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As New Jersey’s legalized cannabis marketplace enters its next phase of growth, regulators are introducing guidelines for the rollout of cannabis-infused edible products and regulations for medical-based ventures seeking to participate in clinical research, as well as opening up three additional classes of business licenses.
Currently, the only types of digestible cannabis goods available at dispensaries in New Jersey are syrups, pills, tablets, tinctures, lozenges and soft chews. But cannabis-infused drinks, other candies and pastry-style treats are coming soon now that regulators have voted to relax restrictions on edibles.
At its Sept. 8 meeting, the Cannabis Regulatory Commission proposed new rules that would allow for an expanded group of ingestible cannabis products – including baked goods, chocolates, butters, jams and drinks – to be sold in the medicinal and recreational markets.
Under the regulations, products must have clearly displayed nutrition information, warning labels and expiration dates, along with child-resistant packaging that doesn’t have any imagery or names that could pique kids’ interest. The products are also prohibited from containing alcohol or nicotine, must be ready to consume and manufactured by staff trained in food safety.
Additionally, edibles will be limited to 10 milligrams of THC per serving, while drinks will be capped at 5 milligrams.
“We did research looking at other markets and other states’ regulations,” CRC Executive Director Jeff Brown said of the THC amounts. “I think we wanted to make sure that particularly with beverages where somebody might sit down to have a couple of seltzers or whatever, you want to make sure that they’re not overdoing it.”
“So, I’d say 5 milligrams THC would be akin to probably like an IPA or something like that. Whereas if somebody was sitting down and having a 10 milligram THC beverage, for some people that could be quite a lot. For beverages specifically, we wanted to make sure there was a reasonable limit even below that 10 milligram threshold,” he said.
The proposal, which was approved in a 4-0 vote by the board, is subject to a 60-day public comment period, running from Oct. 16 through Dec. 15. But because finalization of the new rules could take up to six months, the commission also took steps to let manufacturers start production to meet expected demand.
According to Brown, the regulatory waivers approved by the CRC will enable some edibles to be made and sold while the proposed guidelines are under public comment and through the adoption process.
“Overall, I believe that this will help New Jersey’s market move further toward a more mature cannabis market. It will really expand product offerings akin to what you see in markets that might be at this for five or 10 years,” Brown said. “I think there’s been excitement from the industry.”
“We had a longstanding medicinal market and one of the things that we dealt with was that the law originally signed by Gov. Christie back in 2010 essentially banned edible products except for children,” he said. “It wasn’t until 2019, [and the] Jake Honig [Compassionate Use Medical Cannabis] Act that we even started to get more edible-like products in the medicinal market. When we transitioned to adult use, we had gummies and lozenges available in medicinal, so those were the first products that transitioned over.
“In planning for this, we had to do some research and look at commercial kitchen regulations that are under the Department of Health,” he said. “A lot of the products that were made in the medicinal context were made kind of more like a drug that somebody would take rightfully so for a health ailment, so ingredients had to be on an FDA [Food & Drug Administration] database for inactive drug ingredients.
Overall, I believe that this will help New Jersey’s market move further toward a more mature cannabis market. … I think there’s been excitement from the industry.
– Jeff Brown, CRC executive director
“In these waivers and in the rules, we expanded the ingredients available for ingestible products to what are called FDA GRAS [Generally Recognized As Safe] ingredients. So, that will really enable the ingredients you see in the foods on grocery store shelves to be used to make these products,” he said.
Brown continued, “I will note when we’re talking about this expansion, it’s not going to be products that will spoil quickly without refrigeration. They have to be shelf stable in order to be produced and sold. The maximum expiration date is six months, but it’s up to the license holder to determine that based on scientific and safety data. These products, like any other cannabis product, will be required to be third party tested, and that will include testing for salmonella, E. coli and other common contaminants before they’re brought to market.”
“One of the things that we’ve done with this rollout, and particularly as we look to edible products, is we took our time and we did our research. Consumer safety comes first at the end of the day, and we want to make sure that people have confidence in this market, that people have confidence in regulated products. And I think the process that we’ve followed ensures that that will be the case,” he said.
High anticipation
Justin Singer, co-owner of Queen City Dispensary in Plainfield, described the CRC’s decision as “a long time coming.”
“One of the most common questions we get from consumers is why aren’t beverages, chocolates and other edible form factors that consumers are used to seeing in other adult use markets, available in New Jersey?…This expansion to allow beverages, baked goods, chocolates and other edible form factors brings New Jersey’s adult use program in line with most other adult use programs in the country,” Singer said, adding, “As for Queen City, we will definitely be carrying these new form factors as soon as they are available.
“It’s an important development that will help expand the category of options available to consumers and will spur additional investment into the state from homegrown brands as well as out of state brands that are now looking to jump into the market,” said Singer, who is also a founding partner at New York-based law firm Feuerstein Kulick LLP and considered one of the country’s experts in cannabis licensing.
“We are already seeing an uptick in licensing and contract manufacturing agreements whereby brands are partnering with existing operators in the state to hasten their entry into New Jersey’s adult use market,” he said.
