Authored By: Patrick McKnight

Patrick McKnight is a JD/MBA student at Rutgers University and a Senior Editor on the Rutgers Business Law Review.

Learn more about Patrick at his LinkedIn

https://www.linkedin.com/in/patrick-mcknight-802a4958/

Governor Phil Murphy has pledged his support for legalizing the recreational adult use of cannabis, but his administration is at an impasse with state lawmakers over the 2019 budget. State legislators have included $60 million in revenue from taxes on medical cannabis in their $32.6 billion budget, but they have not included any revenue from recreational use because it remains illegal in the Garden State. Earlier this year Governor Murphy predicted the state would take in $80 million from recreational cannabis.

Governor Murphy refused to accept the proposed budget from his fellow Democrats in the Statehouse, sparking concerns a government shutdown may be looming. The Governor is demanding a “millionaire’s tax” and an increase in the sales tax from 6.6% to 7%. Also on the table is increasing the state corporate business tax to 13% on companies earning more than $25 million. This rate would be the highest in the nation. New Jersey is the third-most indebted state in the country and has struggled for decades to get its fiscal house under control. Unfunded liabilities including public pensions have pushed Garden State government debt to over $44 billion. Cannabis advocates hope legalization can generate New Jersey some much-needed revenue.

In March 2018 New Jersey implemented a significant expansion of its medical marijuana program. The reforms included broadening eligibility for patients, lowering registration fees, and abolishing the public registry for participating physicians. Although medical marijuana has been legal in New Jersey since 2010, the state had experienced low participation rates and a limited number of dispensaries. Two competing cannabis legalization bills were introduced in the Statehouse earlier this year. Industry experts predict legalizing the recreational adult use of cannabis in New Jersey will generate $1 billion in revenue within the first twelve months.

Many cannabis industry experts had expected legalization of recreational use this summer, but the ongoing battle over the budget has dampened their optimism. Others are hoping Canada’s recent legalization will help carry forward local reform efforts.

A recent U.S. Supreme Court case involving New Jersey may indicate the Court will not force states to repeal cannabis legislation. Although the facts of Murphy v. NCAA center on sports gambling, the decision could have important implications for cannabis reform in New Jersey. The Court decided a federal sports gambling statute could not forbid New Jersey from enacting its own legislation.

Congress is also considering taking action. The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act would amend the Controlled Substances Act to alleviate tension between federal and state laws. The White House has thus far sent out mixed messages regarding its position on cannabis reform. President Trump has expressed support for the STATES Act, however in January 2018 Attorney General Jeff Sessions rescinded an Obama-era policy memo which allowed states broad discretion regarding cannabis laws.

The STATES Act draws on the text of the Tenth Amendment which says, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Supporters of the Tenth Amendment believe this sentence explains the proper legal relationship between the federal and state government.

The Supreme Court has rarely been sympathetic to the Tenth Amendment. In United States v. Sprague (1931) the Court claimed the Tenth Amendment “added nothing to the [Constitution] as originally ratified.” Since then the Court has only occasionally struck down federal legislation for violating the Tenth Amendment. This trend may be changing with cannabis reform leading the way. 29 states have enacted medical cannabis programs and eight have approved recreational use, despite the DEA leaving cannabis a Schedule I drug under the Controlled Substances Act. Schedule I substances are considered to have “no currently accepted medical use” and include drugs such as LSD and heroin.

The Schedule I status of cannabis is coming under increasing pressure, especially since the FDA recently approved the first cannabis-based drug. Epidiolex treats certain types of epileptic syndromes by using purified cannabidiol (CBD). CBD is an active chemical found in cannabis, however unlike tetrahydrocannabinol (THC) does not produce the high associated with recreational use.

“This is an important medical advance,” FDA Commissioner Dr. Scott Gottlieb said in a statement. “Because of the adequate and well-controlled clinical studies that supported this approval, prescribers can have confidence in the drug’s uniform strength and consistent delivery.”

“This is a purified form of CBD. It’s being delivered to patients in a reliable dosage form and through a reproducible route of delivery to ensure that patients derive the anticipated benefits,” Gottlieb said.

The Senate recently introduced the Marijuana Freedom and Opportunity Act which would remove cannabis from the Controlled Substances Act as well as fund the expungement of cannabis convictions from criminal records.

Many industry experts remain hopeful New Jersey will enact legalization of recreational cannabis use later in 2018.