of stock is closely regulated. Notably, the investors cannot secure full ownership of the cannabis dispensary if a financial default occurs in a worst-case scenario. Controlling interest can only be transferred to another certified minority, women, or disabled veteran-owned cannabis company.

Vertical Integration Section Allowing Chains

There are also provisions in the New Jersey cannabusiness license changes bill that allow for vertical integration. New Jersey adult use and medical cannabis licensed cultivators and manufacturers are allowed to buy into a limited number of certified minority, woman, and disabled veteran adult-use and medical cannabis dispensaries as well.

With this provision, the New Jersey cannabusiness license changes law could lead to many de facto chains sprouting up.

The same limits of only 35 percent share of seven cannabis companies are imposed on them as well.

Currently, vertically integrated cannabis corporations that are mostly Multi-State Operators (MSOs) are allowed to grow, manufacture, distribute, wholesale, retail, and deliver cannabis and cannabis products. These corporations started as medical cannabis only Alternative Treatment Centers (ATCs) and have now largely expanded into recreational, adult use, or personal use cannabis sales. They also allowed three dispensary locations for retail.

In stark contrast, a New Jersey recreational/adult-use cannabis dispensary license only allows a company to have one location. However, they are allowed to seek other licenses to grow and manufacture cannabis products.

In a unique quirk, only the expanded ATCs, mostly MSOs, are allowed to wholesale and distribute adult use cannabis and cannabis products. The process for others to apply for such licenses has been delayed.

Dispensaries are allowed to deliver independently of holding a delivery license.

The NJ-CRC will only allow Social Equity applicants who were felons or had two misdemeanors to secure such licenses for a year starting this fall.

They seem to think the problem with the lack of Social Equity owned cannabis companies is access versus a lack of money and political clout to secure town approval.

Many advocates and members of the New Jersey cannabis community and industry do not favor any sort of chains.

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