Edibles are considered a fresh way to attract new consumers who might otherwise shy away from cannabis because they are intimidated by trying to use a dab rig or properly rolling a joint. They are also popular with those who don’t want to inhale smoke and find edibles easy, discreet and convenient.
The global market for consumables is anticipated to grow from $5.13 billion in 2023 to $11.09 billion in 2030, according to research and advisory firm Technavio.
LeafLink, a leading cannabis wholesaler, reported that 15% of purchases on its platform last year came from the edible category, with 14% of those sales in the food & beverage subcategory of items like chocolate, cookies, brownies and savory snacks.
Based on the $306 million of total recreational sales reported in New Jersey during the first and second quarters of the year, LeafLink believes New Jersey has the potential to gross $12 million annually in sales of beverages and edibles with the proper regulations in place.
“The recent relaxation of restrictions on cannabis edibles and THC-infused beverages in New Jersey will not only broaden the margins for operators in the state but allow New Jersey customers access to alternative forms of consumption which have proven to be successful in other markets,” said Claire Moloney, vice president of business operations at LeafLink, adding, “We’re excited to see this change and help more brands of all sizes get their products on more shelves in New Jersey.”
The New Jersey Cannabis Trade Association, a statewide coalition of licensed medical and recreational dispensaries, also applauded the CRC’s recent move to ease regulations and introduce new categories of edibles, saying it “marks a victory for New Jersey’s regulated cannabis industry, its operators, and consumers alike.”
“This positive move greatly expands product choices and will bolster the state’s legal cannabis market as it continues to evolve and advance,” the group said.
The change will “offer a valuable addition” to the state’s legalized market, however it is one that manufacturers will “need to quickly adapt to” in becoming compliant, said Ryan Magee, a partner at McCarter & English LLP. “For example, equipment used in manufacturing these products will need to comply with applicable health and safety standards and manufacturers will presumably need to obtain Food Protection Manager Certifications through the New Jersey Department of Health. There are a host of food safety and handling requirements that manufacturers, including their employees, will need to comply with before rolling out a consumer-ready line of edible or drinkable cannabis products in the Garden State,” said Magee, whose specialties at the Newark law firm include cannabis law.
Upping the class
The CRC is also gearing up to begin accepting applications for wholesale, distribution and delivery service licenses.
Starting Sept. 27, social equity businesses will be given priority review and approval for a 90-day period. After that window closes Dec. 26, the CRC will accept applications from diversely owned businesses – categorized as certified minority-, woman- and disabled veteran-owned – as well as social equity businesses through March 24, 2024. Then, the application process will open for all other applicants March 27, 2024, the CRC said.
Finalized earlier this year, the new license types are:
- Class 3 Cannabis Wholesale: allows the holder to store, buy and sell bulk cannabis and cannabis products.
- Class 4 Cannabis Distribution: permits the holder to transport bulk cannabis and cannabis products between cannabis cultivators, manufacturers or retailers within New Jersey.
- Class 6 Cannabis Delivery: authorizes the holder to transport retail-purchased cannabis and cannabis products to consumers.
The new categories join the state’s existing Class 1 (cultivator), Class 2 (manufacturer) and Class 5 (retailer) licenses.
When it comes to wholesalers, distributors and delivery licenses, Brown said it was “really important to get the market stood up because these licenses are really dependent on moving products between businesses and from businesses to consumers, so there needs to be product available – widely available – in order to do that.”
He went on to say the additional classes “open up new opportunities for businesses, particularly as this market is transitioning from larger companies that were established as a medical market to smaller businesses that I think are really going to become the predominant business type here, small to medium sized business.”
“Depending on what people want to do, this enables them to either go after individual licenses … or pair them with other licenses and vertically integrate to a certain degree,” said Brown, who added, “It’s a good thing for the market and good thing to create more economic opportunities for entrepreneurs.”
Nearly a year and a half after legal recreational marijuana sales started in New Jersey, Brown said he believes the state is doing a good job getting the market up and running.
While the CRC has been criticized over the pace at which the industry is advancing, Brown is confident it is poised to become a $1 billion market within the next year. After noting the state will record its 50th adult-use dispensary opening in a matter of weeks, he said, “This market is going to reach its potential. All market rollouts take time and we’re on the path to success. And, as I’ve said before, New Jersey can be the premier cannabis market on the East Coast and I think we’ll get there.”
Magee said that while the application process for the new licenses seems to be “met with slightly less fanfare than cultivators, manufacturers, and retailers,” the additional classes “stand to play an important role in New Jersey’s cannabis supply chain.”
“As more cannabis businesses make their stamp on the market, we will start to see the role of wholesalers and distributors in ensuring a wide selection of cannabis products from different brands are available to consumers around the state. As for delivery licenses, in a world of DoorDash and InstaCart, I’m interested to see how these licenses can lead to opportunities for consumers to order cannabis deliveries via mobile platform,” Magee observed.
Overall, Singer believes it’s an exciting time in the New Jersey market as the independent supply chain starts to come online, with the opening of applications for delivery, wholesale and distribution licenses as one of the final pieces.
