Cannabis in New Jersey: A Budding Industry?

Adult-use marijuana presents big opportunities for businesses, but also raises legal considerations in the workplace.

By Jim Pytell, Assistant Editor On Oct 29, 2020

This month, New Jersey residents will finally decide whether or not to legalize cannabis use for adults over the age of 21. The vote, which is taking place via ballot referendum, comes after the New Jersey Legislature failed to gather enough support to pass a bill that would have legalized adult use of the plant in March of 2019. 

According to polling, a majority of New Jerseyans appears to favor the legalization of cannabis. A Brach Eichler poll conducted in July revealed that 68% of those surveyed (all registered New Jersey voters), would vote “yes” to the ballot question. This figure was up from the results of a Monmouth University poll in April, which found that 61% of respondents would vote “yes.” 

“When it comes down to where people’s comfort levels have been, there has been increasing support for cannabis legalization nationwide,” Scott Rudder, president of the New Jersey Cannabusiness Association, says, citing social justice concerns as well as the economic impact of legalized cannabis as two of the biggest reasons for support. 

“Today, people are also using cannabis for medicinal purposes in lieu of other pharmaceutical drugs such as opioids,” Rudder adds. “Overall, cannabis use is becoming much more normalized.” 

While public opinion seems to point to having adult-use (recreational) cannabis on the precipice of being a reality in New Jersey, from a business perspective, there are a number of questions as to what the industry will look like. 

Potential Economic Impact 

In 2012, Colorado and Washington were the firsts states to legalize recreational cannabis, and in 2019, Colorado collected more than $302 million in taxes and fees on medical and recreational marijuana, with sales in the state totaling more than $1.7 billion, according to the Colorado Department of Revenue. Overall, US sales reached $12.2 billion in 2019, and, according to Arcview Market Research and BDS Analytics, sales are projected to increase to $31.1 billion by 2024. 

According to Leafly’s annual Cannabis Jobs Report, there are more than 243,700 full-time-equivalent jobs in the legal cannabis industry. With a 15% year-over-year increase in jobs, legal marijuana is one of the fastest growing industries in America. 

Rudder believes, “[New Jersey can have] a $3 billion matured cannabis market, and that’s just in terms of sales. 

The ballot measure states that the New Jersey sales tax (6.625%) would apply to recreational marijuana sales, and the State Legislature would be authorized to allow local governments to enact an additional 2% sales tax if they so choose. Rudder says that this is primarily to incentivize municipalities to allow cannabis businesses to locate in their jurisdictions. 

He adds that it is also important to note the ancillary industries that would benefit from legal cannabis including attorneys, accountants, marketing companies, security professionals, trucking, and construction, to name a few. “All of these people can benefit through the growth of [the cannabis] industry,” Rudder says. 

Opening a Cannabis Business 

At press time, there are currently 12 medical marijuana dispensaries operating in New Jersey. If adult-use was to pass, the number of dispensaries in the state would undoubtedly rise, but the existing medical dispensaries would likely be the first to sell to the separate adult-use market. Rudder says that in those instances, adult use sales could happen as soon as the first half of 2021. 

For entrepreneurs who want to open a new cannabis business, there are a few early considerations to increase the chance of success. 

“How you get started on day one is going to reflect on your operations for the next several years,” Rudder says. 

He explains that with banks not lending to cannabis companies in the same way they would for a traditional business due to cannabis’s federal standing (it is still federally illegal), securing a solid partnership or investor is critical to long-term success. 

“You need to make sure you are properly funded so you don’t go in the hole too early,” Rudder says. “While cannabis is an exciting business, it is still a business and you need to ensure you have the financial wherewithal to sustain the operation while potentially not making a profit early on.” 

Rudder also says it is important to find a municipality that will approve and appreciate your presence. “Developing that community relationship is very important for this brand new industry,” he says. 

To Test or Not to Test? 

While not all employers drug test their employees, for those that do, legal marijuana presents some new considerations. 

“Just because it is no longer illegal does not mean that employers lose their ability to terminate because of it, or that they have to stop testing for it,” John D. Fanburg, co-chair of Brach Eichler’s Cannabis Law Practice, says. “Alcohol is legal, but if someone is at work who has been drinking, the employer has the right to terminate that employee.” 

However, complications arise since an individual can test positive for cannabis days – or even weeks – after using it, while generally the effects of cannabis last for only several hours after consumption. 

“This is all going to be new legal territory,” Fanburg says. “There’s going to be a lot of litigation on behalf of employers and employees until the law gets settled.” 

Fanburg points out that how individual companies decide to handle policing marijuana in the workplace will vary based on the type of business. “If you are the pilot of an airplane? Different rules. If you are a busboy in a restaurant? Perhaps different rules,” he says. 

Conclusion 

This article only scrapes the surface of the adult-use cannabis industry. If the amendment does pass, more steps will need to be taken by the Legislature to smooth out some of the more nuanced details of what the market will look like. However, it does appear that legal cannabis in New Jersey is closer to reality than ever before.

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