Governor Phil Murphy has signed into law a bill allowing entities to own up to 35 percent of seven minority, women, and disabled veteran-owned medical cannabis dispensaries to provide them with capital.
Under the law, which was A-5179/S-2875, investors offering significant financial assistance to businesses applying for medical cannabis dispensaries permits will be allowed to hold up to 35 percent interest in up to seven minority, women, or disabled veteran-owned medical cannabis dispensaries. The law currently prevents any entity from holding more than one permit for a medical cannabis cultivator, manufacturer, or dispensary. The 12 licensed cannabis companies in New Jersey are all vertically integrated whereby they own and operate cultivation, manufacturing, and retail facilities.
Business owners will be required to pay back the financial assistance they receive from an investor within a set period determined by a sliding scale system based on the size of the loan. The law specifies that ownership will not revert to the investor if the business were to default.
The NJ Cannabis Regulatory Commission (CRC) will be permitted to review agreements between business owners and investors to ensure the terms are commercially reasonable and consistent with fair market value.
The legislation was sponsored by Assemblymembers Verlina Reynolds-Jackson (D-Mercer, Hunterdon), Jamel Holley (D-Union), Brian Bergen (R-Morris), and Gordon Johnson (D-Bergen). Senator Troy Singleton (D-Burlington) was the bill’s prime sponsor in the State Senate with Shirley Turner (D-Mercer). He has been pushing the bill consistently.
“Lack of access to capital is one of the biggest barriers women, minority, and disabled veteran entrepreneurs face when trying to become business owners. Lower wages mean these individuals generally have fewer personal savings or opportunities to borrow external funds. In fact, the vast majority of startups backed by investors are overwhelmingly white and male-owned,” Reynolds-Jackson and Holley said in a statement.
Many cannabis industry experts agree that lack of access to capital is a serious issue affecting many minority-owned companies.
“As the medical cannabis industry grows in New Jersey, we need to ensure equal opportunities for involvement in these businesses. By allowing investors to have partial ownership of more than one medical cannabis dispensary, if those businesses are minority or women-owned, we will incentivize them to invest in more diverse ventures,” they added.
“Minorities have historically been disproportionately impacted our country’s ‘war on drugs.’ It is only fair they have the opportunity to benefit from this substance’s legitimization as the medical cannabis industry advances,” Reynolds-Jackson and Holley said in a statement.
It will be interesting to see how this develops. Many do not want large cannabis corporations that are Multi-State Operators (MSOs) to dominate the cannabis market in New Jersey.