“Most operators in the state are used to doing their own distribution, both in New Jersey and in their operations in other markets,” said Singer. “The truth is that there are not many examples of successful standalone distribution models in the cannabis industry, but given New Jersey’s relatively small size, dense population, and well-established status as a distribution hub, it will not take too long for New Jersey’s distribution and wholesale market to come online. Once it becomes more efficient and less costly for the state’s operators to self-distribute, they will all jump at the opportunity to offload that function to an independent distributor or wholesaler, but it will likely take some time for the market to mature to that level.”
“As for delivery, consumers have been clamoring for the opportunity to purchase cannabis in the same manner that they are now used to ordering food, groceries and even alcohol. It will be interesting to watch this part of the market develop, because this has also been a challenging segment of the cannabis industry, but New Jersey’s size and population density makes it one of the more appealing markets to launch a cannabis delivery business,” Singer continued.
Research opportunities
The CRC is also seeking to amend the state’s cannabis law to create a new permit that would allow “clinically focused” alternative treatment centers to partner with an academic medical center to conduct studies using cannabis products that they grow or sell to patients. Since marijuana is currently classified by the federal government as a Schedule I drug – meaning it’s deemed to have no accepted medicinal use and a high potential for abuse – scientists are faced with an onerous registration process with the U.S. Drug Enforcement Administration to access cannabis for studies, which has created a research gap.
According to Brown, New Jersey’s program is modeled after one launched five years ago in Pennsylvania.
Since Pennsylvania became the first U.S. state to implement government-mandated research on cannabis, several medical schools – including those at University of Pennsylvania, Drexel University, The Pennsylvania State University (Penn State), Temple University and University of Pittsburgh – have begun research on the effects and potential of medical cannabis.
“We’re really trying to incentivize research here in the Garden State, as well,” said Brown, who noted New Jersey’s “long history of pharmaceutical innovation.”
After President Joe Biden signed a bill last year aimed at streamlining the research process, Brown said he believes “there’s more opportunities.”
“Things are loosening at the federal level a bit, and this sort of creates the opportunity for businesses to partner with academic medical centers who do research in order to make that happen,” Brown said.
Under the CRC’s proposed guidelines, clinical registrant permit-holders in New Jersey would be authorized to carry out activities such as growing, manufacturing and selling, just like other licensees, however they’d be able to execute agreements to advance clinical research related to the use of cannabis.
According to the rules, a clinical registrant may dispense usable medicinal cannabis, in any form authorized by an institutional review board, directly to an academic medical center as part of a research study.
Additionally, clinical registrants may not concurrently hold a non-clinical medical cannabis cultivator, medical cannabis manufacturer or medical cannabis dispensary permit, or a personal-use cannabis business license, and partnering institutions would be barred from accepting “anything of value” from clinically focused dispensaries “except for reasonable remuneration, specifically in a research contract for the services to be performed or costs to be incurred by the academic medical center,” the guidelines state.
The public comment period on the proposal ends Oct. 6.
MSOs hit with fines
During its most recent meeting, the CRC sanctioned two of the state’s largest cannabis companies for violating patient access and labor laws.
TerrAscend – which has dispensaries in Lodi, Maplewood and Phillipsburg – was fined $100,000 for five infractions related to medical cannabis patient access. According to the CRC, the state received complaints from patients who said they were told to make their purchases off the adult-use menu, which are more expensive and taxed at higher rates than medicinal use products.
Though the penalty carries a fine of up to $5,000 per violation, the CRC voted 3-1 to slap TerrAscend with four times the recommended maximum penalty as outlined in the state law, with Board Chair Dianna Houenou saying the amount should “reflect the serious nature that the board considers prioritizing patients.”
The heavier fine also went against the recommendation of Brown, who said during the meeting that the MSO submitted a corrective action plan and has taken several steps already, including new standard operating procedures and retraining staff.
“Additionally, this is all relatively new still, not only for businesses, but for consumers. And so, we certainly don’t recommend going above the maximum penalty there and would ask the board to consider other factors in the entity’s compliance at this time,” he said.
In a statement to NJBIZ, a TerrAscend spokesperson said, “TerrAscend has a deep history of compliance in New Jersey, as this is the first violation of any type we’ve received in our four years of operating in the state.
“In June 2023, we were informed that the CRC had received five medical patient complaints related to the fact that certain products were listed only on our adult-use menu. While these patients were still able to purchase these products, it violated a CRC requirement that all products available on our adult-use menu must also be listed on our medical menu. Once informed of this deviation, TerrAscend took immediate action to refine product listing procedures, including IT improvements and further employee training to ensure full compliance with these requirements. We share in the CRC’s focus on ensuring that New Jersey’s medical patients are treated with the priority and care they deserve,” the company said.
Columbia Care, which manages The Cannabist in Deptford and Vineland, was hit with a $50,000 fine for a 13-day lapse in its labor peace agreement.
After being issued a notice of violation in July, Columbia Care has since provided a corrective action plan to the CRC stating it has implemented “new process controls that will enable it to better track its labor peace agreement, as well as other agreements” going forward, according to the CRC.
A representative from Columbia Care did not respond to a request for comment.
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