Barton Blogs

East Coast Cannabis: Legal Restrictions Demise May Soon Allow it to Fly High

Introduction:

Typically when the topic of legalized cannabis comes up the states that come readily to mind are Oregon, Washington, California and Colorado. This is not surprising since these states were some of the first states to decriminalize cannabis as well as to legalize it for both medical and then recreational purposes (somewhat ironically since these same states were some of the first to ban cannabis in the early 1900s).

See https://en.wikipedia.org/wiki/Timeline_of_cannabis_laws_in_the_United_States. However, these states are now barely the tip of the iceberg with respect to cannabis decriminalization and legalization. As of this summer, 13 states had decriminalized cannabis, 9 states plus Washington, D.C. had legalized cannabis for recreational adult use, and 30 states, together with Washington, D.C., have legalized cannabis (and/or Cannabidiol, CBD) for medical purposes. The northeast and eastern seaboards of the United States have been no exception. North of Connecticut, the states of Maine, Massachusetts and Vermont have legalized cannabis for both medical and recreational purposes. Vermont was recently the first state to do so for recreational use through legislation (as opposed to public ballot initiative) which went into effect in July, 2018. See http://www.ncsl.org/research/civil-and-criminal-justice/marijuana-overview.aspx. Virtually every other state south of Massachusetts and down to the Mason-Dixon Line allow cannabis for medical purposes (while Washington, D.C. has laws allowing both recreational and medical cannabis, the federal government has largely banned such allowance in the nation’s capital). Many of these same states, as well as a number of cities/towns, have also decriminalized small amounts of marijuana possession. The states south of Washington, D.C. along the eastern seaboard down to the state of Florida allow cannabis on a more restrictive basis mainly as to the use of CBD, a non-psychoactive cannabinoid that has been shown to be effective in the treatment of, among other conditions, seizure disorders, especially in children. Florida, in turn, by an overwhelming 70 percent of voters legalized cannabis for medical purposes in 2016. Around the country there are also 4 additional states with legalization of cannabis on the ballot for this November; 2 for recreational use (Michigan and North Dakota) and 2 for medical purposes (Utah and Mississippi). Additionally, a half-dozen other states will be choosing between gubernatorial candidates that are pro- and anti-legalization. If the four states with legalization on their ballots approve the measures, two-thirds of Americans would then be living in states where medical cannabis is allowed and a quarter of the country’s population will be living in states where recreational cannabis is allowed.

In the midst of this seemingly unending growth of legalized cannabis use and distribution at the state level throughout the country is equally stunning developments on the east coast. A fairly rapid change of heart in New York and New Jersey from both their executive and legislative branches has seen significant steps being taken, during just this year, to legalize cannabis at each of the decriminalization, medical and recreational legalization levels. By next summer (if not earlier) the whole landscape of cannabis use and distribution in these key states could be largely unbridled by past restrictive laws. New York could conceivably become the largest legal cannabis market in the country. How radical is this change? Just last month Manhattan District Attorney, Cyrus Vance, speaking at the GannaGather meetup in Manhattan, attended by cannabis entrepreneurs and enthusiasts, exclaimed that “I want you all to be successful and legal.” He enthusiastically endorsed a legal marijuana market in the hopes of dampening down one of the largest marijuana black markets in the country. With the change of executive leadership in New Jersey, there have also been lighting-like steps taken to further decriminalize marijuana possession as well as to push for legalized adult recreational cannabis. Much further south, in the state of Florida, there are also positive developments for those operating within the legal cannabis industry, albeit from a much more limited standpoint.

New York:

In 2014, the state of New York passed the Compassionate Care Act (CCA) which created an established medical marijuana program. At that time, the state approved a limited number of organizations that could manufacture and dispense medical marijuana for an equally limited number of medical conditions, Since 2014, the lists of approved organizations and qualifying medical conditions has grown, although the law as administered has remained fairly restrictive. Even with some growth in patients and dispensaries under the CCA, only roughly 12 medical conditions currently qualify for medical marijuana use, it may not be smoked legally, and there are only approximately 20 registered dispensaries throughout the entire state. Cracks in this restrictiveness began to become more obvious as the district attorneys (DA) for two of the largest metropolitan areas in the state, Manhattan and Brooklyn, turned their attentions to limiting or stopping prosecutions of a significant amount of marijuana-related charges (which were also shown to have been enforced significantly more heavily against the cities’ African-American and Hispanic populations). Brooklyn had already decided to stop prosecuting many low-level marijuana cases as far back as 2014. This past year, however, the Brooklyn DA has taken steps to expand that policy to cover a greater number of marijuana-related charges. At the same time, the Manhattan DA’s office has moved from last year’s policy of lightening penalties for some offenders to declining to simply prosecute the vast majority of low-level marijuana cases. Beginning this past month, the New York Police Department undertook a new policy and is simply issuing tickets for people found to be smoking marijuana in public instead of making an arrest of them. These are criminal court summonses with fines left up to the judges. Since the charge is technically a violation and not a crime the summonses are sealed at the end of the cases. Mayor de Blasio, who is more cautious on the topic of marijuana legalization in general, supports this decriminalization change and has said it may cut arrests by more than 10,000 a year.

