adult-use cannabis market rules

The New Jersey Cannabis Regulatory Commission (CRC) released the adult-use cannabis market rules which prioritize social equity and small businesses.

However, they do not allow for baked edibles or gummies to be legally sold.

At their sixth meeting, scheduled for a special date, they released the interim rules that will serve the market for a year as more permanent rules are established.

“It’s been a long road to get here,” CRC Chair Dianna Houenou said, noting people have fought for 10 years for adult-use cannabis. “We’re finally taking that final step today.”

She acknowledged the rules were not filed in the traditional manner.

CRC Executive Director Jeff Brown said they were eager to give small businesses access to the industry and protect them from predatory practices seen in New Jersey and elsewhere.

The rules establish three types of cannabis businesses that will receive priority review in the application process regardless of when they apply. They include:

  1. Social Equity Businesses are owned by people who have lived in economically disadvantaged areas with higher-than-average unemployment or those with past convictions for cannabis offenses.
  2. Diversely Owned Businesses, which are minority, woman, disabled veteran-owned and certified as such by the NJ Department of the Treasury
  3. Impact Zone Businesses, which are located in an Impact Zone, owned by people from that area, or employ people from an Impact Zone

“We really to help those have shouldered those burdens,” Brown said regarding Social Equity Businesses.

Under the adult-use legalization law, Impact Zones are towns with a large population, high unemployment rate, or high numbers of cannabis arrests.

The CRC’s rules establish an application process in which they are reviewed on a rolling basis, with Social Equity, Impact Zone, and Diversely Owned Businesses prioritized over others. 

“It is competition in the active marketplace, not competition in an RFA, that determines the success of awarded applicants,” a summary of the regulations says.

Many advocates would argue this has not been the case thus far in New Jersey’s medical cannabis market.

A special conditional license applicant has been created whereby conditional applicants only need to submit background disclosure information to the CRC, along with a business plan and a regulatory compliance plan, and where they plan to locate their business

If approved, they will be given 120 days to secure local approval and apply for conversion to an annual license. 

Conditional license-holders that can convert to an annual license won’t have to submit the application sections requiring applicants to demonstrate past experience in the regulated cannabis industry.

This is different than conditional micro business licenses, which will allow them to expand their businesses.

“This flexible application process offers a strong opportunity for New Jersey grown businesses to get into this new industry,” a statement from the CRC on the regulations reads.

Microbusinesses limited to 10 employees and premises no larger than 2,500 sq f, will also be prioritized. If successful, they will be allowed to apply to expand their business following consumer demand with a conditional license.

“We really wanted to focus on easy access to the business,” Brown said.

While they enjoyed the idea that it would be easier to obtain a micro license, many prospective applicants were unhappy with the restrictions on growth.

Initial application fees will be affordable, starting as low as $100. Annual license fees will range from $1,000 for a microbusiness to $50,000 for a cultivator with up to 150,000 sq ft of capacity.

No Legal Baked Edibles or Gummies Allowed

While many forms of cannabis will be permitted, baked edibles and gummies will be prohibited.

This will likely lead to the continued thriving of underground edible sales barring a legal crackdown approved by the CRC. Many underground entrepreneurs specialize in making edibles, specifically filling the gap in supply by the official market.

The CRC likely did this to alleviate parent concerns that, instead of parents watching their children and being held responsible, the State can restrict what adults can consume, so children are not harmed.

The only edibles currently allowed in the medical cannabis market are lozenges which are not popular.

Along with flower, drops, tinctures, syrups, pills, tablets, capsules, and chewable forms can be sold along with lozenges. Cannabis concentrates, including extracts, resins, and vape formulations will be allowed to be sold as well. Restrictions are in place to sure vape cartridges contain no harmful chemicals.

Town Guidance

While many towns have sought guidance from the CRC before enacting their local ordinances, the interim regulations do not include much new information.

