Licenses

What are Cannabis Microbusinesses?

/ Alexander Banzhaf

Colorado Grow HouseAs 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.

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

/ Alexander Banzhaf
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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Legal Cannabis and Local New Jersey Government

/ Alexander Banzhaf

Understanding the role of local government is critical to the success of potential legal cannabis businesses.  Not only will cannabis businesses need to obtain a license to operate from the Division of Marijuana Enforcement (“DME”), but cannabis businesses will also have to navigate regulations and ordinances set by local governments.

Picture of city hall.

A provision of Senator Scutari’s Bill (“the Bill”) that will invariably cause headaches for legal cannabis entrepreneurs is the local governments section.  The Bill, § 11.  The most complicating aspect of this section of the Bill is that it allows a local government to decide whether it will allow legal cannabis businesses in its borders.  In other words, even if cannabis businesses are deemed legal by the State of New Jersey, individual towns have the right to prohibit them.  Towns are given one year from the date Governor-Elect Murphy signs the Bill into law to decide if legal cannabis businesses will be able to operate in their borders.  If a town does not make a call one way or another, legal cannabis businesses are allowed to operate in the town for five years, and at the end of the five year period, the town is given the opportunity to prohibit the operation of a cannabis business.

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Cannabis Licenses: What New Jersey Businesses Can Learn from Colorado

/ Alexander Banzhaf

The proposed legalization bill drafted by Sen. Scutari (the “Bill”) outlines the types of licenses that will be available to marijuana businesses, but is generally silent on how to actually obtain those licenses.  The Bill intends to create a state agency called the Division of Marijuana Enforcement (the “DME”) and charge the DME with the task of promulgating legal cannabis regulations.   It will be the DME who determines the nuances of licensure – in other words, when it comes to license application and issuance, the Bill essentially tells the DME to “figure it out.”

Image of Colorado and New Jersey Stat Flags.

While this lack of guidance is understandably upsetting for aspiring recreational marijuana business entrepreneurs, the license application process in Colorado provides a possible preview for what the DME may look for when screening potential marijuana business owners in New Jersey.  After all, it is fair to assume that New Jersey will use Colorado as a model in developing a regulatory framework for recreational marijuana businesses given that multiple New Jersey legislators traveled to Colorado to research its regulatory scheme, returning with favorable impressions.  This article will look at the license application process as it presently functions in Colorado and highlight the key aspects of obtaining a license in Colorado that may eventually also be requirements in New Jersey.

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