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.
Federal Reserve Chair Asks for Clarity on Cannabis Banking Issues
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.
Early Cannabis Trends in 2019
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 This is an about-face from former Attorney General Sessions, who rescinded the Cole Memorandum, which was the Obama era policy document that effectively told the Department of Justice to only pursue legal cannabis businesses that were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.
Sen. Scutari Advocates for a New Jersey Cannabis Regulatory Commission
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.
NJ Awaits Closed Door Session to Determine Next Steps in Cannabis Legalization
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.
What are Cannabis Microbusinesses?
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.
Recent Polls Suggest NJ Residents Support Cannabis Legalization
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.
Federal Court Finds that Employers in New Jersey are not Required to Waive Drug Test for Medical Marijuana
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.
Out-of-State Partnerships: What is a “Significantly Involved Person”?
Perhaps the most significant change in Sen. Scutari and Sen. Sweeney’s new adult use cannabis legalization bill is the change in residency requirements for cannabis license holders. In earlier iterations of Sen. Scutari’s legalization bill, cannabis license holders had to be New Jersey residents for two years prior to the date of the license application. The thought process behind this requirement was to prevent established cannabis businesses from jurisdictions that have already legalized cannabis from entering the New Jersey marketplace and establishing dominance before New Jersey citizens had an opportunity to gain a foothold themselves.
The new bill has changed that. It creates a defined term known as a “significantly involved person” which essentially means a person or company with a 20% or greater stake in the company applying for a license. § 9(a)(3) of the new bill states that “[a]n applicant shall have a significantly involved person or persons lawfully residing the State for at least two years as of the date of application to receive a license.” Continue reading
NJ Attorney General Temporarily Suspends Prosecution of Cannabis Related Offenses
New Jersey Attorney General, Gurbir S. Grewal, issued a memorandum to New Jersey prosecutors which ordered them to seek adjournments of “any matter involving a marijuana-related offense pending in municipal court.” The term “adjournment” in legal parlance simply means postponing a court hearing until a future date. The adjournments being sought are until September 4, 2018.
Attorney General Grewal’s adjournment date seemingly coincides with the general time frame of when Sen. Scutari anticipates that the New Jersey legislature will again consider the issue of legalized adult use cannabis. Attorney General Grewal has not commented on whether there is an actual connection between the temporary halt in the prosecution of cannabis offenses pending in municipal court and any efforts to legalize cannabis, instead stating that his office is developing “appropriate guidance” for prosecutors.