Somerset Maugham once stated that “[t] the most useful thing about a principle is that it can be sacrificed to expediency.” In the case of New York and the legalization of marijuana for adult recreational use such expediency may be best explained in political terms. In short, Governor Andrew Cuomo’s change of heart this past year moved him from a previously steadfast position of non-support for recreational legalization based, in part, on his belief that marijuana is a “gateway drug” to the use of harder drugs (a generally disproved proposition) to relatively sudden support for exploring the potential for legalization in the midst of a gubernatorial campaign that made the issue a political one with ever-increasing support. Whatever the full explanation, the Governor’s office opened the door fairly wide this year to moving towards a legalized recreational marijuana market in New York which if it comes to fruition is likely to be the largest legalized market nationwide. First, in January, the Governor called upon the New York Department of Health (NYDOH) to oversee a multi-agency study of cannabis legalization. Then, in May of this year, New York’s Democratic Party Committee announced that it supports cannabis legalization and its regulation and taxing similar to alcohol. Just over a month later, the Governor’s office released a guidance that encouraged banks and the financial community to work with the medical cannabis and hemp businesses (the lack of such financial support in light of the federal government’s criminalization of cannabis has been one negative growth factor for the market). Then, came the release of the Health Department’s Assessment of the Potential Impact of Regulated Marijuana in New York State report on July 18th. This report was a game changer. The report concluded that the “positive effects” of recreational marijuana legalization clearly “outweigh the potential negative effects.” Those positive effects include the NYDOH’s estimate that legalization will generate between $248.1 million and $677.7 million in state revenues in just the first year alone. On the heels of the release of this report, the Governor scheduled “listening sessions” around the state for community input. Those sessions are to to be completed this month. At the same time, the Governor created a new 20-person panel in August to draft legislation focused on the legalization of recreational marijuana. Additionally, the chairs of four New York Assembly committees announced in late-August that there will be a series of hearings on cannabis legalization this fall. Is there a hiccup? The Republican-led state Senate has indicated it is less keen on the idea of legalization then is the state Assembly and the Governor. The momentum, however, is clearly on the side of recreational legalization with the devil likely to be in the details (including how such a law would be administered statewide).

New Jersey:

In 2010 New Jersey passed the Compassionate Use Medical Marijuana Act (the “Act”) (N.J.S.A. 24:61-1 et seq.). The Act placed its implementation with the New Jersey Department of Health (NJDOH). The NJDOH established a Medicinal Marijuana Program (the “Program’) after the Act’s passage. The Program principally focused on determining what medical conditions would qualify for medicinal marijuana use and the oversight and regulation of what were to be called Alternative Treatment Centers (ATC). Former Governor Chris Christie, however, kept tight restraints on the dispensing and use of medicinal marijuana, including with respect to what conditions would qualify for its prescription. Only 5 dispensaries were approved while he was in office and only approximately 15,000 people gained access to medical marijuana (by contrast, during the same time, Michigan gave 218,000 people access to medical marijuana). Governor Philip Murphy though ran a campaign promising the full legalization of marijuana. With his victory in place he wasted little time moving the ball forward towards expanded medical use and recreational legalization. In January of this year he issued an executive order directing the NJDOH to conduct a 60-day study of the Program, focusing on how to expand access to it. Virtually overnight expansive changes occurred under the Program. Between January and June of this year, some 10,000 new patients gained entry into the Program bringing the total patients to about 25,000. By March, six new conditions were added to those previously qualifying for medicinal marijuana care, another dispensary opened in state and additional ATCs were in the works, together with additional growth steps (the state also received almost 150 applications to run six new planned ATCs with two in each region of the state). See https://nj.gov/governor/news/news/562018/approved/20180702a_marijuana.shtml. Meanwhile, New Jersey’s Attorney General Gurbir Grewal asked municipal prosecutors to place a moratorium on marijuana-related cases to allow his office time to develop “appropriate guidance” for their handling of those cases. By late-August he lifted the moratorium but through a 9-page guidance left it to local prosecutors discretion as to how they will prosecute possession cases while at the same time putting additional pressure on the state legislature to pass new decriminalization and/or legalization legislation.

