Does NJ’s recreational cannabis marketplace need better equity?
New Jersey's Cannabis Regulatory Commission has had the somewhat unenviable task of overseeing the debut of recreational-use marijuana sales in the state, but after three months some areas of concern are emerging.
And there don't seem to be ready-made answers, according to Todd Polyniak, who leads the cannabis practice for Parsippany-based firm Sax, LLC and works with clients who have applied for recreational retail licenses.
Addressing social inequities in who owns and operates marijuana dispensaries, Polyniak said, is a problem not necessarily tied to the near 18-month delay between the marketplace being approved by voters in November 2020 and its April 2022 launch.
He believes such priorities should have been addressed from the start anyway, regardless of how long it took the industry to get off the ground.
"Even formulated in the regulations, there's nothing that gives social equity companies access to capital outside of their normal channels," Polyniak said. "The saying is 'it takes money to make money,' so that access to capital is critical."
In documentation provided to New Jersey 101.5, the CRC does make clear that it gives priority to applications to businesses that would be owned by women, minorities, disabled veterans, or those with expunged marijuana convictions, or located in an economically disadvantaged area or impact zone.
But Polyniak said even if a conditional license is granted, the money isn't always there for these applicants to follow through on their plan.
He thinks New York state goes too far in providing robust funding, and favors the involvement of benefactors he dubs "canna-angels."
Getting the right people to buy in — without becoming predatory lenders who use these businesses as financial puppets — can be challenging, according to Polyniak.
"But if there's incentives given to potential angel investors to invest in these companies, that would be a plus," he said.
Other solutions could be found in awarding low-interest loans to minority applicants or making use of state grants for capital improvements, since many banks will not lend to cannabis companies when the drug is still illegal at the federal level.
And with regard to predatory investors, fines against such lenders could be put toward funding for social equity groups, Polyniak suggests.
One creative approach would be for New Jersey to decouple (as Massachusetts has done) from federal statute 280E, which prohibits marijuana businesses from claiming tax deductions.
Whatever changes come, Polyniak knows they will not happen overnight.
"I think we have a long way to go," he said. "I know that we're off and we're starting, but it's going to be very interesting over the next several years how everything gets rolled out."