N.J. cannabis board offers priorities for 2023: medical patients, municipal acceptance, social equity

Dianna Houenou, chair of the NJ CRC, and Jeff Brown, executive director of the NJ CRC

EDITOR’S NOTE: NJ Cannabis Insider, NJ.com’s B2B cannabis industry trade journal and events vertical, is hosting a business meetup Jan. 18 in Jersey City. Tickets are limited.

NJ Cannabis Insider spoke with the state’s Cannabis Regulator Commission Chairwoman Dianna Houenou and Executive Director Jeff Brown in late December. The hour-long conversation was divided in two parts. A look at back at 2022 — a historic year for cannabis in New Jersey — published last week. In this second installment, Houenou and Brown shared what the CRC’s priorities are for 2023, including boosting the medical program, further expanding educational work with municipal leaders, and ensuring legacy market operators get the resources they need to transition to the legal space.

The CRC’s next meeting is Jan. 13 at 1 p.m. The board is also hosting community meetings to hear from stakeholders about how cannabis tax revenue dollars should be used. The next meeting is scheduled for 7 p.m. on Jan. 18 via Zoom.

This transcript has been edited for length and clarity.

Q: Could you tell us what your priorities are for 2023, and what are some of the biggest challenges the CRC wants to tackle?

Houenou: We definitely have some priorities that are taking shape, things that we know we want to tackle, such as updating our medicinal cannabis rules, making sure that program is up to date and mirroring some of the more progressive and equitable practices that we’re utilizing in the adult-use space.

Other priorities include expanding the types of products that are available in the adult-use market. We’ve got the cannabis consumption area [or lounges] rule proposal that will be published in January, and then that will go for public comment.

We are still fleshing out some of the vision here for what New Jersey’s cannabis industry will look like. And we want to make sure that the public is intentionally engaged in shaping that vision.

As far as the challenges that we’re going to see may come out of the regulatory process for the medicinal and adult use issues. But I think we’ll also see more municipalities continuing to opt in.

Q: For state-approved businesses, working municipalities that are open to cannabis remain one of the biggest challenges. What more can you tell us about that front?

Houenou: We have made significant progress in getting municipal officials and the broader public to see this industry as just another business industry. Cannabis businesses are no different than other businesses that are regulated, be it restaurants that have to abide by food safety protocols or T-shirt businesses.

We have tried to make sure that municipal officials understand that the regulations, the local processes and the local approaches to cannabis businesses are thought of this as a regular business. At the state level, we will take care of the bigger lifts and the more complicated regulatory structures. But local officials really should see this as an opportunity to fold cannabis into their existing redevelopment efforts; or their long-term planning vision, just as they would for any other kind of business industry.

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The municipal fees that social equity startups face are ridiculous. Exempt them.

And we’ve done a lot of work connecting municipal officials to each other so that they can hear what other towns are doing and share good ideas. And so, I think that will bear fruit in the form of municipalities continuing to opt in and more space being created in our state for our cannabis businesses. That’s a good thing.

But it just might take a while for us to reach a level where we can solidly predict what the landscape will actually look like.

I think we’ve we have stated the vision for New Jersey’s cannabis industry as one that reflects the diversity of our state. And we mean that not just in terms of the makeup, the demographics of the business owners, but also demographics of the workforce, the sizes of the businesses that we have in the state and locations. Location is an equity issue, right? If we leave entire swaths of the state cut off from accessing this legal plant, then are we really setting up an equitable industry?

Q: February seems to be a big month in our space. Rules being are adopted and limits on the number of certain licenses will also expire. Could you give us a preview of what’s coming?

Brown: There are a bunch of things that are set to expire in the statute. One is the ban on vertical integration. Another is the cultivation caps. There’s a cap on 37 cultivators being licensed and operational until Feb. 22, 2023. The same thing applies to that ban on vertical integration. That’s something we’re watching and looking forward to.

Q: What’s the significance of lifting that cap? What should we expect on your end after that?

Brown: I don’t want to preempt Board discussions on the topic, but, I can tell you that our goal is to create a competitive market here in New Jersey. And, I’ve been clear from Day 1, even before the law passed, that 37 cultivators is not a sufficient number to serve the state’s population. I don’t think you’ll find another recreational market in the entire country that has only 37 cultivators, let alone in even smaller populations than what New Jersey has.

[After the ban expires] you should see some things related to that coming out of the CRC early in the new year. Our goal remains to be a competitive but equitable market, where you have access for entrepreneurs who want to get into the industry.

I do want to highlight that on the cultivation side, we’ve put some things out there that make it easier to get into cultivation — for instance, outdoor cultivation, which is considerably cheaper than indoor cultivation. It can be done effectively even in a climate like New Jersey. Obviously you can’t grow year-round, like in some parts of the country. You can go to Vermont and there are hemp growers who are growing exclusively outdoors; artisanal hemp that’s meant to be smoked, or used for cannabinoids.

Q: And the new rules…

Brown: We continue with the new rules that are set to be adopted. We’ve continued trying to do what we can within the statute to create more flexibility for micro businesses, creating pathways to expand and convert. We’re certainly looking at the expiration of the caps and other marketplace regulation provisions in the statute.

Houenou: I was just going to note as far as what happens after mid-February, we should remember that setting up this new industry is a process and it’s one that shouldn’t be rushed into haphazardly.

So even after the final rule adoption, the CRC will still need to publicly announce when applications for wholesaler and distributor and delivery licenses will open up and then get to work, reviewing and processing those applications.

