NJ License Application Announcement Brings Some Clarity But Also More Confusion

From: Cannabis Business Executive

At its public meeting on November 10, 2021, the New Jersey Cannabis Regulatory Commission announced that on December 15, 2021 applicants for cultivation or manufacturing licenses can begin submitting applications and on March 15, 2022 applicants for retail dispensary licenses can begin submitting applications.  That staggered application process makes sense to help ensure that there will be product available in the market for retailers to sell. In a sharp break from the application process for medical licenses, the CRC made clear that it will accept applications on a rolling basis and that there is no existing plan to close the application window.

The CRC’s Notice advises that applications will be scored on a pass or fail basis. The Notice sets forth the various scoring criteria that must be met and the minimum score required to move forward for licensure. Points will be awarded on an all or nothing basis – meaning applicants must satisfy each scoring criteria so that they receive full points and thereby meet the required score.  This non-competitive approach also is a significant (positive) change from the state’s medical licensing process, which resulted in numerous lawsuits and licensing delays because of application scoring challenges in the courts.  As CRC Executive Director Jeff Brown previously advised, the CRC wants the marketplace – not the CRC or the courts – to determine who is successful in this industry.

However, the Notice appears to have a significant error that on its face will not allow any applicant for an annual license to meet the required minimum score of 250 points. There are 22 scoring criteria for annual licenses, that appear to afford a total of 250 points. But of those 22 criteria, 7 criteria are applicable to only retail or only manufacturing or cultivation applicants. As a result, applicants can only receive a maximum of 210 scored points (there are “bonus points” available but the Notice expressly states “Bonus points only count toward priority. They do not count toward the score necessary for approval.”).  That means no applicant for an annual license will be able to meet the minimum required 250 points even if they receive all points available to the license class for which they are applying. Presumably a corrected notice will be forthcoming.

The CRC will hold a pre-application webinar on November 30, 2021 and will be accepting questions on the application through November 19, 2021. Additionally, the CRC may post answers to other questions on a Frequently Asked Questions page of its website.

Importantly, the Notice clarifies ambiguous language in the CRC’s regulations regarding how the license priority provisions will be implemented.

“Priority will be given to conditional license applications over annual license applications, and microbusiness applications will be prioritized over standard cannabis business applications in every category.”  The CRC will review applications based on the priority structure, and then on a first in-first out basis.

The Notice creates an application priority structure that is largely consistent with the mandates of the statute. First priority goes to social equity businesses that submit a conditional license for a microbusiness. That means, even if a conditional-microbusiness-social equity applicant submits their application after other applicants, they will jump to the front of the line.  The CRC has not disclosed if they will update the application review queue on a daily, weekly or other basis as they continue to accept applications on a rolling basis.

Following social equity businesses in priority, are diversely owned businesses, then impact zone businesses, then bonus point applicants, and finally all other applicants. Interestingly, diversely owned businesses that have more than one certification, e.g. a woman and minority owned business, will be given more priority than a woman owned business or a minority owned business.

While the adult use law encouraged the CRC to try to issue 30% of licenses to diversely owned businesses, it expressly required the CRC to give “priority” to impact zone applicants to ensure that at least 2 licenses for each class of license would be awarded on a priority basis to impact zone applicants. The Notice thus appears to have given priority to social equity and diversely owned business ahead of the statutorily mandated priority for impact zone applicants.

Also of note, the CRC announced that it will be issuing a final list identifying the impact zones in the state. During the final debates leading to the passage of the adult use law, a sponsor of the law shared a list of the 22 impact zones, but it has been impossible to verify using publicly available data whether each of those 22 towns meets the statutory definition of impact zones. This clarification from the CRC is welcome news to anyone considering an impact zone application.

Testing laboratory license applications also will be given the highest priority to help ensure that the labs will be in place to test cannabis and cannabis items prior to their release to the public.

As a result of that priority review process, the CRC has finally answered how the 37 cultivation licenses that are available (until February 2023) will be awarded. Those licenses will be awarded on a first come first served basis consistent with the priority schedule. That should result in most of those licenses being issued to social equity or diversely owned businesses, which has been an important goal of the CRC.