On March 23, 2018,  in response to Governor Murphy’s Executive Order 6 which directed the New Jersey Department of Health (“Department”) to review New Jersey’s Medical Marijuana Program (the “Medical Marijuana Program” or “Program”), the Department issued  its report  focusing on how to expand the Program’s scope and patient access to medical marijuana (the “Report”).

The Report focused on the following four principal areas:

  • The rules for siting of dispensaries and cultivation facilities and the number of alternative treatment center (“ATC”);
  • The conditions for physicians participating in the Program and prescribing medical marijuana;
  • The number of medical conditions which qualify for the Program; and
  • The maximum monthly product limit, THC dosage limits and the types of medical marijuana products available for patient use.

Certain aspects of these recommendations may be affected by Department regulatory action, while others will require amendment of the existing New Jersey Compassionate Use Medical Marijuana Act (the “Act”).

In order to service the growing population of patients with conditions treatable by medical marijuana, the Department plans to amend the existing regulations to permit ATCs to dispense medical marijuana at satellite locations and permit more than one cultivation site per ATC, subject to Department approval. The Department also plans to create an endorsement system to allow ATCs to engage in some combination of production (including edibles), cultivation, and dispensing designed to increase the supply and availability of medical marijuana.  As stated in the Report, the goals of these amendments are to increase the supply and access to medical marijuana for qualifying patients. The Report also makes the statutory recommendation to amend the Act to permit the existing six (6) licensed ATCs, which are statutorily required to be non-profits, to operate as for-profit companies.

The current regulations require that a physician interested in providing care to patients who qualify for medicinal marijuana to first register with the Department, creating a limited number of doctors who can prescribe and treat qualifying patients. The Report indicates that the Department plans to eliminate the physician registry in Spring of 2018 to ensure that any and all New Jersey doctors meeting the good standing  requirements set forth in N.J.A.C. 8:64-2.5 may prescribe medicinal marijuana for patients meeting Program requirements.

Prior to March 22, 2018, the conditions that qualified for treatment by medicinal marijuana under the  Act  were limited to (i) seizer disorders, intractable skeletal muscular spasticity or glaucoma (provided that  such conditions were resistant to conventional medical therapy), (ii) HIV, acquired immune deficiency syndrome or cancer (provided that  sever or chronic pain, nausea, vomiting, cachexia or wasting syndrome resulted from such condition or treatment thereof), (iii) amyotrophic lateral sclerosis, multiple sclerosis, terminal cancer, muscular dystrophy or inflammatory bowel disease, (iv) a terminal illness (provided that a physician determined a prognosis of less than 12 months of life), or (v) other medical conditions approved by the Department by way regulation. As outlined in the Report, a final agency decision was made to effectuate the addition of the following categories to conditions qualifying for treatment by medical marijuana: chronic pain related to musculoskeletal disorders, migraines, anxiety, chronic pain of visceral origin, and Tourette’s syndrome. The Report also recommends an amendment to the Act permitting medical marijuana to be used as a first-line treatment rather than a last resort for the illnesses described in section (i) above.

Under the current Program, physicians are limited to prescribing two ounces of medicinal marijuana to patients within a 30 day time period. According to the Department’s findings set forth in the Report, physicians should have discretion to authorize more than the Program’s current two ounce limit. As a result, the Department is recommending that the statutory limit be increased to four ounces, which aligns more with our neighboring states such as New York, Pennsylvania and Delaware. The Act presently restricts use of edible marijuana products to qualifying patients who are minors. As stated in the Report, the ingestion of medical marijuana is healthier than smoking, the Report, therefore, also recommends amending the Act to permit the manufacture of edible and topical products and their use by patients.  The Report also provides that the Department will eliminate the regulatory dosage limit of 10% THC limit to allow for more effective treatment of the debilitating medical conditions covered under the Program.

The Report and recommended expansions to New Jersey’s Program  set forth above evidence both the Governor’s and the Department’s goal of growing all aspects of the Program related to the production of and access to medicinal marijuana.

Upon assuming office earlier this year, New Jersey Governor Phil Murphy emphasized his intention to legalize marijuana for adult use throughout the State as a priority item. To that end, the State of New Jersey has already taken visible steps toward legalization, namely through the recent introduction of proposed legislation in both the State Senate and Assembly.

