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How Legal Marijuana in New Jersey Will Disrupt Pennsylvania's Medical Program: A Q&A with Duane Morris Lawyers

By Sam Wood
November 27, 2017
The Philadelphia Inquirer

How Legal Marijuana in New Jersey Will Disrupt Pennsylvania's Medical Program: A Q&A with Duane Morris Lawyers

By Sam Wood
November 27, 2017
The Philadelphia Inquirer

Read below

Seth Goldberg

Seth A. Goldberg

Paul Josephson

Paul P. Josephson

New Jersey is almost certain to legalize marijuana for adult recreational use within a year, and that’s sure to have major repercussions on Pennsylvania’s nascent medical cannabis industry….

The Inquirer spoke with two Duane Morris LLP lawyers who represent marijuana clients on both sides of the river. Seth A. Goldberg, based in Philadelphia, heads the firm’s cannabis practice. Paul P. Josephson, based in Cherry Hill, served as counsel to Murphy’s gubernatorial campaign and is an adviser to the New Jersey Cannabis Industry Association. The questions and answers have been edited for concision.

How soon will we see New Jersey move to legalize cannabis for all adults?

Josephson:  It’s likely we’ll see legislative action by June. In the interim, I wouldn’t be surprised if there was another call for license applications and the governor or Legislature looks to broaden the number of qualifying medical conditions.

What will it look like if New Jersey approves full recreational use?

Josephson: I would expect that Gov.-elect Murphy will appoint a commission or panel to provide guidance. The legislation that is out there right now doesn’t define the number of licenses. It creates a new Division of Marijuana Enforcement inside the Attorney General’s Office, similar to the Division of Gaming Enforcement. The legislation leaves it to the director and AG to determine the number of licenses on a town-by-town basis. …

What will legalized recreational use in Jersey do to the Pennsylvania medical marijuana program?

Goldberg: It’s not unreasonable to imagine people going to New Jersey to buy cannabis and, as a result, the Pennsylvania program would not be as profitable as originally anticipated. The assumption seems to be that Pennsylvania is not likely to become a recreational-use state any time soon. If and when New Jersey goes rec, the loss of revenue to New Jersey would seem to be a reason for the Pennsylvania legislature to consider going recreational.

Josephson: To the extent New Jersey is projecting that 10 percent of marijuana revenues might come from Pennsylvanians, I think it’s obvious the N.J. program could have a negative impact on Pennsylvania revenues.

Goldberg: Delaware is also considering going recreational. … Given that there appears to be only one dispensary that will open in Philadelphia, it seems reasonable to expect people will consider going to South Jersey and Delaware for recreational cannabis.

How are your clients on both sides of the river viewing the new markets?

Josephson: The currently licensed medicinal dispensaries in New Jersey are obviously looking to much better days ahead after limping along for the last several years. There’s a lot of interest from within the state and nationally, especially given that it’s pretty rare to get legalization without a referendum. We now have a governor who has signed on full bore. I can guarantee that it will be a rigorous regulatory process, but we’ll have an environment that welcomes this industry. People are very bullish on New Jersey.

Goldberg: People in Pennsylvania are also considering setting up in New Jersey, though it’s unlikely they will stop pursuing their operations in Pennsylvania until more is known about the program in New Jersey.

Will we see the big Western and Midwestern marijuana operators dominate the New Jersey market? Will there be room for mom-and-pop shops?

Goldberg: In Colorado and other states we’ve seen, there are challenges to operating a single dispensary. The costs are high, and you got a tax deduction problem. [Income is federally taxed at 40 percent, and the costs of doing business cannot be written off.]

Josephson: What you will see is some effort to ensure a diversity of licensees and an effort to ensure diversity in operation size and ownership. I’m confident that minority ownership will be favored in the process. … There will be a role for the mom-and-pop operations, especially in the smaller towns and suburbs. A license will be granted by the state, but you’ll need local land-use approval, and mom-and-pops are a much more comfortable fit for municipalities than a large franchise model. …

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