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Put Your Best Foot Forward: Tips for Securing a Cannabis License in NJ

With the signing of a series of landmark bills in February, 2021, New Jersey Governor Phil Murphy ushered in a new era for the Garden State. In particular, the bill called AS21/S21 sets out the rules and regulations for the state’s adult-use cannabis industry. And with a projected value of some $1.2 to $1.5 billion by 2023, New Jersey was immediately set to become one of the country’s largest legal cannabis markets.

Now that the cannabis industry regulations are on the books, a more pressing question is on entrepreneurs’ minds: How do you get a cannabis license in NJ?

In today’s article, we’ll walk you through the regulatory landscape, offering tips and observations from seasoned experts in the legal cannabis realm. Some of the topics we’ll explore include:

  • What kinds of NJ cannabis licenses will be issued?
  • How many NJ cannabis licenses will be issued?
  • Who will be first in line to get a cannabis license in NJ?
  • Can certain towns or municipalities prohibit legal cannabis?
  • What will successful applicants need to demonstrate?

Ready to dive in? Let’s begin with an overview of the regulatory landscape.

Tips for Securing a Cannabis License in NJ: Learning the Landscape

The recent signing of the cannabis bills inaugurated intense celebration. After all, just over 60% of surveyed New Jerseyans had come out in favor of legal cannabis less than a year before. In November of 2020, an even higher proportion of them had backed that up by passing Question 1, which amended the state constitution to allow the cultivation, processing, sale and use of cannabis for adults 21 and over. 

Momentous though that vote was—New Jersey was the first mid-Atlantic state to pass such a measure—the details were left up to the state legislature to work out. Now that cannabis industry legislation is on the books, it’s time to get in gear if you’re interested in securing your cannabis license in NJ. Here are a few top-level questions around that topic.

What kinds of cannabis licenses will be issued in NJ?

The bills recently signed into law create six “marketplace” classes of license:

  • Class 1 Cannabis Grower: Issued for facilities involved in growing and cultivating cannabis
  • Class 2 Cannabis Processor: Issued for facilities involved in the manufacturing, preparation, and packaging of cannabis items
  • Class 3 Cannabis Wholesaler: Issued for facilities involved in obtaining and selling cannabis products for resale by other licensees
  • Class 4 Cannabis Distributor: Issued to businesses involved in transporting bulk cannabis products within the state from one licensed cannabis establishment to another
  • Class 5 Cannabis Retailer: Issued for locations at which cannabis items and paraphernalia are sold to consumers
  • Class 6 Cannabis Delivery: Issued to businesses providing courier services for a licensed cannabis retailer to make deliveries of cannabis products and related supplies to consumers

Now some hard numbers: At present, each license will cost $20,000 annually. Applicants will need to submit full payment in the form of two checks ($2,000 and $18,000) with their submission. If the application is rejected, the CRC will keep the smaller payment but refund the larger one.

How many cultivation licenses will be issued?

At present, the number of Class 1 licenses will be capped at 37, at least for the first 24 months of legal sales. However, there is an exception for microbusinesses: Those that employ no more than 10 employees and with a limit of 2,500 square feet of canopy.

How many dispensaries will be licensed? 

New Jersey plans to issue 24 new medical cannabis licenses. To date, the state has issued 12 medical cannabis dispensary licenses, only 10 of which are in operation. 

As for adult-use licenses, the early word from New Jersey’s Cannabis Regulatory Commission (CRC) is that there will not be a hard cap on licenses granted; instead, the Commission will gauge and respond to market demand. That said, a comparison with Washington State may provide a clue. 

Currently, the number of adult-use dispensaries in Washington State (total population just over 7.6 million) is capped at 556. That places the state 6th in terms of dispensaries per capita. By comparison, New Jersey boasts a population of nearly 9.5 million.

So, doing a little back-of-envelope math, we can look forward to a large number of retail licenses becoming available, especially given Governor Murphy’s highly public support of the state’s legal cannabis industry (not to mention the budget shortfalls following the fiscal wash of 2020). 

Who will be first in line to get a cannabis license in NJ?

At present, the state’s current 12 medical dispensary operators will be able to secure a Class 5 retail license, though reportedly such businesses would have to demonstrate the capacity to attract and serve the additional customers as well as maintain the supply chain and infrastructure to effectively serve current medical patients. In addition, it’s reported that existing medical dispensaries will have early access to cultivation, distribution, and wholesale licenses, though the specifics aren’t yet entirely clear.

What is clear is that the CRC is demonstrating a concerted effort to enact strong social equity initiatives. Other social equity points of focus include:

  • Allocating 30% of licenses to women, minorities or disabled veterans
  • Prioritizing residents of “impact zones”: Municipalities negatively impacted by unemployment, poverty, or past cannabis enforcement activity. As much as is possible, the CRC plans to grant 25% of all licenses to applicants from these municipalities or those who employ at least 25% of their employees from them
  • Potentially levying a small “social equity excise fee” on cultivators, the proceeds of which would fund programs in the aforementioned impact zones

Over and above this, longtime state residents will have priority when it comes to the application process. The CRC defines these as those people who have resided in New Jersey for at least five years and who hold at least a 5% stake in any entity seeking a cannabis license in NJ  

What’s more, at least 35% of the total licenses issued for each class will be “conditional.” In other words, these applicants need not be in compliance with every aspect of the regulatory requirements for full licensure but will need to provide sufficient plans for future actions in order to eventually achieve compliance for full licensure by a certain deadline. 

Applicants seeking a conditional license must demonstrate that any person with a financial interest in the business and having decision-making authority have an adjusted gross income for the immediately preceding tax year of no more than $200,000 (no more than $400,000 if filing jointly).

Finally, at least 10% of the total licenses issued for each class—and at least 25% of the overall number of licenses issued—will be earmarked for microbusinesses (as defined earlier).

Can certain towns or municipalities prohibit legal cannabis?

They can, and they have. In fact, by this time two years ago, more than 60 New Jersey towns had passed ordinances to do so. That said, such a ban may turn out to be somewhat hollow: Under the new cannabis regulations, municipalities cannot prohibit licensed cannabis deliveries within their jurisdictions. For a more complete list of laws pertaining to New Jersey municipalities, click here.

What will successful applicants need to demonstrate to the CRC?

This one is key. Unfortunately, the Commission hasn’t yet made public the exact components of its point scale. But based both on our experience and our interpretation of the CRC’s goals, here are some of the criteria the Commission will consider over and above those named above:

  • Direct experience in the cannabis industry
  • A detailed business plan that includes all pertinent cannabis-specific aspects, including compliance software and reportage tools 
  • Demonstration of financial and managerial competence
  • Environmental-impact and sanitation procedures plans
  • Safety and security procedures, including those for cybersecurity and diversion prevention
  • An emergency management plan, as well as procedures to report adverse events

By necessity, this is only a partial list. Crafting a business plan and understanding the regulatory, financial, and marketing landscapes require intense focus and the help of an experienced and trustworthy guide. 

If you’re serious about trying to secure a NJ cannabis license, there’s no one better qualified to help you navigate and manage the process. Since 2009, we’ve helped over 400 license holders all across the United States navigate the daunting array of rules, regulations, and pitfalls around applying for and securing a cannabis license. Reach out, we’d love to talk.