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.
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
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.)
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.”
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.”
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.”
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.
This blog has discussed Attorney General Sessions and his recent actions to rescind the Cole Memorandum, an Obama Administration directive that federal law enforcement should not pursue cannabis businesses operating legally within a state’s regulatory framework.
Recently, General Sessions explained that, notwithstanding the retraction of the Cole Memorandum, the Department of Justice would still functionally follow the same policies based on a lack of resources:
“We’re not going to be able, even if we desired, to take over state enforcement of routine cases that might occur,” Sessions acknowledged. “Federal agents are highly paid, highly trained, and they work on cases involving cartels, international organizations, major distribution networks, large amounts of cash. And they deal with criminal organizations, RICO-type cases. And we’re not out there prosecuting those cases every day.”
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.
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.
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.
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.
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).
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.
On January 4, 2018, Attorney General Sessions unveiled a new policy that effectively rescinds the Cole Memorandum, which set forth the Obama Administration’s position that the federal government would not generally not enforce cannabis laws in states where it is legal. This is an about-face from General Sessions’ recent testimony where he suggested he would maintain the Obama Administration’s position. General Sessions’ new policy comes at a time where support for legalization has never been higher, as a recent Gallup poll suggested 64% of Americans favor legalization. Unlike the Cole Memorandum, which discouraged enforcement of cannabis laws, Gen. Sessions’ policy allows US Attorneys to exercise their own judgment as to whether to enforce cannabis laws.
Clearly, General Sessions’ announcement has the potential to have a major impact on the legal cannabis industry. His new policy, though, has already started a political battle. Cory Gardner, the Republican Senator from Colorado, immediately took to Twitter to oppose General Sessions’ action, arguing that cannabis policy should be a states’ rights issue. Sen. Gardner stated that he was “prepared to take all steps necessary, including holding DOJ nominees, until the Attorney General lives up to the commitment he made to me prior to his confirmation.” Presumably, the commitment Sen. Gardner spoke of was adherence to the Cole Memorandum.