Why NJ towns are opting out of legal cannabis, and why it might perpetuate the illicit market

"The question becomes, do you want this market to be transparent or do you want it to be underground? Do you want it to be run by criminals or do you want it to be run by licensed businesses?”

While a handful of New Jersey’s cities and towns are diving headfirst into legal recreational cannabis—Trenton, Jersey City, Lambertville, to name a few—many are opting out of allowing production, retail sale and consumption lounges in their communities. 

Municipalities have until Aug. 21 to decide if they’ll opt-in to one, several or all of the six cannabis production and sale designations outlined in the legalization measure approved by voters last year. And they must decide before the state cannabis regulatory board outlines cannabis rules; the Cannabis Regulatory Commission also has to codify regs by Aug. 21, and is likely to use all the time until then to do so.

Given that uncertainty, Mike Cerra, executive director of the New Jersey State League of Municipalities, expects “the bulk” of NJ’s 565 towns and cities to opt out by Aug. 21, citing feedback he’s heard from municipal leaders and the fact that dozens of municipalities pre-emptively passed opt-out ordinances several years ago (which they’ll have to redo, by the way).

Yet, these opt-outs come despite the 2-to-1 margin of victory for legalization last year, and nearly unanimous approval in every town. Cerra says, however, that there’s more nuance to the decisions local leaders are making now.

“I think there’s an understanding that the ballot measure that passed was on legalization and decriminalization, and it wasn’t whether or not your community is right for a dispensary. It’s a different question. You can for very good reason support legalization but say it’s not a good fit for this community and here’s why,” Cerra says. 

Those reasons? In addition to the hesitance regarding how the state will regulate cannabis businesses, Cerra says there’s valid anecdotal evidence about traffic and parking impacts. Some aren’t opposed to cannabis businesses in town, they just want to wait and see how other cities and towns do it, and let them work out infrastructural kinks first.

But if you ask Edmund DeVeaux, president of the New Jersey CannaBusiness Association (the state’s first cannabis trade organization), the lingering stigma of cannabis may underlie decisions to opt-out of cannabis. 

“There are communities and residents and stakeholders …  who say we’re talking about a drug, and while on one hand, yeah, you’re talking about a substance, I do have to still continue to remind people that almost 90 years ago we criminalized a plant not for public health reasons, not for public safety reasons, but because it was a plant used by negroes, jazz musicians, Mexicans… and if white women got a hold of this plant, they would lust after black men. That’s why the plant was criminalized; not for public safety or for public health,” DeVeaux says.

For some lawmakers, perpetuating the stigma around cannabis has become part of their platform, and they may not yet be ready to either give up the prohibition fight or know enough about what the legal cannabis market actually looks like to get onboard.

“You’re talking about something that’s going, overnight, from illicit to licit, and politicians can’t necessarily change their attitudes by flipping a switch,” says Paul Armentano, deputy director the cannabis advocacy group NORML. “They’re going to initially look at regulating cannabis like it’s plutonium, not like it’s alcohol, and it takes time for them to come to terms with this reality. For most of their political reality, this hasn’t [only] been an illegal substance, it’s been a demonized substance. Some of them have championed it being illegal and demonized it in their own political careers.”

Part of what’s so maddening, or nonsensical, to cannabis advocates, or just people who have seen legal cannabis integrated into communities in other states, is that the stats don’t bear out concerns some may have about increased underage use, crime or quality of life impacts. As Armentano points out, research has been done for the last 25 years on medical, and then recreational, cannabis businesses on communities—and “a cottage industry” has cropped up to continue to study the effects.

For instance, a Regional Science and Urban Economics study in 2019 looked at areas of Denver near recreational cannabis facilities and found a 19% reduction in crime. Another study, in 2018 from Contemporary Economic Policy, found a 7.7% increase in home value for properties within a half-mile of a dispensary. Several studies found no correlation between increased underage cannabis use and distance of cannabis facilities to schools. And studies in Oregon and Colorado found dispensaries are probably less likely to sell to minors than establishments selling alcohol.

So is that information getting through to municipal leaders in NJ? Does it matter? It seems, at least, that skeptical municipalities and the cannabis advocacy groups are trying to bridge the information gap. The League of Municipalities (which drafted an opt-out ordinance, partly in response to feedback from League members), is hosting a tour of a cannabis facility later this month, for instance, just so interested members—who may still be on the fence about opting in or out—can see what a professional operation looks like.

And events like that—as well as time for municipalities to see it work in other NJ towns and cities—could usher in a sea change of opinion on legal cannabis businesses across the state. And though it’s hard to prove a negative, the effects of not allowing legal cannabis can be, ironically, detrimental to a community, Armentano says.

“They’re certainly shooting themselves in the foot,” Armentano says of municipalities that opt out. “The idea is to replace the illicit market with an above-ground legal market. By continuing to outlaw the above-ground legal market, these communities are simply keeping the illicit market in place.

“When you hear the discussions, clearly local politicians have concern about the idea of introducing marijuana to communities. The irony is marijuana is already in these communities. The question becomes, do you want this market to be transparent or do you want it to be underground? Do you want it to be run by criminals or do you want it to be run by licensed businesses?”

Adds DeVeaux: “The legacy market or the illicit market does not go away just because you legalize cannabis. The real desire here is to certainly put a dent in their operations and provide a safe and responsible source of a product that should’ve neve been criminalized to begin with. And so when we talk about the illicit market or the legacy market, I have had conversations with adults who have said I would rather pay more money and go to a regulated legal facility than to support the same person that would sell to a minor and sell an unregulated, untested product. …. When people talk about what about the children, the response is first of all do you think today that just because the product is illegal that you are preventing the children from accessing it? And so what we do share is statistics that show that teenage use actually drops in states with a legalized regulated adult use market.”

Cerra says August 21 is an “artificial deadline,” because municipalities can opt-in after opting-out at any time. (If they do nothing, they can’t opt-out for another five years.) A more telling date on how municipalities feel about cannabis would be August 21 next year, Cerra says, because then cannabis business will be in operation (presumably) and local officials will have the information they say they need to make decisions.

“I hear from plenty of officials who are opting out in August and aren’t opposed to it, they just want to see the state regulations for it,” Cerra says. “If they opt in by statute they lose a lot of control, not knowing what the state does with regulations. Effectively, towns can give themselves their own extension by opting out.” 

Armentano says it would be natural for officials to punt the decision down the road.

“As much as lawmakers, whether they’re state or local, tend to be somewhat overall cautious or skittish at first over time they become more comfortable with the concept of a legal market,” Armentano says. “Over time, what we see is a lot of the skittishness gives way to a more rational approach.”

And so ultimately, the proof—if legal cannabis in NJ does in fact integrate well with communities as it has in other states—will be in the (dank) pudding. And successful integration of cannabis businesses will be quiet.

“At the end of the day when I’m asked what does the industry look like, my vision is you’re going to walk down Main Street and you’re going to walk by a restaurant where you can walk in or walk by it; you’re going to walk by a pharmacy and walk by it. You’re going to walk by a liquor store and if you want something while walking by you’ll drop in and if you don’t you’ll just keep walking,” DeVeaux says. “Then you will walk by a dispensary or a consumption lounge and, guess what, if you want to go in as an adult you will, and if you don’t you’re going to walk by without thinking twice because it’s going to be part of the fabric of the community.”