Cannabis legalized in New Jersey — is New York next?

November 20, 2020

Cannabis Alert 

Author(s): Lori B. Green, Brandon Coyle, Catherine A. Savio

While New York has become more marijuana-friendly in recent years, New Jersey’s voter-approved legalization creates incentives for the New York State Legislature to reconsider its stance.

The time is “ripe” for marijuana legalization in New York, said Governor Andrew Cuomo during an interview two days after the election.

On November 3, 2020, New Jersey voters approved a constitutional amendment to legalize “a controlled form of marijuana called ‘cannabis.’” The amendment will take effect on January 1, 2021, but New Jersey law makers must still pass a bill governing the rules and regulations of the industry, which will be overseen by a Cannabis Regulatory Commission. The creation and implementation of a regulatory scheme will be no small feat given the highly regulated nature of the industry.

Meanwhile, New Jersey’s neighbor to the north, New York, has become more marijuana-friendly over the past few years, but it has not yet embraced legalization. New York’s law decriminalizing possession of small amounts of marijuana went into effect on August 28, 2019, and just last month the New York State Department of Health created a Cannabinoid Hemp Program to license cannabinoid hemp processors and retailers and set quality control standards for cannabinoid hemp products. However, Governor Cuomo, who has argued in favor of legalization for some time, has been unsuccessful in convincing the New York State Legislature to adopt legislation to legalize adult recreational use of marijuana in New York. Governor Cuomo has included marijuana legalization in his annual budget proposals for the last two years, but negotiations in the legislature have stalled, with legislators unable to agree on how cannabis tax revenue would be allocated.

We expect that a potential side effect of the overwhelming approval of marijuana legalization by New Jersey voters, taken together with the significant revenue losses New York is experiencing as a result of the COVID-19 pandemic and the social justice reform movement in New York, will be to put pressure on New York legislators to adopt legislation legalizing adult use marijuana in New York. Absent doing so, New York likely will lose tax revenue to New Jersey, including as a result of New York residents purchasing marijuana in New Jersey and businesses establishing themselves in New Jersey as part of the marijuana supply chain. Given the shared border and high rate of exchange of both people and goods between the two states, New York legalization would allow the state to avoid putting itself and its residents at a competitive disadvantage with New Jersey. If New York were to act quickly, it may also cooperate with New Jersey to put together a regulatory structure that would benefit both states and allow New York to avoid having to incur the costs associated with policing a potential influx of currently illegal cannabis through the bridges and tunnels of New York.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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