Fox Rothschild LLP

The New Jersey Legislature, on December 17, 2020, passed the “New Jersey Regulatory Enforcement Assistance and Marketplace Modernization Act,” which governs the development, regulation and enforcement of the personal use of products containing cannabis by individuals aged 21 and older. It tasks the state's Cannabis Regulatory Commission, which oversees New Jersey’s existing medical program, with overseeing the recreational market, which likely will not be up and running until 2022.

The act also provides for criminal justice reforms with respect to enumerated offenses associated with manufacturing, distributing or dispensing smaller amounts of marijuana. The act vests the commission with the authority to promote participation in the industry by minorities, women and disabled veterans as well as individuals from socially and economically disadvantaged communities. The goal is to issue not less than 30% of the total number of cannabis licenses to such businesses with not less than 15% issued to minority-owned businesses and not less than 15% to women-owned businesses.

The act establishes six “marketplace” classes of licensed businesses:

  • Class 1 Cannabis Cultivation License
  • Class 2 Cannabis Manufacturer License
  • Class 3 Cannabis Wholesaler License
  • Class 4 Cannabis Distributor License
  • Class 5 Cannabis Retailer License
  • Class 6 Cannabis Delivery License

Application Process

Applications will be scored and reviewed based on a point scale, with the commission determining the number of points, point categories and system for point distribution. In addition to the point scoring, priority will be given to applications based on “impact zones.”  At least 10% of the total licenses issued to each license class and at least 25% of the overall total number of licenses issued would be designated for “microbusinesses.”

The commission’s goal will be to complete review of a license application within 90 days of submission and, if approved, issue the license within 30 days after notice of approval. The act also allows the commission to issue a “conditional license” whereby such applicants would not need to comply with every aspect of the regulatory requirements for a full license. Instead, conditional license applicants would need to provide sufficient plans for actions to be taken to achieve full compliance during the 120-day period following issuance of the conditional license, which could be extended for up to an additional 45 days at the commission’s discretion.

Licensing Provisions 

The act increases the number of available clinical registrant permits from four to five and allows alternative treatment centers to cultivate at up to two physical locations subject to a limit not to exceed 150,000 square feet of bloom space.

During the initial 24-month period following enactment, there are limitations on the number and classes of licenses any one licensee may hold. Specifically, a licensed cultivator, manufacturer, wholesaler, distributor or delivery service cannot also be a licensed retailer and vice versa. Additionally, a cultivator or manufacturer may only hold two licenses at the same time, although the restrictions do not apply to a vertically integrated medical alternative treatment center.  Moreover, during this 24-month period, there will be a limit of 37 cannabis cultivators. The act does provide and allow for the holding of various classes of licenses after this initial 24-month period.

Prior to and during the transition period leading up to eventual retail sales, each municipality is provided the option to authorize and regulate the number of licensed businesses, as well as the location, manner and hours of operation within its jurisdiction. A municipality has 180 days following the law's enactment to adopt an ordinance prohibiting any operations within its borders, but cannot block the delivery of cannabis items to consumers located therein.

The act also provides for certain types of license holders to apply for an endorsement to operate a cannabis consumption area at which on-premises consumption could occur. These consumption areas can be inside or outside with the act further prescribing certain requirements for the areas.

Fees, Penalties and Taxes

All license fees and penalties and tax revenues collected from medical cannabis transactions and all tax revenue collected from retail sale transactions will be deposited into the “Cannabis Regulatory, Enforcement Assistance and Marketplace Modernization Fund.” These funds will be apportioned by the Legislature annually with guidance more specifically set forth in the text of the act. Important to many, there is an optional Social Equity Excise Fee that could be imposed on personal use cultivation activities. The fee, if imposed, would apply to cultivator sales or transfers and is initially set at 1/3 of 1 percent of the statewide average retail price of an ounce of usable cannabis.

Finally, the legislation provides for certain consumer and employee protections and employer workplace policies as more fully set forth in the language of the legislation.

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