Senate Bill 830 and Assembly Bill 1348 (collectively, the “NJ Bill”) propose  legalizing the possession of small amounts of marijuana for personal use for persons age 21 and over, and set forth a licensing scheme intended to facilitate the manufacturing, production and distribution of marijuana across the State. The NJ Bill would establish the Division of Marijuana Enforcement, a governmental agency vested with broad oversight and implementation authority pertaining to enforcement, licensing and general regulation. The regulations to be promulgated to facilitate implementation of the NJ Bill set forth, among other things, a proposed sales/transfer taxation scheme, in addition to regulations regarding advertising and marketing of marijuana products.

Introduction of the NJ Bill comes almost concurrently with the introduction of similar federal bills, Senate Bill 1689 and House Bill 4815, sponsored notably by Senator Cory Booker of New Jersey and co-sponsored by Senator Kirsten Gillibrand of New York. The push for legalization also comes amidst policy change at the federal level, following U.S. Attorney Jeff Sessions’s decision to overturn the Obama administration’s “Cole Memo” and issue a new memo, once again placing state-compliant marijuana-related businesses at risk of federal prosecution under the Controlled Substances Act.

Despite being a priority item for Governor Murphy, the legalization movement has encountered some skepticism and resistance. According to a survey recently conducted by NJ Cannabis Insider, the NJ Bill would fail in the State Senate if a vote were conducted today – with only 5 of the 40 senators polled committing to an affirmative vote in favor of the proposed legislation. Another 20 members indicated that they would vote against the NJ Bill, while 15 were either undecided or did not respond. Several New Jersey municipalities have also joined in the opposition, preemptively passing measures and/or resolving to oppose marijuana legalization and the institution of cannabis business enterprises within their bounds. Such locations include Middleton Township, Wall Township, Toms River and Seaside Heights.

While the NJ Bill remains pending, Governor Murphy has taken interim steps toward legalization, calling for a 60-day review of the State’s current medical marijuana program, potentially resulting in large-scale reforms to the program aimed at expanding access and loosening restrictions on both prescribers and users. These anticipated reforms, together with the proposed legislation, present a unique opportunity for entrepreneurs and investors to get in on the ground floor of what appears to be a rapidly emerging market sector.

 

Cheers!  New Jersey’s Agricultural and Natural Resources Committee voted 5-0 last week in favor of bill A2196.  The bill is designed, among other things, to eliminate the current “mandatory tour” obligation imposed upon New Jersey’s craft brewers.  Under the current state of the law, craft brewers are required to provide a tour of their facilities each and every time a patron enters the premises to purchase the breweries’ products for on-site consumption – whether it is the individuals first or one-hundredth time visiting the facility.  If passed, the pending legislation will alleviate craft breweries of this oft-criticized requirement in the hopes of placing New Jersey brewers on par with their competitors in neighboring states where such tours are not required.

As the bill continues to gain steam among craft brewers, many New Jersey bars and restaurants have expressed opposition.  These groups fear that the bill will provide breweries with an end-run around the steep costs of obtaining liquor licenses and thereby unfairly compete in the market.

At the present time, the bill is awaiting a second reading before the State Assembly.

As New Yorkers enjoy their pumpkin spice lattes, the fact that a Grande (16oz) serving will cost them about 380 calories (including 2% milk and whipped cream, because why not?) is becoming common knowledge.  Calorie information has been conspicuously posted on menus at “covered establishments” in New York City for nearly a decade, but on August 28, 2017, New York City agreed to postpone enforcement of its rule requiring restaurants, convenience stores and other establishments to post calorie counts for prepared food in response to a law suit brought by the food industry and supported by the Federal government.

In 2008, New York City became the first jurisdiction in the United States to require chain restaurants to post calorie information on menus and menu boards.   Shortly thereafter in 2010, the Federal government adopted similar laws by way of the Affordable Care Act.  The Federal government’s implementation of such laws has continually been delayed over the years, but now the Food and Drug Administration (“FDA”) plans to provide additional guidance on menu labeling requirements in May 2018.  New York City did not want to wait for the Federal guidance to begin enforcement of its Rule 81.50, New York City’s nearly identical version of its federal counterpart.

New York City’s most recent version of Rule 81.50 tracks its federal counterpart and applies to “covered establishments”, which means “a food service establishment or similar retail food establishment that is part of a chain with 15 or more locations nationally doing business under the same name and offering for sale substantially the same menu items, or a food service establishment that is not party of such a chain that voluntarily registers with the United States Food and Drug Administration to be subject to the federal requirements for nutrition labeling of standard menu items pursuant to 21 CFR 101.11(d), or successor regulation”.   For any such covered establishment, “[m]enus and menu boards must provide the number of calories contained in each standard item.”

