Legalization status update: New Jersey and New York

By Alex Halperin
Jan 12, 2021

In November, New Jersey voters made the Garden State the most populous northeast market to legalize REC. Many observers believe the move will set off a domino effect of legalization along the Acela corridor between Boston And Washington D.C. Fear of missing out on tax revenue is a powerful motivating force in the region, said Steve Schain, an attorney with Hoban Law, citing a similar dynamic with gambling. 

However, much has to happen before REC is available even in New Jersey. Since the election day vote, legislators put together a bill that would create a framework for the state’s REC market, but it collapsed in recent days, with Gov. Phil Murphy (D) insisting that it include fines for underage users. 

The position strikes some observers as bizarre. Jennifer Cabrera, a New York-based attorney with Vicente Sederberg, said “It just hurts poor kids basically.”

Cabrera described the bill as the “starting gun.” Once it’s renegotiated and signed, the state cannabis commission can begin drawing up the finer points of regulation in the state and companies can begin to apply for licenses. She said the state market is likely to be comparable to Massachusetts, in that it’s likely to be expensive to participate and loaded with regulation.

“They’ll reach some sort of compromise,” Cabrera said. “But not without some confusion and delay.” One possibility she suggested would be an additional bill addressing the underage use issue. 

But the clock is ticking. During his 2017 campaign, Murphy said he wanted to legalize REC in his first hundred days in office. Now Cabrera said it could be well over a year after the bill gets signed that REC goes on sale. 

At the same time, it the bill as it’s currently written contains much that the industry will appreciate. Among other things, it would allow retailers and permit holders to create consumption lounges. It would also allow home delivery, which was just approved in Massachusetts, the northeast’s most mature market.

The bill would also create a government office to promote participation in the industry by people from socially and economically disadvantaged communities. The office’s effectiveness will be evaluated on whether 30% of licenses are awarded to businesses owned by women, minorities and disabled veterans, a bar, that would be a high bar in any state.

One aspect of the New Jersey law that may help with that mission is that microbusinesses aren’t subject to the state cap of 37 cultivation licenses. 

However, similar efforts in other states, including California and Illinois, have struggled to foster minority owned businesses. Trying to do so has been the focus of litigation that has delayed the industry’s overall growth. There’s reason to expect this to be an issue of ongoing contention in New Jersey as well, not just, as Hoban attorney Schain said, it’s a state where he said generally, “nothing’s ever resolved.” 

At this point, Schain said, analyzing the New Jersey market is a bit like doctors examining a baby that’s still in utero and trying to divine where it will go to college.

New York is watching

However, it seems clear that across the Hudson River New York is paying attention. Amid the state’s pandemic related budget woes, there’s widespread speculation that New York could legalize REC in 2021. New York Gov. Andrew Cuomo (D) is an enthusiastic supporter. Last year he even expressed interest in legalizing even after Covid overrode everyone’s plans. 

The key sticking point in New York, Cabrera said, is what to do with the tax revenue. The New York Marijuana Regulation and Taxation Act (MRTA), introduced last week by State Senator Liz Krueger, would earmark revenue for social causes. 

Last year, Krueger’s bill of the same name differed from a bill from Cuomo in that MRTA allocated revenue specifically for social causes whereas Cuomo’s gave him discretion on how to allocate the funds. Cuomo is expected to release his new bill next week. 

Cabrera gave REC a slightly better than 50% chance of passing this year.

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