Cannabis Law Develops in NJ After Workers Compensation Ruling

Cannabis law continues to develop in New Jersey.  On June 28, 2018, a New Jersey workers’ compensation judge ordered Freehold Township to pay for an injured worker’s medical cannabis.  This is the second time a New Jersey Workers Compensation judge has come to this conclusion, which is a significant step in the development of New Jersey cannabis law.

Freehold Township SealThe attorney arguing for the insurance company who provided workers compensation insurance for Freehold Township argued that the workers compensation court could not order the insurance company to pay for the medical cannabis because cannabis is illegal under federal law.  This argument is called a preemption argument, which means that the Supremacy Clause in the United States Constitution – which makes federal law “supreme” over state law – should not allow the workers compensation judge to rule in the injured worker’s favor.  The insurance company cited to a June 14, 2018 ruling from the Maine Supreme Court which disallowed medical cannabis in the workers compensation context because of federal law.

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Sen. Sweeney Pushes for Legalization this Summer

New Jersey Democrats are now hopeful that a legal cannabis bill could be approved before Labor Day.  Even though the recent state budget passed without including tax revenue from adult use recreational cannabis, Senate President Steve Sweeney said that lawmakers are “rounding the corner on marijuana” and said that “the speaker and I are committed to getting the marijuana bills done this summer.  That’s our goal.”

Image of New Jersey State HouseSen. Sweeney’s comments suggested that preparing the budget actually made the cannabis discussion more difficult.  “I’m thinking late July, August, hopefully,” Sweeney said.  “Now that this budget’s out of the way, not that a lot of this stuff’s out of the way, all the noise is out of the way, hopefully the administration and we all can focus on marijuana.”

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The State of Cannabis Licensing in New Jersey: What Has Changed?

Image of Senator Nicholas P. Scutari (D) and Senator Stephen M. Sweeney (D)

Senator Nicholas P. Scutari (D) and Senator Stephen M. Sweeney (D)

This installment of New Jersey Cannabis Counsel dives into the new Scutari/Sweeney legalization bill (the “Bill” or the “New Bill”) and focuses on what was changed, and what was not changed,  from the predecessor bill (the “Old Bill”) when it comes to cannabis business licenses.

Our inaugural blog post addressed the first step for any legal cannabis business in New Jersey under the Old Bill: licensure.  The New Bill still requires licenses, but has slightly changed the overall licensing structure.  Currently, the New Bill proposes four cannabis licenses:

Class 1: Marijuana Grower License
Class 2: Marijuana Processor License
Class 3: Marijuana Wholesaler License
Class 4: Marijuana Retailer License

Followers of this blog and New Jersey’s efforts to legalize cannabis will be familiar with these licenses.  While the Old Bill had growing and processing under one license, all of the above types of cannabis businesses were included in the Old Bill.  More interesting is what was not included in the New Bill.

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NJ Senators Consider “Impact Zones” in New Cannabis Legalization Bill

New Jersey Counties Map

On June 7, 2018, Sen. Scutari and Sen. Sweeney jointly introduced a new cannabis legalization bill (“the Bill”).  Unlike its predecessors, this bill is empowered by the sponsorship of Sen. Sweeney, the New Jersey Senate President, who has been advocating for cannabis legalization for over a year but previously did not take a step this significant toward making cannabis legalization a reality.

 

This blog will analyze various aspects of this new bill in a multi-part series that will begin with a completely new concept proposed in the Bill: Impact Zones. Continue reading

NJ Cannabis Insider: With Few Options, Cannabis Businesses and Bankruptcy can be as Easy as ABC

In an article published by NJ Cannabis Insider, Alex Banzhaf explores the limitations of filing for bankruptcy as a cannabis business due to federal law, and a viable alternative that businesses may consider when faced with insolvency.

Click here to read the article. (Subscription required.)

Logo for NJ Cannabis Insider publication

Legalization Delayed, But Not Derailed

Governor Murphy promised legalized adult use cannabis as one of his first 100 days initiatives.  That time has come and passed.  So what exactly is the status of legal cannabis in New Jersey?

In early March, Gov. Murphy told New Jersey legislators that he wanted to legalize and tax cannabis before the end of 2019.  Money talks, and Gov. Murphy included $60 million in revenue from taxing the legal cannabis industry in his first budget proposal. Recently, however, Gov. Murphy has been less resolute about a legalization bill coming to fruition by his self-imposed deadline, saying that it was “too early to tell.”

Image of NJ Governor Phil Murphy and Senate President Stephen Sweeney

Gov. Murphy and Senate President Sweeney

That is not to say that legal cannabis will not happen in New Jersey.  The initial time frame was ambitious – perhaps overly so – but Gov. Murphy and Senate President Sweeney are still pushing for legalization. “There’s no reason to believe we can’t get there,” Gov. Murphy recently stated.  “This is not one you get overnight.  This takes time.  We’re in that process right now.”  Sen. Sweeney added “I don’t know if we’re going to be able to get it done in the budget session.  I was actually hoping to get it done in the first 100 days.  But we have work to do.  I think it’s time for us to really start putting a plan in place, have hearings, and for the governor to hold some town halls and draw more attention to it.”

