Despite the intentions of the NJ Cannabis Regulatory Commission (NJCRC), many legacy operators going legal and small cannabis companies continue to struggle.
Red tape and cautious small-town suburban politicians favor large cannabis companies that are Multi-State Operators (MSOs) or backed by former MSO executives.
“It’s definitely hard if you’re not a well-capitalized MSO right now,” attorney Duncan Delano said. “Who’s winning in these suburban and rural markets is these really well funded MSO backed applicants.
He is notable because many of his clients are self-identified legacy operators.
“They’re grateful to have someone who’s not gouging them. But they’re out of money because the last place overcharged them. I suspect some of my clients who are struggling are going to fall off,” Delano said. “Or sell out.”
“Is weed still being sold while they’re talking? Is weed being smoked while they’re talking?” a North Jersey Legacy Operator asked rhetorically.
Delano had pessimistic guesses about the number of his clients who would ultimately open. One legacy cultivation client did get approved but had to switch properties and had funding problems.
He explained that several NJCRC-issued legal cannabis licenses have been sold.
“There seems to be a market for people coming in and buying licenses,” Delano observed.
“It would be great if there were a true path,” he said about cannabis companies going from legacy to legal.
Barriers to Entry Force Legacy Operators to Roots
Some legacy operators in the New Jersey cannabis black market going legit are succeeding. But they are few and far between. Most cannot overcome the barriers to entry. With money coming in, few need to.
A Central Jersey legacy operator who’s Hispanic won a conditional license but can’t find a location due to issues with the town.
“I thank New Jersey for keeping their word,” he said.
A Central Jersey legacy operator had launched a cigar shop/CBD store to get a toe hold in a town.
“We’re making no money,” he lamented.
A Central Jersey legacy operator said there is little demand for CBD there.
To make matters worse, his store is not within the town’s Green Zone, where cannabis companies are allowed. But opportunistic politicians seizing on “reefer madness” have squashed attempts to expand it.
Thus, he has reverted to his legacy roots. A Central Jersey legacy operator hosted a legacy cannabis market in his store recently. No one has caught him in the suburban town where he operates. It’s amusing since he has a prominent location in town.
Delays and Money Problems Remain
Many cannabis companies are having trouble raising the money it takes to open. They need somewhere between $800,000 and $10 million depending on the type of operation.
“It’s really difficult to fundraise right now,” he explained. “The ones doing OK are the ones with lots of friends and / or also family money. A lot of them really don’t have those networks.”
He noted the NJEDA’s cannabis grant program. But Delano said it’s a small amount thus far.
“That’s going to be a solution for a very small handful of applicants,” he argued.
The small businesspeople without a legacy operator’s revenue to fall back on are having the most trouble with the red tape and politics. A legacy operator with significant revenue is likely more poised for success than a salaried upper-middle-class professional.
Delano saw the value of legacy operators continuing in the underground.
“It’s sad. There’s definitely a carpet bag market now for vendors to take advantage of all these applicants,” he said.
Many of his clients had previously paid incompetent and/or pricy consultants and lawyers.
Few Pro-Small Business Cannabis Company Suburban Towns
Delano said his legacy operator clients are succeeding in the “Camdens, the Trentons, the Jersey Citys, the more liberal centers that aren’t as caught up with the stigma. Unless a legal applicant has tons of outside clean funds, I don’t see them opening in the suburbs any time soon.”
“If you’re on the legacy side, it’s that much harder to be the one standing up before city council making a nice elevator pitch,” he explained.
“The towns that finally get over the hump they want to hand the keys to MSOs that have done it in Illinois, Massachusetts, California, or Colorado,” Delano noted. “They don’t want to spend the time and resources to learn how to run a new cannabis program. They want to hand it over to someone in their mind they don’t have to worry about.”
Suburban seems perfectly fine with approving another big box in the land of Big Box stores.
“The shit you hear at council meetings from the opposition is anachronistic… and built on stigma,” Delano said. “We’re writing research memos to city councils sort of countering all the points and unfounded concerns being raised at city council meetings. There’s tons of misunderstandings.”
He explained they utilize studies from West Coast markets to show there is no correlation between legalization and crime.
These towns do not care about social justice or undoing the harms of the War on Drugs. They are most likely largely motivated by generating the most revenue and also interested in the most jobs.
Cannabis Companies Navigating Politics
The North Jersey Legacy Operator was annoyed at the process and red tape surrounding cannabis approval and opening. He was unhappy about building community support to prevent the opposition from stopping the process.
“Everybody’s already said yes. If I open a liquor store, nobody knows nothing,” the North Jersey Legacy Operator said.
The North Jersey Legacy Operator advocated for a simple vendor license for New Jersey cannabis legacy operators.
“Let the floodgates open and tax everybody,” he argued.
More Political Cannabis Organizations Needed
There is no mass political movement for cannabis legalization. A relatively small number of people during COVID won a massive majority throughout the State. The opposition has sought to deny the effects of the 67 percent mandate from the 2020 referendum.
There wasn’t a mass coordinated New Jersey adult-use cannabis legalization and implementation movement of local leaders persuading their neighbors, friends, and community to support it.
There’s only a motley collection of legacy operators, lawyers, opportunistic small businesspeople, consultants, and also several activists with a wide range of experience in politics and lobbying.
Bayonne attorney Jay Coffey noted last year that most lawyers and lobbyists for MSOs have no desire to see other companies succeed.
Many cannabis companies don’t think they will make much money due to the federal prohibition on deducting their expenses.
A New Jersey Cannabis Gray Market Association would help with the politics. So would a New Jersey Craft Cannabis Coalition.
An advocacy group can push its specific policy platform and teach its members how to advocate for political change effectively. They can also give them pointers on opening and thriving.