On August 19, 2021, the New Jersey Cannabis Regulatory Commission (CRC) issued the Initial Rules for Personal Use of Cannabis. The initial rules are highly anticipated, especially considering New Jersey’s proximity to New York and the potential impact these rules may have on New York’s pending plans.
The initial rules cover all aspects of recreational cannabis in New Jersey, including the license application process, social equity, and the role of municipalities in shaping the actual impact of recreational cannabis legalization. CRC published A handy summary The initial rules are divided into overall goals and key clauses in each chapter.
The initial rules contain a lot of information, so we divide the summary into two articles. The first is the stated goal of the initial rules, and the second is the key clauses of each chapter.
The stated goal is to increase opportunities for the cannabis industry for people in the target communities. The preliminary rules establish three types of cannabis companies, which will receive priority review and approval:
- Social Equity Business, Owned by people who live in economically disadvantaged areas of New Jersey or have been convicted of marijuana crimes in the past;
- Diversified enterprise, Owned by a minority, female, or disabled veteran, and have been certified by the New Jersey Department of Treasury; and
- Affected area business, Located in the affected area, owned by people in the affected area, or hired by residents of the affected area. Affected areas are defined as cities with large populations, high unemployment rates, high crime rates or arrests for marijuana.
Regarding the actual impact of priority review, whenever an application is submitted, the application of each type of equity applicant will be reviewed before the non-equity application.
Another important note: the initial rules stipulate that the CRC will establish a social fair consumption tax, which is a planting cost that may increase as consumer prices increase. The income generated by the social equity consumption tax will be used to fund the economic and social services of the affected area.
The focus of the initial rule is to prevent people 21 years and younger from using cannabis. This includes advertising. There are also physical requirements for controlling odors and forcing communication with neighbors. To this end, the initial rules require that every company has a staff member responsible for receiving complaints from neighbors.
From an operational perspective, companies will need to provide consumer education materials, including information on drug abuse risks and side effects of cannabis use. The product must have meticulous labeling, including a statement about potential health risks. The packaging must be “child-safe” in both form (no cartoons, trademarks, etc.) and material (physical).
An important rule: biscuits, brownies and other edible products like food are prohibited.
Small business priority
The most notable thing in the CRC summary is that the initial rules include a conditional permission process. Small businesses can choose to submit conditional applications that only require background disclosure, business plans, and regulatory compliance programs. If approved, qualified applicants will have 120 days to find a suitable location, obtain municipal approval, and apply for conversion to a formal permit. Small businesses also do not need to prove past experience in the regulated cannabis industry.
The CRC effectively codified the participation of municipalities. The cannabis business can only be demonstrated if the applicant can prove:
- Support from the municipality they intend to operate;
- District approval; and
- It has been verified that their operations comply with any municipal restrictions.
The municipality has the power to determine business hours, the number and types of businesses allowed to operate, and whether to impose a 2% transfer tax on any sales between cannabis businesses. The municipality can also set any other restrictions or requirements that apply to any other type of business.
Overall, CRC is clearly focusing on improving the prospects of equity applicants and small businesses, while also gaining support from local municipalities. Stay tuned for our breakdown of the key terms of the initial rules in Part 2.