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The widely anticipated legalization of adult-use marijuana along the densely populated East Coast is tempered in New Jersey by high fees and limited licensing availability. Sales in this heavily regulated market are expected to grow quickly, however, buoyed in part by visitors from nearby states that have yet to legalize adult-use marijuana.
Milestone: Voters approved a referendum in November to legalize recreational marijuana by a margin of 66.3% to 33.7%.
Initiative: Public Question 1.
Market Data: Marijuana Business Daily projects the adult-use market will generate $850 million to $950 million in annual retail sales by 2024.
New Jersey has a restricted medical marijuana market. The state has issued only 12 vertical licenses, and just 13 dispensaries were in operation as of Nov. 30.
State lawmakers approved an expansion to issue a mix of 24 additional MMJ licenses, but the licensing has been held up by litigation.
Companies in the Market: Multistate operators have a strong foothold in the market, partly through acquisitions.
MSOs with licensed operations in New Jersey include Acreage Holdings, Columbia Care, Curaleaf, Green Thumb Industries, iAnthus and TerrAscend.
Big Picture: The New Jersey vote is expected to put pressure on other states to follow suit across the Northeast and down the East Coast, including Connecticut, Delaware, Maryland, New York, Pennsylvania, Rhode Island and Virginia.
Legalization in the densely populated region would create billions of dollars in business opportunities for plant-touching marijuana companies and ancillary businesses such as makers of cultivation and procession equipment, consultants and law firms.
One potential hurdle: New Jersey’s limited medical cannabis market could make it difficult to flip the switch to adult use and create enough supply to meet pent-up consumer demand.
Several operators are busy preparing for a recreational market by expanding cultivation and processing capacity.
Key Details: Lawmakers passed an implementation bill Dec. 17. Provisions include:
- The state’s 12 licensed medical marijuana operators will be fast-tracked into the adult-use market but first must show they can meet MMJ demand.
- Cultivation licenses will be limited to 37 for the first two years of the program. The exception is microbusinesses with 10 or fewer employees. The program is designed to offer plentiful opportunities to microbusinesses owned by residents.
- Priority consideration also will be given to applicants living in “impact zones,” or areas affected by high jobless rates, poverty or past marijuana enforcement activity.
- Priority consideration in general will be given to minorities, women, disabled veterans and residents of at least five years with significant investment interest in an entity.
- Labor peace agreements are required except for microbusinesses.
- Adult-use sales will be taxed at 7%, and the Cannabis Regulatory Commission has the option of assessing a small grower tax.
- 70% of the sales tax revenue and the possible grower tax revenue will go to programs that assist individuals and communities disproportionately impacted by the war on drugs.
- Municipalities would have 180 days to decide whether to ban adult-use operations. They could pass ordinances to charge local sales taxes of up to 2%.