There has been some division within the state legislature as to legalization as opposed to further decriminalization….and not simply along party lines. A budget battle in the first half of the year also slowed progress on any marijuana-related legislation. Yet, there still remains momentum towards legislation being passed by early next year, if not sooner. Several bills have been drafted in the state Senate and Assembly (see, e.g., S-2702, A-3581 and A-3620). State lawmakers have been focusing on drafting both legalization as well as separate decriminalization legislation. While there apparently remains various moving parts, recent draft legislation moving to legalize recreational marijuana has been developed that is being touted as a bill believed “to have a real chance to pass” (the “Bill”). Key elements of this bill can be found at and are discussed in a New Jersey Advance Media article. As support for this bill grows, Governor Murphy has gone on record in the past week stating that New Jersey will have legal adult recreational marijuana available “sooner rather than later” which he has (maybe overly) optimistically said could happen by the end of this month. At the same time, his enthusiasm appears contagious in the industry as NJ Cannabis Insider just held a completely sold out all-day education and networking event in state on October 3. Six takeaways from this event are summarized in a New Jersey Advance Media article. How strong is the momentum in New Jersey? Within a week of the NJ Cannabis Insider event Democratic lawmakers met collectively to hash through the Bill to bring it closer to finalization and circulation. Senate President Stephen Sweeney is still talking about bringing the bill to a vote by October 29. While that timeframe may turn out to be overly optimistic, it’s clear that state legislators are focused on the issue of legalizing recreational marijuana legislatively.

Florida:

By public ballot measure in 2016, Florida voters passed a constitutional amendment referred to as the Florida Medical Marijuana Legalization Initiative. This Amendment legalized medical marijuana for individuals with specific debilitating diseases or comparable debilitating conditions as otherwise determined by licensed physicians. The Amendment, which went effective in January, 2017, also sought to require the Florida Department of Health (FDOH) to regulate marijuana production and distribution centers as well as to issue identification cards to patients and/or their caregivers. With, at best, limited enthusiasm by Governor Rick Scott and the GOP-led state legislature, the implementation of the directives of the Amendment were stalled. Legislation (the Medical Use of Marijuana Act; Senate Bill 8A) was finally passed six months later in June, 2017. This Act was designated to establish regulations for the earlier Amendment’s implementation including, among other things, defining only eleven medical conditions as qualifying for medical marijuana treatment, capping the number of dispensaries and treatment centers until 2020, banning the smoking of medical marijuana, and regulating physicians under the law. This legislation (especially its ban on smoking of medicinal marijuana) was met with almost immediate lawsuits. Even though more than 70 percent of voters supported legalized medical marijuana, the state has spent more than $2 million since seeking, supporters say, to undermine the law. The state’s legal track record since has been unremarkable as it has lost most of the steps along the way.

Not surprisingly, given the unsupportive atmosphere out of Florida’s state capitol, the marijuana industry has been a fledgling one during the past two years. That said, there are still approximately 91,000 Floridians who have gained access to medical marijuana via the orders of some 1,400 physicians. Supporters expected more but the state legislature, in particular, has muddied the water in the interim. However, by June, the FDOH was registering new users at roughly 5,400 a week and had brought the registration process down to about two weeks. While there have been a few other positive developments, more significant steps are likely to have to await the results of this November’s elections. Rick Scott, now running for the Senate, generally opposes both medical and recreational marijuana while current state Senator Bill Nelson supports medical marijuana. In the state gubernatorial race, the Republican candidate, Ron DeSantis, would simply continue to implement existing medical marijuana policy. His opponent, Democrat Andrew Gillum, however, actively supports full marijuana legalization. Needless to say, November’s elections will have a significant impact on Florida’s marijuana market and corresponding businesses.

Impact: 

It is obvious that the legal environment for legalized cannabis remains very fluid. While a huge section of the public nationwide supports its decriminalization and/or legalization and the industry continues to grow rapidly around the country, the laws (and corresponding regulations) vary materially from state-to-state and are in a fairly constant state of change. Additionally, the present federal government remains generally opposed to decriminalization as well as legalization which adds a whole new layer to the equation of both operating a business within the cannabis industry as well as being a user of their products.

Beyond being able to stay on top of all of the state and local legislative and regulatory developments pertinent to the cannabis industry, there are a host of other legal issues for businesses in general to be aware of as marijuana is decriminalized and/or legalized in state and localities in which those businesses are located. The legal issues are many and beyond the scope of this article but some examples come readily to mind. For instance, as an employer what does legalization’s impact mean to you? How do you responsibly respond to an employee’s request to use medicinal marijuana to accommodate their corresponding disability? Does the same require some sort of physical space  accommodation on or around your premises? Does the state in which you conduct your business require an accommodation? If not, can you safely enforce a “zero tolerance” policy during business hours? After hours when your employee may still be, in theory, on the clock remotely? What if you operate from a state that has legalized marijuana on a recreational basis; how might this impact any drug testing policy? Can you be facing discrimination actions based on what policies you are already utilizing or seek to adopt regarding drug use? How do you, for instance, properly proceed in New Jersey if an existing provision of its current draft legislation is passed that bars you from taking any adverse action against an employee due to his/her use of legalized marijuana, unless you have “a rational basis” for doing so? Have you even developed an appropriate employment policy applicable to drug use under the current state of the law in your state? Or, if you operate a hospitality business which allows a patron to use legalized marijuana to the point of “being under the influence” and then injures others, do you face legal liability for having hosted that patron?

In short, advice of counsel may be key to avoiding the legal consequences of the ever-growing cannabis decriminalization and legalization movement around the country, including the rapidly changing markets in both New York and New Jersey. Should you have questions about any of the above, please feel free to contact Eric Sleeper.