New Jersey Finally Legalized Cannabis. What’s Next for Equity in the State's Industry?
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New Jersey Finally Legalized Cannabis. What’s Next for Equity in the State's Industry?

Stopping low-level cannabis arrests and moving forward on an initiative the state’s voters approved nearly four months ago is just the start.

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March 2, 2021

Last week, New Jersey Governor Phil Murphy ended a weeks-long legislative saga that saw cannabis legalization—supported by more than two in three voters in November—finally go into effect. On Feb. 22, Murphy signed a bill to legalize and another bill clarifying penalties for underage possession, a sticking point that had stalled the development of the legal industry. 

Stopping low-level cannabis arrests and moving forward on an initiative the state’s voters approved nearly four months ago is just the start. Those fighting for a fair industry in New Jersey say there’s still a long way to go to ensure the new state market helps correct the previous decades of biased law enforcement.

Racial disparity in New Jersey prohibition

Between 2010 and 2018, Black people were 3.5 times more likely to be arrested for cannabis across the state. In certain counties, that discrepancy shoots up to over 13. And according to the ACLU, the disparity has gotten worse over time—in 2000, Black people were arrested 2.2 times as often.

“New Jersey averaging 32,000 arrests a year for low-level, nonviolent, minor possession of cannabis—and 80% of those arrested were people who look like me—is not a fluke or happenstance,” said Leo Bridgewater, Director of Veterans Outreach for Minorities 4 Medical Marijuana (M4MM) and an advocate in the state’s effort for cannabis reform.

He and others involved in New Jersey’s legalization process, who spoke to Cannabis Business Times and Cannabis Dispensary via email, weighed in on how Garden State lawmakers should proceed from here on out to create an industry that can begin to compensate for many years of racially biased law enforcement.

What will it take for a fair industry?

Recent estimates from The New York Times project that legal cannabis will bring the state of New Jersey more than $125 million in annual revenue. In many other legalized states—from early-movers like Colorado to newcomers like Illinois—markets are dominated by white-owned businesses, who often control 80 to 90% of state industries.

“There have always been glaring social justice concerns and obvious inequity in the high number of arrests of minority residents. Now, finally, this is the time for it to stop,” said Assemblyman Jamel Holley in a statement to the media announcing the bill’s signing.

Proponents of an equitable industry say that New Jersey could end its long-running racial and socioeconomic disparity in cannabis with a few key steps:

Equity licenses

With varying degrees of success, states like Michigan and California have offered special licenses for people from cities and counties hit hardest by cannabis prohibition. Given the disparity in arrests between various counties of New Jersey, this approach is one option upcoming legal market. 

Matt Platkin, partner at Lowenstein Sandler and former chief counsel the governor, said the state intends to follow a similar strategy.

“In drafting this legislation, the governor and the legislature placed a heavy emphasis on those communities that were disproportionately affected by the criminalization of cannabis,” said Platkin. “Priority for new licenses will be given to applicants from those communities, as well as to individuals who reside in New Jersey. The legislation also seeks to issue at least 30% of all new licenses to minority, women or veteran-owned businesses.”

Bridgewater noted that the bill’s text includes the creation of an Office of Minority, Disabled Veterans, and Women Cannabis Business Development to help empower disadvantaged entrepreneurs who still want to participate in the industry. This office will be part of New Jersey’s Cannabis Regulatory Commission (CRC), which will oversee the state’s new industry and the way it creates standards for cannabis licensing.

Funding from tax revenue

Cannabis tax dollars could serve as a boon to state-level economies, many of which are still suffering under the fiscal strain wrought by the pandemic. California recently announced the state has brought in over $2 billion in tax revenue from the legal cannabis industry since the program launched in 2018.  

New Jersey’s cannabis tax structure begins with a 6.6% state sales tax, on top of which can be added a 2% tax for towns and cities. Under the new law, the CRC also has the option to implement a sliding excise tax earmarked for social equity causes. This unique structure varies from $10 to $60 per ounce depending on the retail cost of the product.

Home grow

For decades, supporters of home grow laws have argued that allowing people to grow their own cannabis is one of the easiest ways to ensure universal access. Late efforts to pass a separate bill to allow medical patients to grow were unsuccessful, making New Jersey one of the only states with adult-use and medical cannabis—but no home grow. State officials expressed fears it would keep money flowing into legacy cannabis markets and stall the growth of the legal industry, a claim dismissed by proponents.

“Just because you craft brew or have a pizza oven at home doesn't mean you won't grab a beer and a slice of pizza,” said Chirali Patel, a New Jersey-based attorney, cannabis entrepreneur and executive board member on the New Jersey State Bar’s Cannabis Law Committee. “Home grow is a basic right and certainly one for patients at a minimum.”

Looking ahead

Attention in the state’s developing cannabis industry will now shift to the formation of the CRC and the way it chooses to implement its rules and execute on its new mandate. Bridgewater, who predicted adult-use sales will begin in 12 to 18 months, also pointed out the importance of the personnel leading the state’s new cannabis agency. Dianna Houenou, former senior adviser to Murphy and policy counsel for the state’s ACLU chapter, will chair the CRC. Murphy announced the appointment of the final two members of the five-person commission last week.

Above all, cannabis legalization advocates are hoping it will help lead to additional reforms that continue addressing the longstanding racial disparities in New Jersey law enforcement. 

“The intentional targeting and tormenting of people and communities of color in this state has been a massive money maker for the prison industrial complex,” said Bridgewater. “Cannabis legalization only took away one tool out of a box filled with many others. Ending the targeting and tormenting of Black and brown communities for prison profits is how we truly begin to heal together as a state and nation.”