Marijuana entrepreneurs already lining up for New Jersey’s looming recreational market

New Jersey can’t even begin the recreational cannabis legalization process until mid-January, but marijuana entrepreneurs across the country are descending on the Garden State in hopes of getting a first-mover’s advantage in what could become one of the most buoyant markets on the East Coast.

Indeed, many marijuana businesses already have a presence in New Jersey, including California-based Terra Tech and Weedmaps, and more are expected.

“The Green Rush is very much on,” said Joshua Bauchner, an attorney at Ansell, Grimm & Aaron, a law firm in Woodland Park, New Jersey.

He noted that his dedicated cannabis practice has taken a flood of calls from marijuana entrepreneurs expecting New Jersey to become the nation’s next recreational marijuana state.

“Since the election,” he added, “I’ve been doing this nonstop.”

Legislative head start

All signs point to Governor-elect Phil Murphy and the New Jersey legislature hitting the ground running after Murphy’s Jan. 16 inauguration.

Murphy has promised to sign a recreational marijuana bill within his first 100 days in office, and lawmakers already are familiar with an adult-use draft bill that State Senator Nicholas Scutari introduced last May.

At the time, Scutari said he wanted a bill ready in case New Jersey’s outgoing prohibitionist governor, Chris Christie, was succeeded by a pro-legalization chief.

If New Jersey lawmakers were to pass an adult-use cannabis law, they would make history as the first legislature to do so. The nation’s five operating recreational states were passed through referendum.

The draft bill is “a really good starting point,” said Dara Servis, executive director of the New Jersey Cannabis Industry Association.

Scutari simply needs to reintroduce the bill after lawmakers return to session Jan. 8.

Although Scutari’s bill is far from final, it’s far along. Key points include:

  • Governing entities and time frame: Establishment of a Division of Marijuana Enforcement under the state attorney general’s office and requires that regulations be promulgated and applications be released within one year after the governor signs the bill.
  • Licensing and vertical integration: Five classes of licenses are mandated – cultivation/manufacturing, processing, wholesaling, delivering and retailing. Vertical integration is banned, but companies can own up to three types of business licenses.
  • Medical operator grandfather preference: New Jersey’s existing medical marijuana operators are allowed to pursue recreational licenses.
  • Taxes: There will be a 7% tax rate during the program’s first year, with annual increases of 10%, 15%, 20%. The rate then would top out at 25%.
  • Products: All types of cannabis products are allowed, including flower, concentrates and infused products like edibles and capsules.
  • Residency: Any company stakeholder must be a state resident for at least two years to qualify for licensing.

While Servis’ association is mostly happy with what’s in the bill, she said there are some points she’d like to see changed or clarified, including a less-stringent residency requirement and having separate recreational and medical programs instead of folding them into one.

Already there

While Murphy’s election sparked a wave of interest in New Jersey as a recreational business destination, some marijuana companies have already set up shop.

Terra Tech – a marijuana company with multiple cultivation, processing and retail licenses in California and Nevada – built a five-acre greenhouse facility in Belvidere in 2013.

But the facility doesn’t produce cannabis.

Rather, Terra Tech’s grow is a federally legal business, Edible Gardens, that cultivates herbs such as parsley, cilantro, thyme and sage. The products are sold in major groceries like King Kullen, Kroger, Market Basket and Stop & Shop.

“We did it as a hedge to our West Coast cannabis businesses,” said Terra Tech COO Mike James.

But now that legalization appears imminent in New Jersey, Terra Tech is prepared to enter the adult-use marijuana market.

“We definitely want to move forward and apply for the permits,” James said, noting that Terra Tech is eyeing growing, retailing and other parts of the cannabis supply chain.

Weedmaps, the online marijuana retail guide, handles its medical marijuana clients in New Jersey from offices in New York.

But the company is actively involved in trying to shape New Jersey’s adult-use regulatory process.

“We’re working closely and serving as a resource to the incoming Murphy Administration, the state legislature and key stakeholders,” Weedmaps spokesman Carl Fillichio wrote in an email to Marijuana Business Daily.

“We are all working to advance a first-in-class cannabis policy framework that will stand up as a safe, responsible and successful industry in New Jersey.”

