2 Competing Marijuana Legalization Bills in New Jersey Leave the Garden State Divided
The legal cannabis industry has expanded at an incredible pace in recent years. In North America, legal pot sales grew by 33% to $9.7 billion in 2017, according to a new report from ArcView Market Research, in partnership with BDS Analytics. Meanwhile, in the U.S., we've seen 29 states legalize medical weed over the past 22 years, beginning with California in 1996, and nine states OK the right for adults to use recreational cannabis since November 2012.
However, there may soon be a 10th legal recreational pot state to add to the list: New Jersey.
Since taking office this January, Gov. Phil Murphy (D-NJ), who replaced the anti-cannabis former Gov. Chris Christie, has vowed to make recreational marijuana a priority. Between the campaign trail and his short time in office, Murphy has pleaded for his state's legislature to bring a bill to his desk that he could sign. The problem is, two competing bills with plenty of support have emerged, and little middle ground has yet to be found.
Competing marijuana legalization bills take shape in New Jersey
The bills include the "New Jersey Adult Recreational Use Marijuana Law" proposed by Democratic Assemblyman Reed Gusciora on March 12, and NJ S830, a bill introduced in the Senate by Democratic Sen. Nick Scutari on Jan. 9. While both aim to boost access to recreational cannabis, there are vast differences in how they go about achieving that goal.
On dispensary count:
Scutari's bill is considerably more conservative in its approach to legalization. According to commentary at the New Jersey Cannabis Symposium in New Jersey this January, revisions to S830 are only expected to push the number of licensed dispensaries in the state to 80, or roughly two per district (there are 40 districts in the Garden State. Comparably, the bill proposed by Gusciora would allow for as many as 400 retail dispensaries, with no more than 11 dispensaries allowed per legislative district.
On one hand, pot entrepreneurs don't believe 80 dispensaries would be sufficient to satiate the market in New Jersey. Meanwhile, opponents suggest that up to 400 dispensaries is overkill, especially if a number of districts vote against allowing dispensaries to operate in their locales.
On excise taxes and tax-sharing with towns:
There are wide variances in the tax rates that would be charged on recreational weed, too. Under the more conservative Scutari plan, the tax rate would begin at 7% in the first year, then jump to 10% in year two, 15% in year three, 20% in year four, and 25% in year five. By comparison, Gusciora's bill would begin at a 7% excise tax for the first two years, then jump to 10% for years three and four, and peak in year five at 15%. The obvious concern with Scutari's plan is that higher tax rates could incentivize black-market purchases, while Gusciora's bill may not generate enough tax revenue to make regulation worthwhile.
It's worth pointing out that there are differences regarding tax-sharing with towns as well. With Gusciora's bill, 1% of tax revenue goes to towns the first two years, 2% the third and fourth years, and 3% by year five. Scutari's more conservative bill would allow towns to collect 1% of tax revenue in year one, 2% in year two, and 3% by year three and thereafter.
On a home-grow option:
Lastly, Scutari's bill makes no specific mention of home-grow options, which are common with recreational pot legalization bills. As for Gusciola's proposal, it would allow up to six marijuana plants at home, with a maximum of three flowering plants at a time.
Needless to say, there are vast differences in these proposals, and there's quite a bit of support for both. Finding common ground could be difficult, despite the fact that all parties involved are aiming for the same goal: legalizing weed throughout the state for adult purchase.
Sessions continues to wage war on the marijuana industry
Unfortunately, even if New Jersey manages to become the 10th state to legalize recreational marijuana, and the second to do so entirely through the legislative process (Vermont being the other), the prospect for the legal weed industry in the U.S. is still grim thanks to Attorney General Jeff Sessions.
When Sessions became the head of the Justice Department, it wasn't a secret that he was against the expansion of cannabis. However, no one knew just how far he'd go in to reinstitute federal law and wipe out the legal cannabis movement in the United States.
For example, Sessions sent a letter to a few of his congressional colleagues last year requesting that the Rohrabacher-Farr Amendment (also known Rohrabacher-Blumenauer) be repealed. This amendment, which is attached annually to federal spending bills, disallows the Justice Department from using federal dollars to prosecute medical marijuana businesses. Given Sessions' belief that medical marijuana is no cure for the opioid crisis – in fact, he's intimated that cannabis use, among other drugs, has led to the opioid crisis – a repeal of this amendment would open the door for the prosecution of large-scale pot businesses. However, Sessions' efforts to repeal Rohrabacher-Farr has thus far failed.
But he was successful in rescinding the Cole memo on Jan. 4, 2018. The Cole memo, which was written in August 2013 by former Deputy Attorney General James Cole, outlined a series of "rules" that legalized states would have to abide by if they wanted the federal government to leave them alone. These rules included ensuring that cannabis grown within a state stayed there, as well as that measures were taken to keep weed away from adolescents. Its rescinding now allows state-level prosecutors to bring marijuana charges against businesses and/or persons, with discretion, under the Controlled Substances Act, even in states that have chosen to legalize.
Thus, no matter how quickly the U.S. legal weed industry grows, it could come crashing down even quicker if Sessions continues to wage his war on pot.
The consequences of this war on marijuana are even being seen in our neighbor to the north. Canopy Growth Corp. (NASDAQOTH: TWMJF), the largest marijuana stock in the world by market cap, has suggested that it has no intention of entering the U.S. market as long as the federal government deems the drug illegal. Instead, Canopy Growth has been focusing on growing its capacity in domestic markets within Canada, as well as expanding through international channels via its Spectrum Cannabis brand. With a number of European countries recently legalizing access to medical marijuana, Canopy Growth isn't lacking for opportunities. Other Canadian growers have also followed suit by either selling their U.S. assets and interests, or pledging not to enter the U.S. market until the federal government changes its scheduling of the drug.
There's simply no path forward for the U.S. cannabis industry, or investors in U.S.-based pot stocks, until Jeff Sessions is no longer in office.
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