New Jersey’s Initial Rules for the “Personal-Use of Cannabis” (That is New Jersey’s Term for “Adult Use”) Restrict Vertical Integration and Focus on Equity

Aug 23, 2021

On August 19, New Jersey’s Cannabis Regulatory Commission (CRC) approved the first set of rules and regulations to establish the “personal-use” cannabis industry in New Jersey. The rules come in at 160 pages in length and start the clock on the launch of New Jersey’s recreational cannabis market, which must now happen by February 2022.

The rules also clearly show New Jersey’s focus on ensuring the rollout of recreational cannabis in the Garden State is equitable. Indeed, the CRC does not mince words and states the “rules address social equity by increasing opportunities in the cannabis industry for people from statutorily designated target communities.” There are three preferred ownership categories: Social Equity Businesses, Diversely Owned Businesses (defined “as a minority business, as a woman’s business, as a disabled-veterans’ business”), and Impact Zone Businesses. Applications will be accepted on a rolling basis but the rules are designed to ensure “Social Equity Businesses, Diversely Owned Businesses, and Impact Zone Businesses will be prioritized in the licensure process so that their applications are reviewed before other applicants – regardless of when they apply.” The stated goal of this preference is to “ensure that business owners and staff in communities historically underrepresented in regulated cannabis industries can get timely access to the market, and that it is competition in the active marketplace, not competition in an RFA, that determines the success of awarded applicants.”

There are multiple ways to achieve the three preferred ownership qualifications and the categories are not mutually exclusive. As such, it’s easy to envision a Diversely Owned, Social Equity business that is situated in (or hires from) an Impact Zone receiving considerably favorable treatment in the application process. In other words, it will not only be how a company structures its ownership but also where it decides to locate its facility that will impact its application. New Jersey is anticipated to be a very competitive market so applicants must take all of these factors into consideration when forming their corporate entities and applicant teams. Additionally, applicants will need to pick and choose the type of licenses for which they’ll apply.

For now, the CRC has set a limit of 37 growers to be licensed before February 2023. There are also restrictions on how many applications an applicant can submit and how many licenses an applicant can hold. There are also restrictions to vertical integration that remain in effect until February 2023. Additionally, there is a separate category for microbusinesses, which are defined as 10 or fewer employees. Licenses for these microbusiness, which must be entirely New Jersey-owned, won’t count toward the 37 grow licenses or any other caps that the CRC establishes in the future.

We will continue to monitor the application process in New Jersey, so if you are considering applying please contact us for assistance.

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New Jersey’s Initial Rules for the “Personal-Use of Cannabis” (That is New Jersey’s Term for “Adult Use”) Restrict Vertical Integration and Focus on Equity

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