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The Blunt Reality of Cannabiz
While adult-use recreational cannabis has been legal in New Jersey for a year and a half, industry insiders assess its evolution and anticipate plans for the future.

by Carly Murray

The prospect of legal marijuana has been a journey across decades. West Coast states became tourism hotspots for recreational purchase a little more than a decade ago, and researchers in the ‘90s began demonstrating marijuana’s medical benefits in alleviating symptoms of illnesses such as HIV, PTSD and cancer for all ages without dangerous side effects or signs of addiction. New Jersey legalized medical marjuana in 2010, following the precedent set by California in 1996 with the Compassionate Use Act.

From there, the industry expanded across the country despite the federal classification of cannabis as a Class 1 drug—which many cannabis experts disagree with. This and other longstanding misconceptions still seep into today’s cannabis market, creating obstacles in a relatively new industry. Despite efforts by the Cannabis Regulatory Commission (CRC) to prioritize veterans, BIPOC, women and individuals affected by prior marijuana convictions, self-starters still face both financial and legal impediments that complicate launching small-business dispensaries.

“The provisional licensing process … can take some time,” says Seth R. Tipton, Esq., partner of Florio Perrucci Steinhardt Cappelli & Tipton LLC and author of New Jersey Cannabis Regulation. “While you get a leg up and get a conditional license first, if you don't have the ability to raise the capital necessary to start a business, or you don't have a location that you can secure, you're still going to have the same troubles as everyone else. It's an extraordinarily thin market to raise capital. With interest rates where they are today, it's very hard for cannabis businesses to raise money when there are more traditional investments available with sizable returns.

“They're under an extraordinary amount of stress and challenge here. You're starting a program from the ground up. You have no legacy industry. As a result, the CRC is dealing with those sort of nuts-and-bolts regulatory issues and operations issues for new licenses, at the same time as they're trying to fundamentally change and address the war on drugs and all the effects. That's a lot to try to do. It's an ambitious plan. I have seen in my own clients that the diverse clients have tended to move faster through the licensing process, which I think was a key goal.”

New Jersey has thus far handled dispensary licensing with caution. Large, corporate dispensaries with locations in other states dominate the market in retail for recreational and medical, as well as for cultivation and distribution. Yet, the state provides little guidance on operation regulations, as it has been primarily the decision of local townships.

“Being able to get through the municipal application process, getting the property, the building—it's such a highly regulated business that it's really quite expensive. It's not hard to spend a quarter of a million dollars on getting from A to Z, and I have clients that have frankly spent much more than that to get through the process. So, you have to have some real upfront money to be able to get into this at all,” says Sheila M. Mints, Esq., chair of Capehart Scatchard’s Cannabis Law Group, adding that supply-and-demand is a challenge, too. “It can take two years to get from getting a license and cultivation to actually getting product out the door.”

“It's difficult for someone in a mom-and-pop scenario, and that's sort of what encourages the corporate actors,” she continues. “In New Jersey, at least the stated purpose was to allow disadvantaged Jersey residents and mom-and-pop-type businesses to open. …  It's so wide-ranging in terms of what their municipal requirements are, there’s really no standardization there.”

Beyond the cannabis industry, a lack of clarity is contributing to some organizations’ struggle to balance a legal recreational market with workers’ on-site safety and performance.

“While the law prohibits employers from taking any adverse action against employees because of a positive cannabis test alone, employers are not prohibited from maintaining a drug- and alcohol-free workplace,” notes Susan S. Hodges, Esq., a shareholder and chair, labor and employment, at Parker McCay. “Most employers … had to adjust their drug-testing policies because the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA) requires an employer, prior to conducting most marijuana drug testing, to conduct a ‘physical evaluation’ of an employee and to use a so-called WIRE-certified individual to make a decision about whether the employee is impaired by marijuana. … Unfortunately, we are still waiting for further guidance on how employers can get an individual trained to be an interim wire.”

Hodges does offer some advice as employers wait for further guidance to come to fruition.

