Feb 22, 2021

Gov. Phil Murphy Signs Legislation Legalizing Cannabis for Adult Use in New Jersey

The new law will significantly expand the state's cannabis market, creating a variety of opportunities for local entrepreneurs through provisions that promote small businesses and social equity

TRENTON, N.J. — Gov. Phil Murphy signed into law Monday a package of bills to legalize, regulate and tax cannabis for adult use in New Jersey. Voters signed off on legalization in November when they approved Public Question 1 (67-33), which required the Legislature to implement it and determine the details. Lawmakers passed enabling legislation (A21) and an accompanying decriminalization bill (A1897) on December 17. A cleanup bill (A5342), which addressed a discrepancy between the bills relating to underage possession of cannabis, was approved earlier today.

The bills took immediate effect, but possession of limited amounts of cannabis will not become legal for adults 21 and older until the commencement of adult-use sales, which is expected this summer. The legislation calls for the creation of a five-member Cannabis Regulatory Commission that will be tasked with issuing detailed regulations by June 2021 that will govern virtually every aspect of the adult-use cannabis industry. Applications for adult-use cannabis business licenses will begin to be accepted 30 days after the regulations are issued.

"This is a major milestone on the path to ending cannabis prohibition in New Jersey," said Jennifer Cabrera of Vicente Sederberg LLP, a national cannabis law firm that helps shape and implement cannabis laws and regulations across the U.S. Based in Union County, she co-manages the firm’s New Jersey and New York offices and works closely with state lawmakers and regulators on cannabis policy issues.

The legislation establishes a licensing system for cultivators, manufacturers, wholesalers, distributors, retailers, and delivery services, in addition to testing labs. Vertical integration is prohibited and cultivation licenses are capped at 37 for the first two years. Twenty-five percent of licenses must be distributed to microbusinesses, which are comprised of 10 or fewer employees and must be locally owned. Microbusinesses can obtain any of the six license types through a simplified application process, and they are exempted from the cap on cultivation licenses. 

"The legislation was intended to promote small locally owned businesses and should foster a vibrant craft cannabis industry in the state," Cabrera said. "It reserves licenses for microbusinesses and offers them a streamlined application process that will reduce barriers to entry and help them get a footing in this growing industry. There are some additional steps we would like to see policymakers take to make it easier to operate these microbusinesses, and we look forward to working with them as they fine-tune the system. Still, this is a great starting point and opens the door to a lot of exciting opportunity for local entrepreneurs."

The law also includes several provisions aimed at promoting social equity in the cannabis industry and repairing damage caused by prohibition. For example, it specifies that 30% of licenses must be allocated to businesses owned by women, minorities, or disabled veterans, and at least 25% should be allocated to residents of impact zones, which are defined as municipalities with more than 120,000 residents that: rank in the top 40% of municipalities in the state for cannabis-related arrests; have a crime index of 825 or higher; and have a local average annual unemployment rate that ranks in the top 15% of municipalities.

"New Jersey has adopted some of the strongest social equity provisions we’ve seen," Cabrera said. "Contemplating these issues at the outset of the process will likely prove to be a big advantage for the state. It is much easier to build these considerations into the system than it is to go back and incorporate them later."

Vicente Sederberg has worked on social equity and small business policy matters and programs around the country. It has also provided pro bono and reduced-fee legal assistance to a wide variety of equity and economic empowerment program applicants and participants.  

"We are committed to working with microbusinesses and social equity applicants to foster a vibrant local cannabis industry that reflects the racial, ethnic, and economic diversity of the community. Ending cannabis prohibition and promoting diversity in this new industry does not eliminate injustice or fix all the harm caused by the drug war, but it is an important step toward a fairer and more equitable Garden State."