PrintShare


Publications

What New Jersey’s Vote to Legalize Recreational Cannabis Means

Client Advisory

November 9, 2020

While the final results of the nationwide 2020 elections were not known on the morning of November 4, one of the clear winners of the election cycle has been cannabis legalization. On election night, New Jersey joined eight other states in establishing or expanding their cannabis laws. In New Jersey, citizens overwhelmingly voted on Ballot Question 1 in support of a constitutional amendment to legalize the possession and use of marijuana for persons aged 21 and older. While this is welcome news for proponents of legalization, it is important to understand what the amendment does (and what it does not do).

The Yes vote on November 3rd enabled Senate Concurrent Resolution No. 183 (which was introduced a year earlier), to amend Article IV, Section VII of the New Jersey Constitution. The amendment authorizes the “growth, cultivation, processing, manufacturing, preparing, packaging, transferring, and retail purchasing and consumption of cannabis, or products created from or which include cannabis, by persons 21 years of age or older” subject to regulation by the Cannabis Regulatory Commission or its successor. Even putting aside its conflict with federal law, the amendment does not usher in wholesale decriminalization or legalization of all forms of cannabis. Instead, it applies only to cannabis regulated (and taxed) by the state, in accordance with legislation that needs to be adopted by the legislature and, later, regulations adopted by the commission. The amendment does not take effect until January 1, 2021, and does not apply to (1) medical cannabis, or (2) hemp and hemp derived products like CBD, or (3) unregulated or “black market” cannabis (which will remain very much illegal). Notably, the amendment does not decriminalize possession of unregulated cannabis, and New Jersey’s attorney general recently warned that any such de-criminalization (even of small amounts) must come from the legislature – while simultaneously encouraging law enforcement to exercise their discretion (and hopefully common sense).

The amendment specifically envisions enabling legislation that will confer authority on the commission concerning the legalized form of recreational or adult-use cannabis. The constitutional amendment also specifies that receipts from retail purchases of cannabis or products created from cannabis would only be subject to the sales and use tax, and also to a potential municipal tax up to two percent if authorized by the Legislature. New Jersey expects to generate revenues of up to $126 million annually from taxes on the sale and use of cannabis once the program is up and running. This is in addition to indirect contributions to the tax base through additional investment and jobs.

Hopefully such enabling legislation comes relatively quickly, as New Jersey’s legislators will not be starting from square one. The most likely scenario is that a bill that is very similar, if not identical, to a bill introduced by State Senator Nicholas Scutari last year. That draft law decriminalized possession of small amounts of marijuana by those 21 or older (though it prohibited consumption of marijuana in public places). It also imposed escalating penalties on retail establishments and employees that allow those under the age of 21 to purchase marijuana. It also envisions a licensing regime, with certain preferences for minority and women-owned businesses, as well as rules governing the packaging and labeling of products. As an interim step, while the regulatory framework is worked out, it is possible that the legislature will authorize existing medical dispensaries to begin selling recreation products, giving them an early mover advantage.

In short, stay tuned.

* * *


For more information concerning the matters discussed in this publication, please contact the author Alexander G. Malyshev (212-238-8618, malyshev@clm.com) or your regular Carter Ledyard attorney.


       
[1] https://ballotpedia.org/New_Jersey_Public_Question_1,_Marijuana_Legalization_Amendment_(2020)

[2] https://legiscan.com/NJ/text/SCR183/id/2062318

[3] Which is separately regulated under the "Jake Honig Compassionate Use Medical Cannabis Act," P.L.2009, c.307 (C.24:6I-1 et al.).

[4] Which are regulated under the “New Jersey Hemp Farming Act,” P.L.2019, c.238 (C.4:28-6 et al.).

[5] See “Interim Guidance on Constitutional Amendment Legalizing Cannabis” https://www.nj.gov/oag/newsreleases20/Marijuana-Referendum-LE-Guidance.pdf.

[6] https://www.njleg.state.nj.us/2018/Bills/SCR/183_E1.PDF.

[7] See S-2703 https://www.njleg.state.nj.us/2018/Bills/S3000/2703_I1.HTM.



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2020 Carter Ledyard & Milburn LLP.
© Copyright 2020

Related practice area:


© Copyright 2020 Carter Ledyard & Milburn LLP