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Sen. Gardner Satisfied with Trump Administration’s Position on Legal Cannabis

Following Attorney General Sessions’ rescinding of the Cole Memorandum, the most vocal opposition has come from within the Republican Party.  Senator Cory Gardner has consistently held up Department of Justice nominees based on his perception that Gen. Sessions reneged on a promise to continue the Obama Administration’s decision not to enforce cannabis laws in states that have legalized.

Recently, Sen. Gardner and President Trump had a private discussion about the cannabis industry and Gen. Sessions.  In response, Sen. Gardner dropped his attacks on Department of Justice nominees, noting:

“I have received a commitment from the president that the Department of justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry.  Furthermore, President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.”

Portraits of Senator Gardner and President Trump

Sen. Gardner and President Trump

While this statement does not offer particulars, two important questions emerge.  The first is whether any leniency vis a vis legal cannabis will only be afforded to Colorado – the state with the Republican legislator whose actions were negatively impacting a Republican political agenda – or to all states with legal cannabis (irrespective of the party affiliations of their elected officials).  The second focuses on how serious the President (and the Congress) is about a pledge to resolve the discrepancies between state and federal marijuana laws.

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Bipartisan Group of Senators Fight Back Against Attorney General Sessions

On February 12, 2018, a bipartisan group of senators wrote a letter (“the Letter”) to Sen. Thad Cochran (R. Mississippi), Chairman of the U.S. Senate Committee on Appropriations and Sen. Patrick Leahy (D. Vermont) to fight back against Attorney General Sessions’ actions on January 4, 2018 which rescinded the Cole Memorandum.  The Letter supports the regulatory frameworks of the states which have legalized recreational adult use cannabis and argues that General Sessions’ actions would “deny medications to the sick, push individuals back into illicit markets, and nullify the previously-effective regulations – all while thwarting the democratically-expressed will of the states.”  The Letter otherwise strongly supports states with legal cannabis and attacks Attorney General Sessions’ actions against cannabis.

Jeff Sessions

Attorney General Sessions

The goal of the Letter is to convince the Senate Committee on Appropriations to add language to spending bills to prevent federal enforcement of cannabis laws.  This idea follows the Rohrabacher-Farr Amendment, which prohibits the Justice Department from spending funds to interfere with the implementation of state medical cannabis laws.  This amendment safeguards the medicinal cannabis industry from federal law enforcement.  The Letter seeks to do the same thing for recreational adult use cannabis.  While the Rohrabacher-Farr Amendment and the proposed amendment to the spending bill do not re-write the Controlled Substances Act, the effect would be (and is for medicinal cannabis) to render it meaningless by eliminating funding for its enforcement of cannabis laws.

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Municipalities Continue to Voice Opinions on Legal Cannabis

New Jersey’s efforts to legalize adult use recreational cannabis are moving forward, full steam ahead.  While Governor Murphy has somewhat walked back his pledge to sign a legalization bill into law in his first 100 days, he has stated that he is not deterred by Attorney General Sessions and continues to study how legal cannabis has operated in the eight jurisdictions where it is legal.  Moreover, Senator Scutari has reintroduced his legalization bill to the legislature and Deputy State Assembly Majority Leader Reed Gusciora, who co-sponsored Scutari’s bill, also plans to introduce his own competing bill in the coming weeks.  Gusciora’s bill is rumored to allow for home-grows and to limit the number of cannabis businesses who are given licenses.

Atlantic City Boardwalk

Notwithstanding this forward momentum, certain municipalities have launched preemptive attacks on legal cannabis.  The Ocean County Board of Freeholders is expected to approve of a resolution against the legalization of cannabis.  The Monmouth County Board of Freeholders passed a similar resolution last month.  These resolutions do not actually carry any legal authority – the proposed bill requires municipalities (towns) to make the decision about legal cannabis, not counties.  The resolutions are also seemingly premature given that the counties are implementing a ban before there is any consensus about what legal cannabis will actually look like in New Jersey.

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Cannabis Businesses and State Banks: a Possible Solution to a Difficult Issue

One of the more frustrating aspects of the cannabis industry for business owners is the lack of available banking services.  Many banks are hesitant to provide banking services to the cannabis industry because of the conflict between state legality and federal illegality, not to mention the obligation of banks to file Suspicious Activity Reports for transactions that may violate the Bank Secrecy Act.  While the number of banks providing services to the cannabis industry is growing, obtaining banking services is still very challenging for cannabis entrepreneurs.  The standoff between banks and the cannabis industry manifests in many frustrating ways, including but not limited to strictly cash businesses, banks who charge excessive services fees to cannabis business clients and the need to use credit unions in lieu of traditional banks (who themselves are fighting their own legal battles).

Iconic image of a bank.

Recently, California proposed an idea that could very well reshape the entire cannabis industry: a state sponsored bank for cannabis businesses.  California State Treasurer John Chiang and Attorney General Xavier Becerra are planning to conduct a feasibility study to test whether a California state bank would help California’s many cannabis businesses.

“We are contending with the emergence of a multi-billion dollar cannabis industry that needs banking services, and a private banking industry that is stymied by federal law in meeting the needs of the new industry,” Chiang said.

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