Absent a Veto, a New Jersey Bill Will Kill the State’s Hemp Industry

In a trend popping up across the country, the New Jersey legislature recently passed a bill to regulate intoxicating hemp products. NJ S3235, currently awaiting signature from Gov. Murphy, contains important provisions which hemp product manufacturers and retailers should monitor.

While most hemp operators are in favor of sensible regulation, critics of the legislation say that it will effectively kill any future for hemp businesses in the state. If signed, the new law would implement the following important changes:

• The definition of “Hemp Product” would be amended to establish cannabinoid potency levels of not more than 0.5 mgs of total THC per serving and 2.5 mgs of total THC per package. This term would not include “intoxicating hemp products” or those products that are not derived from naturally occurring biologically active chemical constituents of the plant.
• “Intoxicating hemp product” would be defined as any product cultivated, derived, or manufactured in the State of New Jersey from hemp under the 2018 farm bill. While cannabinoid potency for “intoxicating hemp products” does not appear to be defined in the bill, one must assume that it would include anything over the quantified limitations in the definition of “hemp product.”
• The definition of “Cannabis Item” would be amended to include “intoxicating hemp products” and all requirements applicable to cannabis items would be applicable to intoxicating hemp products.
• A carve out would be included in the prohibition against selling “intoxicating hemp products” for businesses that hold a valid and unrevoked plenary wholesale or plenary retail distribution license (alcohol) and is approved by the NJ Cannabis Regulatory Commission (CRC) to sell intoxicating hemp beverages. Otherwise, only licensed cannabis businesses can sell these products.
• The new requirements would apply to any online retail sale of an intoxicating hemp product sold in the State of New Jersey.
• “Intoxicating hemp beverage” would be defined as a beverage that is an intoxicating hemp product, as defined above.
• The NJ CRC would have to adopt regulations governing the sale of intoxicating hemp beverages and products before any sale would be lawful.
• An application and approved license would be required before any plenary wholesaler or retail could sell intoxicating hemp beverages in the state.
• Any intoxicating hemp beverages sold or offered for sale in the state could only be sold to persons 21 years of age or older.
• The sale of intoxicating hemp beverages would be subject to taxes similar to that of cannabis items.

This bill would define “intoxicating hemp products” as only those that were produced within the state, which some argue would prevent out-of-state products in violation of the dormant commerce clause.

The licensure requirements, while easier for existing alcohol wholesalers and retailers, will still cause a delay in—and potentially a de facto ban on—the existing full spectrum hemp product market in New Jersey. The CRC will have to propose and adopt regulations to implement this program and then the application process could take months, and possibly years. Those regulatory proposals would also need to include state-specific packaging and labeling requirements as well as other compliance requirements. As noted, the new law would be applicable to the online retail sale of intoxicating hemp products in addition to physical brick-and-mortar sales within the state.

Now, hemp business owners await the Governor’s signature or potential veto of the bill as well as future guidance and enforcement from state regulatory officials. Importantly, responsible hemp business owners are already complying with industry best practices, such as packaging and labeling guidance and age-verification protocols for 21+ purchases.

For non-compliance, the bill would establish penalties for an owner or operator of a business who sells an intoxicating hemp product in violation of the provisions set forth therein. The penalties would be as follows:

• For a first offense, a fine of not less than $100;
• For a second offense, a fine of not less than $1,000; and
• For a third offense, a fine of not less than $10,000.

Each product sold in violation of the bill would constituent an additional separate and distinct offense.

If you have questions about this new bill, before or after signature, or any of the changes that would be implemented, reach out to Kight Law Office today.

July 10, 2024

This article was written by Kight Law attorney Amber Lengacher. Kight Law represents hemp businesses in the US and throughout the world.