United States: New Jersey's Budding Industry Poses Questions For Businesses

It's here!  A proposed bill is finally before the New Jersey Legislature with aims of legalizing recreational use of marijuana in the state.1  Politicos on both sides of the aisle will differ on whether the bill will actually pass and get signed into law in its proposed form, but one thing is for certain: cannabis could be a game changer in New Jersey.  Governor Phil Murphy ran on a platform that included a push for cannabis reform, largely for its effects on social justice–decriminalizing marijuana would serve to curb arrests in urban areas and lead to record expungements for scores of citizens, many of them persons of color.  Yet, it cannot be ignored that cannabis has significant economic opportunity.  

If this bill passes, New Jersey will once again rise as a tourist destination with enough business ideas for everyone.  Storefronts, lounges, clubs, bakeries and other cannabis businesses will pop up with more frequency than corner stores or neighborhood Starbucks.  But you can't wait until the bill passes to get in the game.  If you're not already brainstorming, you're late!  Here are a few things to consider so you can have a head start in this budding industry (pun intended):

1.  What kind of business will you open? Immediately when the subject of legal marijuana is raised, people often think of growhouses and dispensaries. Of course, these two business models will generate handsome amounts of money, but they will also be the most scrutinized and regulated. If there is any lesson we can glean from our sister-states who have forged the path to legalized cannabis, we should expect that any business "touching the plant" will be subject to strict state licensing and reporting requirements, while also deftly navigating the federal laws governing this industry. However, the "no touch" industry—those businesses that provide products and services ancillary to the actual plant—has vast opportunity. From marijuana lounges to packaging and equipment, there is a niche for everyone in this new market. Some economists estimate a $1.2 billion a year cannabis industry—and there are equally as many potential business ideas. Entrepreneurs should think creatively and remember the full offering of products and services that will be needed once recreational marijuana hits New Jersey.

2.  Where will you set up shop?

Legalizing marijuana may be the easy part. The harder part will be maneuvering the zoning laws in New Jersey. In a state with 565 municipalities, each one is bound to have a different perspective on what cannabis-related businesses will be sanctioned within their respective towns. Some, like Jersey City, Asbury Park, Mahwah and Garfield have spoken out on the issue already, both for and against marijuana sales in their towns. As this proposed legislation heats up, many more towns will follow. It cannot be stressed enough that location will be a critical business consideration that must be carefully examined before a final business plan is put into motion.

3.  Will banks allow you to deposit your earnings?

If you plan to start a "no touch" business, then banking regulations shouldn't concern you. But those businesses "touching the plant" face serious roadblocks with finding banking institutions that will do business with them. Most reputable banks are insured by the FDIC and subject to federal regulation. As long as marijuana is classified as a Schedule I drug under the Controlled Substances Act, it is illegal on the federal level and banks could be subject to money laundering charges for taking drug money. California is exploring the idea of state banks to circumvent the hurdles posed by federally-regulated banks, but for the most part, larger, more trusted banks will remain extremely dubious on accepting deposits from cannabis businesses.

4.  Are you staying abreast of the industry regulations?

As with any evolving industry, there will be new laws unfolding at a rapid pace on the state and municipal level. Given the interplay between state and federal law in this particular industry, new entrants to the market are strongly advised to seek professional guidance before hanging their shingle. Attorneys and accountants are the most obvious counsel who should be sought out as business plans are in their infancy, to ensure all of the risks (and benefits) are thoroughly explained. Lobbyists, pharmacists and doctors might be a good call as well, depending upon the actual business model. Either way, it will be exciting to see how this industry unfolds and transforms New Jersey. If you plan to get in the game, start now!


1The proposed legislation was introduced by State Sen. Nicholas Scutari, D-Union, as two separate bills.  The first addresses New Jersey's medical and recreational marijuana aims in an omnibus bill.  The second is limited to recreational use only.

Cannabis Law Report, published July 21, 2018.

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