“Review and revise your policies to make sure that you are in compliance with the new law,” she says. “Confirm that your managers/supervisors are not disciplining employees based on a positive drug test without some physical sign of impairment. Adopt a reasonable suspicion observation report form and train specific employees on what to look for when it comes to the use of marijuana in the workplace. Last but not least, pay attention to any updates from the NJ-CRC, because this is an area of the law that will continue to evolve.”

Insiders say growers and distributors are as scarce as firm guidelines, too. Federally, supply cannot be purchased across state lines. This allows for regional cultivation and a characterizable local market, but it also hinders the economic possibilities—especially with only a few cultivators right now.

“The cannabis industry has always been a ‘race to the bottom’ for pricing, and once the licensed dispensaries and grow houses populate our state, cannabis pricing and profitability will be reduced drastically,” adds Ryan Romanoli, owner of Country Roads Cannabis.

This year, one of the companies that was the primary source of marijuana cultivation in New Jersey laid off a large number of production facility workers. The nature of the cannabis industry allows for a vast variety of jobs, but its current status leaves much to be desired in protecting workers’ rights. Luckily, UFCW Local 360 has that exact goal in mind.

“In our collective bargaining agreements in the union contracts, we put language in there to make sure that their jobs are protected and they can't just be fired or thrown to the side,” says Hugh Giordano, director of organizing at Local 360 Cannabis Campaign. “We try to negotiate with companies that if layoffs are to happen, if there is some type of economic devastation happening in the industry, that layoffs are fair and transparent, and workers know what to expect. … When CEOs and board trustees lose their job, they get a million dollars and whatever else—so why shouldn't the same thing be fair for the worker? There should be some type of parachute there to make sure that they can buy food for the family, they have health care.”

As the expectations of workers’ rights expand to allow cannabis to have the same standards as any other business, experts like Giordano are also working to diminish lingering stigmas so dispensaries can ultimately become just another retail operation.

“I see [social media memes] that say something like, ‘Would you quit your job today to work in the cannabis industry?’ with a million comments like, “I’d love to quit my job and just smoke weed all day.’ That is not how it is if you walk into a retail dispensary. It is similar to walking into a Rite Aid or CVS: Those workers are knowledgeable, they're trained, they have excellent customer service relations and also health care skills. A lot of workers that come into the dispensaries and cultivation sites usually have degrees in some form of medicine, or medical training,” explains Giordano.

More jobs are forecasted to open up as the edible market expands. Part of the delay has to do with distributing confectionery products from a food regulation standpoint, but most notably, the hesitation is due to packaging and advertising concerns. Essentially, it’s their “likelihood of diversion,” according to Tipton. 

As many cannabis insiders are aware, though, the gray area market is thriving with cannabis’ legal status. Unlicensed delivery services, stores and pop-up markets sell dispensary products at lower prices and with edibles one might see in a California dispensary, such as brownies or even drinks. While some argue this causes unfair competition with dispensaries that go through the lengthy process of legally obtaining a license without any protocol for enforcement, others recognize that this may be the only option in an industry requiring hundreds of thousands of dollars of upfront money. Many banks still refuse to work with cannabis companies, especially where loans are concerned.

“The banking and credit-card processing laws are basic hurdles legitimate cannabis businesses face. The federal and state government need to address this issue, as they are losing millions of dollars in taxable revenue that goes unaccounted for while the cannabis world is largely relegated to dealing in cash transactions,” explains Romanoli.

Regardless, any industry is expected to face hurdles in the beginning—especially one with such a vivid history in legislation. Developments already in progress may allow for the cannabis business to strengthen with its resilience and entrepreneurial initiatives. Ultimately, it is about an expansion of supply and product, but it is more so about assisting and protecting cannabis industry professionals. Only time will reveal its level of success, especially if the state, municipalities and other local businesses can work in harmony with this budding industry.

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Published (and copyrighted) in South Jersey Biz, Volume 13, Issue 11 (November 2023).

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