Weedmaps hopes to sell its software solutions to rec businesses that eventually establish themselves in New Jersey, Fillichio added.

Two Colorado-based marijuana companies also have plans to do business in New Jersey: AmeriCann, a real estate company that leases grow sites in multiple states, and The Green Solution, a multifaceted cannabis firm.

Knowing that out-of-state companies could need in-state partners is good news to one Jersey-based entrepreneur.

“There’s a benefit to having a partner that is a resident of the state,” said Julie Winter, COO of CBD for Life.

Her CBD manufacturing company in Monmouth County sells to about 40 stores in the state and intends to vie for a recreational license.

Sales by 2018?

With New Jersey’s lawmakers so far along on an adult-use bill and the political will backing legalization, most observers believe the governor will sign rec cannabis into law by June 30 – when the fiscal year ends – at the latest.

So, could sales actually begin in 2018?

“It’s certainly possible,” said Michael Bronstein, a cannabis legalization lobbyist in New Jersey. “But no state has passed a recreational law through the legislature before, so it’ll take a lot of work.”

Servis is more confident.

“If the bill is introduced quickly, which I believe it will be,” she said, “I wouldn’t be surprised if the first rec sales happen in 2018 – although it’s mostly going to come from existing medical operators who have been grandfathered in.

“We have a really good shot at it.”

Bauchner believes too much work remains.

“I’d be shocked,” he said.

Omar Sacirbey can be reached at [email protected]

6 comments on “Marijuana entrepreneurs already lining up for New Jersey’s looming recreational market
  1. Lance Brofman on

    New York may beat them to it. The elimination of the deductibility of state income tax will require a drastic plan for new revenue.

    “..Another potential disruption from the Republican tax bill also stems from the reduction or eliminations of deductions for state and local taxes. As with the real estate impact, the impacts on the finances state and local will vary widely for different regions and locations. There are some jurisdictions that will be severely impacted the reduction or eliminations of deductions for state and local taxes. New York and California are the obvious examples.

    Take the example that would be the case if the deduction for real estate taxes were limited to $10,000. There would likely be people in New York and California who were paying $5,000 in property taxes and $5,000 in state and local income taxes. These people would now pay more federal income taxes as compared with someone in a state with no state and local income taxes, who pays $10,000 in property taxes, assume both have the same incomes and itemize. This could cause shifts in businesses out of the states with high state and local income taxes.

    The most significant impact could be felt in New York City. In theory, New York and New York City in particular, could reduce income taxes and make up the difference by raising property taxes. This would make sense since New York City residents pay one of the highest state and local income taxes in the nation. Additionally, in terms of tax as percent of market value, New York City residents pay one of the lowest property taxes in the nation.

    The flight of businesses from New York City could prompt the government to see the advantage of real estate taxes as compared to income taxes, in that real estate cannot be relocated to another tax jurisdiction. However, given the immense power of the real estate interests in New York City, a much more likely scenario would be that as tenants fled New York City, in response to the tax bill, the real estate interests in New York City would force the government to reduce real estate taxes and make up the difference by raising local income taxes. This scenario or something similar might be played out in various other high-tax localities….”
    https://seekingalpha.com/article/4127862

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  2. Joseph J Morgan, MD on

    Logical move for NJ. Will revitalize Atlantic City and other beach resorts. Half of Pennsylvania’s population live within an hour’s drive to NJ. For decades, PA residents went to NJ to buy cheaper alcohol and gas. Same will happen for grass. PA will have to seriously consider a similar program. Or else its expensive to operate and tightly regulated MMJ program, designed to make a lot of fees for the state but allowing only manufactured products (no “flower”), will fail.

    My skin in the game: I certified in cannabinoid medicine in CA in 2014, teach the 4 hour certification course for Physicians and Pharmacists in PA, live 15 minutes from NJ, and want to see those who suffer have a legal option to benefit from the re-emergence of this historical botanical medicine. Expect a 25-50% reduction in opioid-related use and overdose death, decrease in alcoholism, and decrease in familial violence, but more impaired drivers. I want to contribute to the safer medicines and safer than alcohol recreational industry. (Much “recreational sse” is self-directed medical use for anxiety, insomnia, PTSD, and pain,

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