Towns already have the power to restrict cannabis company locations, choose which one they want to operate in their town, restrict hours, and impose a two percent tax on cannabis sales. They can also enact any requirement or restrictions on cannabis businesses that would apply for other business types, such as requiring compliance with all relevant codes and ordinances.  

However, CRC is now in a better position to advise and answer other questions towns might have regarding cannabis.

Adult-use Cannabis Rules on Dispensary Operations

The existing Alternative Treatment Centers or medical dispensaries can sell adult-use cannabis if they receive town approval and CRC certification. They also need adequate supply for their patients and to ensure adult-use sales will not impact access for those patients. 

Certification fees range from $100,000 to $1 million.

The problem with determining “adequate supply” is that, with the high price of dispensary cannabis, it seems they have never had an “adequate supply.”

“We’re going to look very closely at inventory and operations that those two are met and met on an ongoing basis,” Brown said. “We’re going to be extremely strict on those provisions.”

The CRC will look at the specific ATCs’ supply and statewide supply to ensure adult-use licenses don’t adversely impact the medical cannabis market.  

Some towns with medical dispensaries do not like adult-use cannabis. For example, Cranbury in Middlesex County, where Breakwater is located, and Secaucus in Hudson County, where Harmony is located, said they will prohibit adult-use cannabis sales.

For the first two years of operation, majority ownership in a cannabis business must remain the same as on the application. However, new owners and investors can be brought in to raise capital if necessary.

The adult-use cannabis rules also establish provisions to combat exploitative contracts and prevent deceptive license ownership transfers. Brown said they seek to address issues that come elsewhere to guard against exploitative contracts like concealing ownership and exceeding license caps.

The CRC is establishing a Social Equity Excise Fee which was included in the law, on cultivation that would increase as consumer prices decrease. They want to raise money that could be used to fund social services in Impact Zones.

The rules also establish that cannabis packaging must be bland and childproof so as not to appeal to children.

Cannabis businesses must have a designated staffer that locals can call to complain to facilitate quick resolutions of complaints.

Dispensaries must have educational material for consumers on the potential side effects of cannabis, safe cannabis consumption techniques, and indicators of substance abuse. Products must have warning statements about potential health risks and a hotline for poison control centers.

Dispensary employees will all need to buy ID cards for $25 from the CRC.

“This is step one,” Brown said, noting the interim rules are effective upon filing.

Commissioner Maria Del Cid-Kosso noted they spoke with many advocates and other state cannabis regulators.

“It was not an easy task,” he said.

She acknowledged the lack of access to capital is a barrier for many.

“We have to make sure we create sustainability among these businesses,” she said,

Vice-Chair Sam Delgado noted not everyone will be happy with the regulations, especially since they cannot enact homegrow. He said they had hours of passionate discussion on the adult-use cannabis market rules.

“There are important issues we must address as we move forward,” Commissioner Krista Nash said. “I know the difficulties one faces when one has a criminal background.”

She noted the importance of labor protections

“These rules they kick that barrier to the curb. We encourage by ppl harmed by the war on drugs and legacy operators apply,” Nash added, speaking well of legacy operators.

Hugh Giordano of the United Food and Commercial Workers union (UFCW) praised the Commissioners on the regulations.

“Thank you for making workers’ rights part of the rules and regulations,” he said.

Giordano noted the correlation between social equity and worker’s rights. He argued a union workforce is safer.

He noted many of the Multi-State Operators (MSOs) cannabis companies are against unions.

“We are encouraged by the key elements of these rules, including provisions that prioritize social equity and access for diversely owned and impact zone businesses,” Latino Action (LAN) President Christian Estevez said. “We are pleased to see that these regulations ensure a lower barrier to entry that will allow Latinos to thrive in the industry.”

“We are particularly glad to see that fees for applications are low and that the NJ CRC will ensure that the social justice that we fought for legislatively will be implemented via the new regulations,” he added.

(Full disclosure I’m on the board of LAN).

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