While the FDA plans to provide guidance in May 2018, New York City nonetheless wanted to move forward with its enforcement of Regulation 81.50 beginning on August 21, 2017, but on July 7, 2017, the Food Marketing Institute and the National Restaurant Association teamed with several other food-service industry groups to file suit against the City of New York for what it said was premature enforcement of nutritional disclosure guidelines for food-service establishments. The National Association of Convenience Stores and the New York Association of Convenience Stores also joined in the suit, which was filed in the U.S. District Court for the Southern District of New York.

Court documents claim that that the local New York City rules are not identical to the impending FDA rules because they are effective immediately which would clash with the Federal government’s plan to delay compliance for one more year.  The plaintiffs asked the court to stop New York City from enforcing the regulations on the local level prior to the nation-wide rollout in May 2018 and argued that New York City’s Rule 81.50 was preempted by Federal law. The FDA filed court papers in support of the lawsuit.

New York City has now agreed to honor May 2018 as the start date due to the preemption of Regulation 81.50 by the similar provisions contained in the Affordable Care Act. As such, “covered establishments” will have more time to comply and the FDA will be able to set forth guidance as it planned in May 2018.

As the nation awaits the FDA’s guidance, food establishments in New York City should begin to think about whether or not they are a “covered establishment” and the steps they will need to take in order to avoid eventual enforcement action.

New York entrepreneurs in the virtual currency space must be careful to follow New York’s licensing requirements enacted under Financial Services Law Sections 102, 104, 201, 206, 301, 302, 309, and 408. Under the new regulations issued by the New York State Department of Financial Services, a business that engages in “Virtual Currency Business Activity” must be licensed by the New York State Department of Financial Services.  A business is engaged in Virtual Currency Business Activity if it:

  1. receives virtual currency for transmissions or transmits virtual currency;
  2. stores, holds, or maintains custody or control of virtual currency on behalf of others;
  3. buys and sells virtual currency;
  4. exchanges or converts something of value, into virtual currencies; or
  5. controls, administers, or issues a virtual currency.

However, businesses chartered under New York Banking Law and “approved by the superintendent to engage in Virtual Currency Business Activity,” as well as “merchants and consumers” that use virtual currencies for investment purposes or to buy and sell goods or services are exempt from the licensing requirement.

The license application fee to register as a business engaged in Virtual Currency Business Activity is $5,000.00 and is nonrefundable.  The application must include:

  1. the exact name of the applicant, including any doing business as name;
  2. a list of all of the applicant’s affiliates and an organization chart illustrating the relationship among the applicant and such affiliates;
  3. a list of, and detailed biographical information for, each individual applicant and each director, principal officer, principal stockholder, and principal beneficiary of the applicant;
  4. a background report prepared by an independent investigatory agency for each individual applicant, and each principal officer, principal stockholder, and principal beneficiary of the applicant, as applicable;
  5. for each individual applicant; for each principal officer, principal stockholder, and principal beneficiary of the applicant, as applicable; and for all individuals to be employed by the applicant who have access to any customer funds, whether denominated in fiat currency or virtual currency: (i) a set of completed fingerprints, or a receipt indicating the vendor (which vendor must be acceptable to the superintendent) at which, and the date when, the fingerprints were taken, for submission to the State Division of Criminal Justice Services and the Federal Bureau of Investigation; (ii) if applicable, such processing fees as prescribed by the superintendent; and (iii) two portrait-style photographs of the individuals measuring not more than two inches by two inches;
  6. an organization chart of the applicant and its management structure;
  7. a current financial statement for the applicant and each principal officer, principal stockholder, and principal beneficiary of the applicant, as applicable, and a projected balance sheet and income statement for the following year of the applicant’s operation;
  8. a description of the proposed, current, and historical business of the applicant;
  9. details of all banking arrangements;
  10. all written policies and procedures required by, or related to, the requirements of this part;
  11. an affidavit describing any pending or threatened administrative, civil, or criminal action, litigation, or proceeding before any governmental agency, court, or arbitration tribunal against the applicant or any of its directors, principal officers, principal stockholders, and principal beneficiaries, as applicable;
  12. verification from the New York State Department of Taxation and Finance that the applicant is compliant with all New York State tax obligations in a form acceptable to the superintendent;
  13. if applicable, a copy of any insurance policies maintained for the benefit of the applicant, its directors or officers, or its customers; and
  14. an explanation of the methodology used to calculate the value of virtual currency in fiat currency; and

Businesses operating in the virtual currency space, that are not exempt from these new regulations, must ensure that they comply with these new licensing requirements. Businesses interested in pursuing a New York virtual currency license should consult with legal counsel.