New Jersey joined Arizona, Montana, and South Dakota as states whose voters chose to legalize recreational marijuana at the ballot box in November 2020.
Now, 15 states across the nation have legalized recreational marijuana, but New Jersey’s ballot measure differs from the rest because it did not prescribe regulatory oversight.
The amendment language approved by New Jersey’s voters allows for the possession and sale of marijuana without any regulation by the state. The proposal does specify a marijuana market is “lawful and subject to regulation by the Cannabis Regulatory Commission,” but does not require the commission to declare rules and regulations before businesses begin to open their doors in January. This is unusual.
It typically takes state regulatory agencies many months to go through the process of drafting a regulatory framework, soliciting public feedback, and approving a final set of rules for a recreational marijuana market.
The Michigan Marijuana Regulatory Agency, for example, took a full year drafting and adopting its regulatory framework. It likewise took a year after legalization passed at the ballot before California was able to launch its recreational cannabis market, and, due to several factors, including poor regulatory framework, that market is still fractured and largely overshadowed by the state’s vibrant black market.
There is simply no way for New Jersey’s Cannabis Regulatory Commission to have a comprehensive regulatory framework in place before the production and sale of marijuana products is allowed to begin in a few short weeks. These regulatory frameworks are typically expansive and include details about inventory tracking, product testing, packaging, labeling, advertising restrictions, zoning, personnel management, training, and other subcomponents.
As the Asbury Park Press reported, the state legislature is trying to quickly grapple with some of these issues:
Just two weeks before a constitutional crisis over legal weed, a bill to set up the framework of a legal marijuana industry appears headed to the floor for a full legislative vote.
The Senate Judiciary Committee on Monday approved the Cannabis Regulatory, Enforcement Assistance, & Marketplace Modernization Act by a 6 to 5 vote, mostly along party lines — with Democrats voting in favor and Republicans, joined by Sen. Paul Sarlo, D-Bergen, voting against.
That bill, along with a decriminalization bill that would eliminate all penalties for possession of up to 6 ounces of weed, is required to be enacted in order for the ballot question and constitutional amendment overwhelmingly approved by New Jersey voters to take effect on Jan. 1.
The bill is scheduled for a hearing in the Assembly Appropriations Committee on Tuesday morning. If that committee passes it, the bill could then get approval by the full Assembly and head to Gov. Phil Murphy’s desk on Thursday.
“You’re not going to arrest anybody anymore after Jan. 1. What are you gonna do on Jan. 1 if we don’t get this passed? We’re going to have a constitutional crisis like you’ve never seen before,” said Sen. Nick Scutari, D-Union, judiciary chairman and primary sponsor of the bill.
“You’re going to have the constitution saying it’s legal and we’ll have no regulations. We’ll have shirked our responsibility to the public to pass reasonable regulations of an industry that they have commanded us, by greater than a 2-to-1 margin, to legalize and regulate.
“So if we don’t get this done, it’s the wild west on Jan. 1.”
New Jersey might want to slow down rather than make major legislative mistakes.
Based on the state’s new constitutional language, aspiring marijuana entrepreneurs could begin cultivating and selling marijuana products while New Jersey works to put a regulatory system in place. One option to avoid a completely unregulated market in January would be to permit the development of an open marketplace. There is precedent for this—California’s original medical marijuana market remained largely unregulated for 20 years after the passage of Proposition 215 in 1996. Customers would certainly appreciate the cost savings of such an approach while entrepreneurs without considerable financial backing would find it easier to compete with deep-pocketed and well-connected multi-state marijuana companies.
The political or legal danger in this approach for the state, along with cannabis businesses and customers, however, is that a totally unregulated recreational marijuana marketplace could possibly invite massive federal law enforcement crackdowns. Regardless of state laws on the books, marijuana remains a federally illicit substance. Thus, any business that engages in trafficking marijuana can be considered a criminal enterprise if the federal government wants to deem it as such.
Federal authorities have given leeway to marijuana businesses that legally operate in compliance with strict state regulatory regimes, which is why those regulatory frameworks are so extensive.
In 2013, during the Obama administration, United States Deputy Attorney General James Cole penned an advisory memo to federal prosecutors instructing them to concentrate their efforts away from marijuana businesses that satisfy certain criteria, such as preventing unlawful diversion of marijuana to other states or to minors. The Cole Memo was formally rescinded by then-Attorney General Jeff Sessions in 2018, but, in practice, federal prosecutors have mostly continued to abide by its directives.
A totally unregulated cannabis market in New Jersey, however, could challenge the federal government’s willingness to look the other way.
To avoid or reduce the odds of this potential outcome, New Jersey regulators could enact a simplified set of marijuana regulations as quickly as possible. A simple system could require marijuana business owners to register with the state so the government has a database of all legal operators. The state could also require each business to maintain detailed records of sales. This basic framework could be established to allow the commission to avert federal intervention while also giving the state more time to agree to rules that reflect the best practices that other states have developed. Then, if problems emerge that the market cannot solve on its own, rules could be added to deal with them.