The governor of New Jersey would be authorized to enter into agreements for interstate marijuana commerce with other states that have legalized cannabis under a new bill filed by Senate President Nicholas Scutari (D).

However, the agreements could only be forged if federal law changes, or if the Justice Department issues guidance permitting such activity.

With more state adult-use marijuana markets coming online in the Northeast region, the legislation is timely, proposing to create the policy infrastructure for interstate cannabis commerce that could significantly expand the currently fragmented industry and help resolve possible supply and demand issues.

The fact that the bill is being sponsored by the Senate president—who also championed the state’s legalization law—signals that this is a serious legislative endeavor.

But the federal policy conditions that are built into the measure leave questions about the timeline for implementation even if it is passed. The bill itself would take effect immediately upon enactment, but the governor could only initiate the interstate agreements if Congress or the Justice Department gives such activity the green light.

There are also regulatory requirements that must be agreed upon by each of the participating states. The New Jersey Cannabis Regulatory Commission (CRC) and the legislature’s Joint Budget Oversight Committee would have certain oversight and rulemaking responsibilities to that end.

Under the legislation, the text of which has not yet been posted online but was obtained by Marijuana Moment on Tuesday, interstate marijuana commerce agreements would be contingent on compliance with the contracting state’s cannabis laws, including those pertaining to licensure.

The states must agree on the mode of transportation for marijuana products to be exported and imported. And such products could not be shipped through any state or jurisdiction that prohibits the activity.

Agreements could involve either medical or adult-use marijuana products. And considering that the majority of states have legalized cannabis in some form, the map of possibilities is theoretically expansive (especially as it concerns medical cannabis) as long as states and jurisdictions adopt permissive policies.

Any out-of-state marijuana business seeking to engage in cannabis commerce within New Jersey under the agreement must also receive a license from state regulators, as well as by local governments where the activity takes place.

“An agreement shall require that the contracting state impose requirements on foreign licensees with regard to cannabis and cannabis products to be sold or otherwise transferred or distributed within this State that meet or exceed the requirements applicable to State licensees,” the bill text says.

That includes meeting New Jersey rules on public health and safety standards, seed-to-sale tracking, laboratory testing of cannabis products, packaging and labeling requirements and marketing policies.

There must also be a “process for identification of adulterated or misbranded cannabis products, and the destruction of those products, using standards that meet or exceed the standards and procedures promulgated by the commission.”

The agreements would also need to include provisions that address how to handle “public health and welfare emergencies,” such as the need to promptly recall or embargo contaminated products.

“An agreement shall include provisions requiring appropriate regulatory authorities of each state to investigate instances of alleged noncompliance with the commercial cannabis regulatory rules and regulations upon request by the other state and in accordance with mutually agree-upon procedures,” the legislation says.

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There’s also an equity component of the bill stipulating that the agreements must incorporate provisions directed by the governor that “promote the inclusion and support of individuals and communities in the cannabis industry who are linked to populations and neighborhoods that were negatively or disproportionately impacted by cannabis criminalization.”

Before an interstate marijuana commerce agreement is executed or amended, the governor would need to submit the proposal to the Joint Budget Oversight Committee for review and recommendations. The panel would have 60 days to review the agreement and suggest any revisions.

At that point, the governor would be able to incorporate the panel’s changes or refuse them. If the governor does reject the revisions, they would need to share the reasoning with the committee and also publicize the agreement for a 30-day public comment period.

While many industry stakeholders have pushed for lawful interstate commerce to free up isolated state markets, that type of commercial activity has been specifically identified by the federal government as an enforcement priority that could potentially warrant intervention.

In anticipation of that potential conflict, the bill lists four conditions that must be met in order for the governor to exercise the interstate commerce agreement authority.

The agreements can only be made and executed if 1) federal law is amended to explicitly allow interstate marijuana commerce; 2) Congress enacts budgetary restrictions that prohibit the use of federal funds to enforce laws against such activity; 3) the Justice Department issues an opinion or memorandum “allowing or tolerating” the commerce; or 4) the state attorney general issues a written directive affirming that the implementation of the proposal “will not result in significant legal risk” to the state.

New Jersey regulators would be required to notify the governor and legislature if and when any of those four conditions are met.

The bill from Scutari, who also recently filed a measure to legalize the possession and home cultivation of psilocybin by adults, is similar to interstate cannabis commerce legislation that was filed and signed into law by Oregon Gov. Kate Brown (D) in 2019.

Two members of that state’s congressional delegation followed up on that action by filing a measure that would similarly allow for such activity, preventing the Justice Department from interfering in states that have affirmative agreements to sell marijuana across state lines. The legislation did not advance, however.

Two years after Brown signed the state-level legislation, a coalition of cannabis organizations began rallying the business community to join them in asking governors from four key West Coast states to seek Justice Department guidance on interstate cannabis commerce.

The Alliance for Sensible Markets campaign circulated a sign-on letter for those interested in putting pressure on the governors of California, Colorado, Oregon and Washington to make the request.

The coalition pointed out that Attorney General Merrick Garland, during his confirmation proceedings, said in oral and written testimony that it’s a waste of federal resources to go after people acting in compliance with state cannabis laws. However, the top federal prosecutor has not specifically weighed in on the question of interstate commerce.

Meanwhile, in California, a bill from Sen. Anna Caballero (D) to authorize the governor to enter into interstate marijuana commerce agreements is set to be taken up by the Assembly Appropriations Committee this week, which will determine whether it advances to the floor.

“The economics of this industry won’t be rational until we are able to move cannabis from where it is most effectively grown to where there is greatest demand,” Adam Smith, president of the Alliance for Sensible Markets, told Marijuana Moment in a phone interview on Tuesday.

“The longer we mis-incentivize production in places where it will never be competitive, the more economic harm we will do and the more we will hurt the small players,” he said.

Read the text of the New Jersey Senate interstate marijuana commerce bill below: 

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Photo courtesy of Mike Latimer.

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