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by Nick Vadala Published Aug 22, 2023
What you should know
New Jersey's legal marijuana industry is in a "doom loop," the New Jersey Cannabis Trade Association says in a new report.
The group says issues including slow business licensing by the state's Cannabis Regulatory Commission, unregulated products such as delta-8 THC, and lack of enforcement against the illicit market are causing the legal market to stagnate.
By NJCTA's estimation, the state could be losing as much as $1.8 million in sales tax revenue a year for every store that faces a delayed opening.
Just more than a year after beginning recreational cannabis sales, New Jersey’s legal weed industry is in a “doom loop” of slow licensing and a lack of enforcement that is causing it to stagnate, a marijuana trade group says.
The New Jersey Cannabis Trade Association, which represents the majority of cultivators and dispensaries in New Jersey, issued a report Tuesday placing blame for the state’s slow-growing marijuana industry on the New Jersey Cannabis Regulatory Commission, the agency that establishes and enforces regulations governing legal marijuana. The CRC, the report said, is “hindering the market’s potential” due to a protracted licensing process. “We’re advocating starting with the removal of the bureaucracy,” said Todd Johnson, the group’s executive director. “We are making it difficult right at the point of entry for no reason.” New Jersey could be losing as much as $1.8 million a year in potential tax revenue per location, as a result of delayed retail store openings, the report concludes. In addition, the NJCTA points to the proliferation of unregulated hemp-derived cannabinoids and the state’s minimal enforcement against illicit operators as reasons for slow industry growth.
The CRC has received 2,177 applications since it opened up the process for marijuana business licenses in December 2021. Of those, 1,399 applications have been approved, and about 400 are being processed, according to CRC executive director Jeff Brown. “We’ve been very clear with applicants about what we expect timelines to be,” Brown said. “We understand that business owners have to make decisions, and we try to be up front with expectations so that people can plan accordingly.”
Typically, licenses are approved within three to six months, Brown said. By law, the CRC is supposed to approve conditional license applications within 30 days, and annual license applications within 90 days. But the CRC is able to extend the deadline, often due to the sheer number of applications. Applicants also often get held up due to factors largely outside of CRC control, such as municipal approval issues, trouble with real estate, and applicants not responding to letters detailing fixes, Brown said.
Today, the state is home to 37 operating recreational cannabis dispensaries, and 13 that sell only medical marijuana. Brown expects the state to have 50 recreational dispensaries running by the end of 2023; it started with 12 adult-use retailers in April 2022.
According to the CRC, recreational marijuana has generated about $306 million in sales — and $18.8 million in sales tax revenue — in the first two financial quarters of 2023 combined. The NJCTA projects that legal weed sales could bring in about $38.39 million in taxes this year — far below other states of similar sizes with legal sales.
Johnson pointed to Maryland, which started recreational marijuana sales in July. With a population of 6.16 million people, that state had more than $80 million in sales in its first month of operations, Johnson estimated. New Jersey has a larger population — 9.2 million — and an older cannabis market, and is pulling in less money, Johnson said. Brown, however, said New Jersey’s cannabis market is likely to eclipse the $1 billion mark sometime in the next year. He called New Jersey “poised for long-term success.”
But New Jersey’s growth, the NJCTA’s report says, seems to have plateaued after only nine months of legalization. That’s due not only to what it says are slow approvals by the CRC, but also a lack of enforcement against the illicit market, as well as gas stations, smoke shops and head shops selling such products as delta-8 THC, which falls into a legal grey area.
The CRC doesn’t regulate products such as delta-8 THC, but, Brown said, the commission does view those hemp-derived products as being at odds with establishing the regulated market. They are advertised as being similar to what customers would find on the legal market, and often at cheaper prices, but are essentially unregulated.
Brown said the CRC is ready to work with partners to address that, and the state is considering new rules targeting hemp-derived cannabinoids. Johnson said that the NJCTA would also like to see the CRC approve new products for sale, specifically new types of edibles. That would help legal operators compete against the illicit market.
“Not only are we fighting against the illicit market with our hands tied behind our back because of regulation, but when you can’t even offer the same products, then there’s no choice for [customers] to patronize your stores,” Johnson said. Legacy operators should also receive “safe havens” from the state to break into the legal market, said Suzan Nickelson, owner of Atco’s Holistic Solutions and the chair of the NJCTA’s Social Equity Committee. Providing that assistance could potentially alleviate some tension between the illicit and regulated markets, she added. According to at least one study, some customers are going to the illicit market for their marijuana. An April poll from Stockton University found that 30% of New Jersey cannabis users bought weed from “non-licensed dealers,” with 18% of those citing high prices as their reason for going to the legacy market. A vast majority of respondents said that they went to non-licensed dealers because there was no legal dispensary operating near them. The CRC, Brown said, doesn’t set prices for legal marijuana, but it does monitor them. He acknowledged that accessibility is an issue in the state, despite 18 of 21 New Jersey counties having at least one dispensary. As Brown put it, “progress is being made.” But for the NJCTA, the progress isn’t happening fast enough. “New Jersey just seems to be lacking in our resolve to really build a strong foundation through which operators of all kinds can be successful in the state,” Johnson said. “Make it easier for folks to get through the initial hurdles so that they can get to the real obstacles.”