We’ll still see a lot of progress and a lot of forward movement in getting the industry built out. The CRC remains committed to making sure that we get things right even if it means trying a different tactic or changing our rules if we find that a particular approach doesn’t have the effect that we’re looking for — or has some unintended consequences that do not justify the intended outcomes.

I think flexibility is really going to be key for us at the CRC, not just for the applicants and the businesses but also for us as an agency. We will continue to be nimble and adapt to changing circumstances. You know that the cannabis industry is one that evolves quickly. So that really does lend itself for us as an agency to be adaptive, flexible and willing to respond to emerging issues.

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We’re going to keep an eye out for anything that does come on our radar — any emerging trends — and do assessments of the industry and of the marketplace so that the public understands the landscape. More importantly, so that we can make sure that our rules reflect what is happening on the ground, so that we can continue to prioritize safety and equity.

I think New Jersey is particularly well equipped to be a strong leader in the region. And in the country, when it comes to how to set up an industry that is focused on equity and safety with responsible operators — and, also how to do it in a way that makes people feel confident that they are part of the process.

Q: We know the CRC has been making strides to help grey market, legacy operators transition to the legal market. What should we know?

Brown: One of the things we do anticipate coming in the new year is guidance specifically tailored to folks who have worked in the legacy market who want to transition.

There are certainly significant considerations they have to take into account. It’s not like they can take their whole legacy business and just plop it — that’s not going to be compliant with the rules. We’ve been working on getting stakeholder feedback on what that transition looks like, what they should be thinking about.

The approval of the [New Jersey] Business Action Center to start the Technical Assistance Program for small cannabis businesses with a component focused on legacy-to-legal transition is hugely important.

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“We’re really trying to target a lot of the communities and individuals who were disproportionately harmed by cannabis prohibition."

Something that has been surprising to me and regulators across the country is how wide open hemp has become. We’re lucky, at the state level, to have strong partners in the Department of Agriculture. We’ve worked with them to make sure that products like Delta 8 and Delta 10 or THC-O Acetate are not coming out of New Jersey licensed hemp producers. It’s all over the country and that’s just a challenge we’re going to have to continue to contend with.

When you’re talking interstate commerce, that’s a federal government issue. We have consumers who are going into gas stations and other places seeing hemp products and mistaking them for illegal cannabis products. It’s just another level of complexity. Thankfully, like I said, the Department of Agriculture has done what they need to do to make sure that those products aren’t coming out of New Jersey — but they are certainly coming in.

Q: What can you say about interstate commerce and local rules in terms of attracting legacy operators to become legal businesses? We know most weed sold illegally is not grown here in New Jersey.

Brown: In order to operate in the legal industry, you have to obtain products from licensed sources. And so, you know, wherever products in grey market are coming from are informal, unregulated sources.

I don’t think it’s fair to say that interstate commerce is the key issue here. But it is it is fair to say moving from relying on unregulated products to regulated products is one challenge, especially since the market is so new. Others are just moving from a situation where you’re trying to skirt regulation to embracing it and complying with it. There’s a lot of educational components to that. Making sure people know the regulations. As you know, there have been stories about problematic packaging in some of the grey market shops — manufactured products meant to mimic candy and stuff like that. There’s no room for any of that in the regulated market.

The education is a core component, making sure that they have the knowledge they need to be able to transition. I can tell you we’ve talked to legacy operators. A lot of people say they’re fine moving to regulated products. We just need to help the understand what that looks like and how they can comply. That’s why guidance will help, and that’s why the Business Action Center’s Technical Assistance Program will help.

Houenou: From a basic level, we’re talking about engaging with communities that have historically been left out and excluded — whether consciously or unconsciously, deliberately or as a collateral effect — from government participation and from formal economic opportunities.

Getting people from those communities to now trust us as a government agency, that has been a core concept that really lies at the heart of doing our outreach and education work. And so, even before we launched the CRC, I was thinking long and hard about what is actually necessary to do this outreach work in communities that are typically distrusting of government. The distrust is because of very real damage that government has done to them and to their larger communities.

One of the harder things that we as the CRC are going to undertake is getting people to understand, Yes, we are part of government. But we are serious when we say we want you to be a part of this process. We want to hear your voice and you can help us shape what the rules will be.

So we set out to shape our rules and a very deliberative process that was intentionally public engaging. Setting aside time at our board meetings to hear from the public about numerous issues. And I think on that first such board meeting, back in May of 2021, was on social equity issues. That’s where we heard a lot of concerns around some of these issues, like access to capital and business development support. We heard the need to fill those gaps, particularly for communities that have been underserved, especially for legacy operators.

We heard that those concerns were going to be essential if we wanted to create a diverse and inclusive cannabis industry. What we did from there is establish inter-agency workgroups to tackle those issues. We established a workgroup with the Business Action Center. The fruit of the efforts there being the cannabis training academy that will launch in 2023. We set out to work with the Economic Development Authority to explore potential access to funding to see where dollars could be found within the state budget. The EDA has conducted listening sessions across the state to hear from applicants and prospective applicants to hear what their needs are.

We really have been very intentional in setting up these conversations, including legacy operators in the conversations and trying to find solutions to tackle the problems.

Enrique Lavín is publisher and editor of NJ Cannabis Insider, a weekly subscriber-based online trade journal and events group produced by NJ Advance Media, which also publishes NJ.com, The Star-Ledger and other affiliated papers. Follow him on LinkedIn.

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