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New Jersey’s hemp industry is at a regulatory standstill after the state announced that “at this time” it won’t enforce a new law temporarily banning hemp sales, four days after a federal judge upheld most aspects of the law as constitutional.
John Williams, a cannabis and hemp attorney with Porzio Compliance Services, said the state has failed to provide sufficient guidance to business owners, hemp farmers, manufacturers, and retailers. Some feel as though they’re in limbo, unclear about what they can and can’t do, he said.
“Some people have removed the product off the shelves. Some are selling it very judiciously. Everybody’s looking for more clarification, because they’re getting 180 degrees in terms of differing opinions,” Williams said.
The state’s hemp law went into effect Saturday, but the only provision state officials said they will enforce is prohibiting sales to people under the age of 21.
The Cannabis Regulatory Commission, which the new law tasks with overseeing the hemp industry, blamed its decision not to enforce the law on the court ruling. Released Thursday by U.S. District Court Judge Zahid N. Quraishi, it sided in two key areas with hemp businesses that had challenged the law but declined the plaintiffs’ request to toss the entire law out. The commission on Saturday said it was still reviewing the decision and did not respond for additional comment.
Lawmakers wrote and passed the bill amid concerns that children could easily buy products with thousands of milligrams of untested THC. In September, Gov. Phil Murphy signed the bill into law, agreeing with those concerns but stressing he had reservations about the law being too vague.
Hemp businesses filed suit two weeks later. The plaintiffs argued that hemp is federally legal and the law effectively recriminalizes hemp cultivators, manufacturers, and retailers.
The law as written requires hemp businesses to obtain licenses through the cannabis agency to sell, manufacture, or distribute hemp, a process that could take months or longer. The law also allows some liquor license holders to sell hemp products as long they receive licenses from the cannabis commission.
Beau Huch, an attorney representing hemp-derived beverage companies, said the commission’s Saturday statement left people “incredibly confused” about what the future holds for retail shops. Some stores aren’t sure whether they want to take the risk and sell hemp products or buy more inventory, he said.
“You have many businesses in a do-or-die moment of, ‘Can I pay my bills? Do I push the limits?’ That’s definitely been a chilling effect,” he said.
Some attorneys fear that municipalities may begin to take matters into their own hands and get local police to act if they see retailers selling hemp products. Williams said he had expected direction from the Attorney General’s Office to local, county, and state police on how to deal with this matter. He’s concerned businesses are still at risk, criminally and civilly, despite the cannabis agency’s statement.
According to the law, people selling intoxicating hemp products without a license could face a fine of at least $100 for the first offense, $1,000 for the second offense, and at least $10,000 for each subsequent violation.
Joshua Bauchner, a cannabis attorney at law firm Mandelbaum Barrett, doesn’t have the same concerns about municipalities stepping in. He said he doesn’t believe that any town’s attempt to shut down local smoke shops would stand up in court.
“I’m cautiously optimistic that, for the most part, everyone’s just going to take a big, deep breath and step aside from anything that’s unrelated to the prohibited sales to minors,” he said.
For most of his clients, it was business as usual on Monday, he said, stressing that his clients have long checked customers’ identification and refused to sell hemp products to people under 21.
He said it was “very smart” of the cannabis agency to take the position it did. The original intent of the legislation was to stop minors from buying sketchy products with synthetic cannabinoids, and the commission’s decision to enforce only the age requirement for now does just that, he said.
“If things had stood, arguably, people’s shelves and warehouses were filled with contraband. No one wants that — the uncertainty of whether you are now engaging in a criminal enterprise keeping you up at night,” he said.
The Attorney General’s Office and the Cannabis Regulatory Commission did not respond to requests for comment Monday. The Attorney General’s Office declined to comment on the matter last week.
Quraishi’s decision says it’s the Legislature’s task to correct any constitutional deficiencies he found with the law, which focused on language regarding out-of-state hemp businesses. Sen. Teresa Ruiz (D-Essex) sponsored the hemp bill and in a statement said lawmakers will work to “clarify any technical details that are necessary.”
Huch said he wants lawmakers to see this as a second chance to work with the hemp industry. He’d like to see the state’s alcohol control division promulgate rules in conjunction with the cannabis agency. And the state needs to create a funding mechanism to support enforcement, he said.
He added the state could delay the law from going into effect for a year and take that time to collect more data.
“Something like that was lost in translation when this went through originally,” he said.
Williams listed a litany of issues with the decision and the hemp law. He said the judge didn’t address many of the claims in the original lawsuit, like vagueness in the law, language regarding total THC limits, and liquor store compliance.
Under the law, New Jersey will count “total THC” in products, which will hold derived hemp to a higher standard than the federal law that legalized hemp. Products with more than 0.5 milligrams of THC per serving or 2.5 milligrams per package would be under the purview of the cannabis agency.
Hemp farmers feel like it’s nearly impossible to keep that limit so low, Williams said, leaving them concerned about whether they can grow anything under New Jersey’s limit. Most of these workers are local growers on family farms, he added.
Bauchner also hopes that’s something lawmakers also tackle in clean-up legislation, though he’s not confident it’ll happen since the court upheld the state’s definition of intoxicating hemp.
One of the major pain points is how the Cannabis Regulatory Committee will oversee the hemp industry. The agency has had a tumultuous three years since its inception in 2021. Critics said cannabis sales took too long, the licensing approval process remains slow, and without enough cultivators to meet the demand, prices remain high.
Now with overseeing the hemp industry among its tasks, Huch said the commission has been handed “a behemoth of an industry with no immediate appropriation or future funding.”
Sen. Vin Gopal (D-Monmouth) has been a frequent critic of the cannabis agency. He said lawmakers are looking at whether the agency needs more funding and resources.
“I know this is a bigger issue on the CRC and funding and their role on how they’re going to regulate. All good questions and all ones we’re going to be answering pretty soon,” he said.
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“}]] A federal judge’s decision on New Jersey’s hemp law has industry leaders scratching their heads and state officials postponing enforcement. Read More