New Jersey Can Cause an Eastern States Domino-Effect For Adult Legalization

Written By Cátia Kossovsky, Esq.

On November 3, so much will be decided.

In addition to the direction the US will take with the presidential election, legislators both federally and state level will also shift the balance of rulemaking. Once federal legislators are in place, potential federal laws relating to cannabis may move towards passing banking and other industry friendlier laws.  On the state side, tagging along for the election ride, are five states voting on referendums as to whether they will adopt new marijuana-related laws.

Cannabis and the 2020 Election

These states are Arizona, Mississippi, Montana, New Jersey, and South Dakota.  Some of these states are solely voting on adding medical use, while others are voting on including laws for both medical and adult-use, and those already permitting medical use are assessing the addition of adult use.

While the demand for cannabis legalization comes from many perspectives, such as medical assistance and social justice, one of the biggest factors this time around is also financial.  Covid has cost states hundreds of millions of dollars, leaving a giant budgetary crater that needs to be filled. Passing adult-use laws is one way to recoup much of these losses all at once.

New Jersey Marijuana Legalization Amendment

New Jersey is one of those states looking to introduce adult use through a referendum on election day.  As of October 9, a Fairleigh Dickinson University poll indicated the measure has a 61% chance of passing.

If it passes, New Jersey Public Question 1, Marijuana Legalization Amendment would amend the state’s constitution to permit the consumption of marijuana by persons age 21 and older starting on January 1, 2021. It also would legalize the cultivation, processing, and sale of retail adult use.  The referendum question was added to the November 3rd election ballot when the state’s legislature passed a resolution authorizing its inclusion in December 2019.

This is the first time that legislators have added the measure to a state election.  In prior years, where voters have elected to legalize marijuana in other states, those referendums were added to the ballots through the ballot initiative process. Campaigns collected a minimum number of signatures from voters demanding that the question be added to the ballot in a general election.  New Jersey does not have such a ballot initiative process.

It is expected that legalizing adult-use could bring New Jersey $300 million through its current state sales tax of 6.625%.  Marijuana Business Daily estimates that the program could generate sales in its first year of around $375 – $400 million and by 2024, more than doubling that amount to around $850 – $950 million.

The New Jersey Cannabis Regulatory Commission (CRC), originally established to oversee the currently existing medical marijuana program, would be responsible for the adult-use program regulating the cultivation, processing, and sale of marijuana. The state’s current sales tax (6.625%) would apply.  Local municipal government is then permitted to add an additional 2% sales tax but is not mandated to do so.

If New Jersey does pass adult-use, it will also force New York and Pennsylvania to reassess their laws with respect to adult-use. Both states have medical use laws.  Many of New York and Pennsylvania residents who are 21 and over would be tempted to head to New Jersey and leave their money there.

New York and Pennsylvania are also hurting from budgetary gaps.  Both state governors have been pushing for adult-use legalization, and together with New Jersey and Connecticut have been working together to come up with a regional alliance.   Last year, the states held a summit to discuss regional concerns and the best ways to address them.

Pennsylvania is not a referendum state, meaning that laws can only be passed through legislation. It can easily follow New Jersey and legalize adult-use if democrats and republicans align in state congress.  The state has a bill in the works in both the state house and senate. It may be able to pass it in early 2021 if the budget gap is too daunting or the house and senate flip from the more conservative republican control to a more liberal democratic control.

New York has some legalization bills in committee as well in state congress but does not appear to have resolved what an adult-use program would look like.

In either case, having the combination of New Jersey becoming an adult-use state and the budgetary troubles caused by Covid could be the tipping of the scales for both states, and that would also likely then further cause Connecticut, Ohio, and Maryland to reassess their adult-use legalization positions and those states would then cause their neighboring states to do the same.


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