As a recreational cannabis bill in the New Jersey legislature stalls, federal legislation directed at expanding the cannabis industry’s access to banking and insurance services advances in Congress. On March 28, 2019, the U.S. House of Representatives Committee on Financial Services approved H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act. The bill was introduced to allow the cannabis industry to have access to financial services and to enhance public safety by reducing the industry’s reliance on cash. It provides a safe harbor for financial services companies, including banks, credit unions, and insurers, to serve cannabis-related businesses operating under state law without the threat of regulatory backlash or criminal prosecution.
On Monday, March 25, the New Jersey Legislature chose not to vote on the adult use cannabis legalization bill that has been the subject of debate for several years. The vote was delayed due to the lack of support for the bill. This is certainly a roadblock to adult use cannabis in New Jersey, but the efforts to legalize are not over. Legislators will continue to debate the merits of cannabis legalization in the hope that the outstanding assemblymen and senators will change their positions and vote in favor of cannabis the next time the bill is presented for a vote. Alternatively, the issue of cannabis legalization could be put to a ballot question, which would give New Jerseyans an opportunity to make their “voice heard.”
This blog will continue to follow all of the legalization efforts in New Jersey.
Earlier this week, Governor Phil Murphy, Senate President Steven Sweeney, Assembly Speaker Craig Coughlin, Senator Nicholas Scutari and Assemblywoman Annette Quijano jointly announced an agreement on the major outstanding issues for cannabis legalization: regulatory control and taxation. A new bill, that has not been publicly released, will be debated over the next two weeks in anticipation of a vote on March 25, 2019.
This blog has previously addressed the difficulties the cannabis industry encounters with the current federal banking system. One potential solution proposed by Governor Murphy was the establishment of a state bank for cannabis businesses only, which has yet to materialize.
A recent development on this issue took place nationally when Chairman of the Federal Reserve Jerome Powell requested clarity on this subject from the Senate Banking Committee. Chairman Powell was responding to a question from Senator Robert Menendez (D-N.J.), who raised that New Jersey is moving toward legalization of recreational cannabis. The concern for Senator Menendez – as is the concern for many in the industry – is that cannabis businesses will be shut out of the banking industry and will be forced to operate only in cash, which is a safety risk.
With the new year in full swing, New Jersey Cannabis Counsel highlights some of the most impactful news relevant to the potential legalization of cannabis in New Jersey.
New Attorney General Uninterested in Legal Cannabis Businesses?
New Attorney General nominee William Barr testified at his confirmation hearing that he does not intend to pursue cannabis businesses operating legally pursuant to state regulations. This is an about-face from former Attorney General Sessions, who rescinded the Cole Memorandum, which was the Obama era policy document that effectively told the Department of Justice to only pursue legal cannabis businesses that were linked to cartels, children or trafficking cannabis to states where it is not legal. Mr. Barr has also called for additional cannabis cultivation for research purposes, and understands that the new bill legalizing the growth of hemp has implication for cannabis. Mr. Barr has not formally committed to preparing a revised Cole Memorandum, but if confirmed, Mr. Barr as Attorney General would be a potential boon for the cannabis industry.
New Jersey State Senator Nicholas Scutari (D), the architect of the proposed cannabis legalization bill, authored an op-ed advocating for the creation of a Cannabis Regulatory Commission. The Cannabis Regulatory Commission has been a hotly debated topic in the legalization process. The various legalization bills that have been drafted have included versions of the Cannabis Regulatory Commission (originally named the “Division of Marijuana Enforcement”), which would be designed to function as the state regulatory body for the adult use legal cannabis industry. The Cannabis Regulatory Commission would establish the number of licenses to be issued to growers and retailers, process license applications and have the authority to regulate the cannabis industry.
The final push to advance the cannabis legalization agenda will take place in a closed door session on Thursday, December 13. At that time, the governor will meet with Senate President Sweeney and Assembly Speaker Coughlin to continue to negotiate certain nuances of cannabis legalization. Front and center will be the proposed Cannabis Regulatory Commission, a state agency legislators want to create to control both the proposed recreational cannabis industry and the medicinal industry.
As the debate about legalized adult use cannabis continues to take place in Trenton, a new proposal to the legislative bill represents an intriguing potential opportunity to cannabis entrepreneurs: microbusinesses.
As the various drafts of the legislative bills to legalize cannabis have evolved, the barriers for entry to the New Jersey cannabis market have been relaxed for out-of-state operators. While early drafts of the bill made New Jersey residency a requirement, that is no longer a strict requirement so long as one of the proposed owners of a cannabis business is from New Jersey. The legislature’s relaxation of this requirement makes sense: operators from other states have more experience and can help better establish New Jersey cannabis businesses.
But that comes with a very real drawback for New Jersey entrepreneurs. It will not be easy for New Jersey entrepreneurs to compete with the experience and millions of dollars of funding that could potentially come from out-of-state operators. The concept of microbusinesses may help level the playing field.
While New Jersey legislators continue to debate the merits and practicalities of legalizing adult use recreational cannabis, a recent poll indicates that New Jerseyans have made up their minds: 58% of state residents favor legalization, whereas only 37% oppose.
The poll also addresses two key issues associated with cannabis reform:
1) 64% of New Jerseyans believe not only that regulation and taxation of cannabis would be a boon for the state’s economy, but also would not be bothered if a dispensary opened in their town; and
2) 45% of New Jerseyans believe that cannabis is less harmful than alcohol, as opposed to merely 12% of New Jerseyans who disagree.
The issue of whether an employer is required to accommodate an employee’s alleged disability by allowing the use of medical marijuana for chronic pain and waive the requirement that he pass a drug test as a condition of employment, was recently addressed by a New Jersey federal court. In Cotto, Jr. v. Ardagh Glass Packing, Inc., the plaintiff, a forklift operator, hit his head and was asked to take a drug test to continue his employment. The plaintiff employee told his employer that he could not pass a drug test because he used medical cannabis for pain management to recover from back and neck injuries. His employer responded that passing a drug test was a condition of his employment, and he was indefinitely suspended. The employee filed a lawsuit alleging that the New Jersey Law Against Discrimination (“NJLAD”) required that his employer waive the requirement that he pass a drug test as a condition of employment in order to accommodate his disability.
The employer filed a motion to dismiss the plaintiff’s complaint on the basis that the Compassionate Use Medical Marijuana Act (“Medical Marijuana Act”) did not require the employer to accommodate the employee and allow him to continue working while he was unable to pass a drug test based on the use of a substance that is illegal under federal law. The United States District Court for the District of New Jersey, Camden Vicinage, granted the employer’s motion to dismiss, finding that neither the Medical Marijuana Act nor NJLAD compelled the employer to waive the employee’s drug test requirement.