SCR183 – New Jersey Adult-Use Cannabis Legalization Bill

A Promising Vote for November 2020

The Basics

Back in late 2019, the New Jersey state senate passed SCR183 to include the issue of adult-use cannabis legalization on the 2020 ballot. While voters will finally get a shot at making the decision on adult-use, this particular route is a bit atypical. In fact, New Jersey is the first state legislature to refer a cannabis legalization resolution to their voters for approval. 

This resolution proposes a constitutional amendment to legalize cannabis for personal, non-medical use by adults who are age 21 years or older subject to regulation by Cannabis Regulatory Commission, the same regulatory body overseeing the current medical cannabis market. Senators Scutari and Sweeney introduced this resolution after the state legislature failed to pass a statute to legalize adult-use cannabis. 

Level of Support

The resolution was supported by the majority state Democrats (72 of 79) and opposed by the majority of state Republicans (36 of 41), demonstrating the support for cannabis legalization still breaks fairly cleanly along party lines. A recent poll from Monmouth University ¹ shows 61% support, 34% oppose, 5% undecided for the resolution. With support for the resolution polling strongly, it seems promising that the resolution will pass this coming November. 

Opportunity to Alleviate Financial Strain

This bill comes at a time when all medical cannabis licenses from the 2019 Request for Applications (“RFA”) are locked up in litigation. The Health Department disqualified 51 of the 190 total applications for a variety of issues, including lack of approval and site control; submission of corrupted PDF files; and failure to pay application fees. As such, the support that Governor Murphy sought to provide for the state’s medical cannabis program has not yet arrived and will not for some time. 

In a press release from Governor Murphy’s office (5/22/20), they state that: 

“Based on a wide variety of economic assumptions, the State of New Jersey is potentially facing a combined revenue shortfall of nearly $10 billion over the remaining months of Fiscal Year 2020 and through the end of Fiscal Year 2021 – a potential decline that could be worse than the Great Recession.”

SCR183 would go some way towards helping alleviate the financial strain currently facing the NJ state by applying a sales tax of 6.625% to all adult-use cannabis sales and allowing for local municipalities to levy up to an additional 2% in local taxes. 

Should the bill pass, Arcview Market Research and BDSA predict that the New Jersey adult-use cannabis market would be up and running by 2022 with total sales of $200 million, growing up to $1.1 billion by 2025. 

While this spending is significant, there are two factors that would limit the support provided by this legislation to the state’s coffers: 1) 6.625% would be one of the lowest cannabis tax rates in the country (Colorado’s state tax on adult-use sales is 15%); and, 2) adult-use sales would not commence until 2022.

What Happens After November?

If the bill passes, licenses for adult-use cannabis businesses will likely be awarded through the same competitive application process used to qualify previous licensees for medical cannabis businesses. All things considered, this bill brings exciting prospects to citizens of the Garden State. There is also a good chance that New Jersey could be the “domino” for more states in the region to follow suit. 

What Happens Until November?

We will be watching closely for the result of the adult use vote in New Jersey, as our team has been on the ground in this market since the early days of advocacy, business planning, and license application work. We are also here now to help you prepare for the opportunities that will quickly follow the vote.

 

Sources:

1. Monmouth University (4/19/20), sample size: 635, +/- 3.9% margin of error