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Why attorneys and the cannabis industry are a natural fit (updated)

Why attorneys and the cannabis industry are a natural fit (updated)

After launching a year-and-a-half ago with a handful of dispensaries solely owned by multistate operators, New Jersey’s legalized recreational cannabis market is finally generating a steady stream of cannabusinesses being opened by local entrepreneurs.

Hailing from a range of diverse backgrounds – from legacy to the Ivy League to the pharmaceutical industry and community advocates – the wave of new ventures also includes shops that have lawyers as owners, partners or investors. While it might seem unexpected, attorneys who are getting into the blossoming industry say it’s a natural fit because the cannabis space is a complex one, filled with ever-shifting rules and regulations.

Sarah Trent, a cannabis advocate, attorney and founder and chief executive officer of Valley Wellness, a medical dispensary in Raritan

“There is a good lawyer behind most successful businesses and that is not different for cannabis,” said Sarah Trent, a licensed attorney who owns and operates Valley Wellness, a dispensary in Raritan. “Cannabis is about compliance and lawyers are good at compliance.”

Justin Singer, a founding partner at New York City-based Feuerstein Kulick LLP, who is opening Plainfield’s first adult-use dispensary with his mother-in-law, said, “A legal background is certainly helpful in navigating that landscape and ensuring that your business remains compliant in this heavily regulated industry.”

Singer added, “Beyond that, I think that lawyers are natural problem solvers, and, as anyone operating in the cannabis industry would tell you, every day presents a new challenge that needs to be addressed with creative and legally sound solutions.”

Max Thompson, an attorney seeking to open a micro-dispensary, Blue Violets, in Hoboken with his wife, Lauren Chang Thompson, said, “Being able to really understand the rules applicable to the industry and operate in a compliant way will be paramount.

“But don’t make the mistake that you’ll see automatic success just because you can read and interpret the rules. Knowing the industry is critical, so having a genuine interest helps a lot. As for skills, many of the regulations are new and still changing, so savvy attorneys with creative thinking can probably come up with some interesting business ideas or solutions to problems,” said Thompson, who is licensed to practice in New York.

While production, sale and use of regulated cannabis is legal under the New Jersey Cannabis Regulatory, Enforcement, Assistance and Marketplace Modernization Act, it remains illegal at the federal level.

So, when the New Jersey Advisory Committee on Professional Ethics began receiving inquiries from lawyers about whether operating or investing in a licensed cannabis business conflicts with the Rules of Professional Conduct, the panel looked further into the matter.

After examining whether conduct that complies with state cannabis law but violates federal controlled substances law to determine if it “reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects,” the committee issued a September 2022 opinion saying that operating or backing a cannabusiness is not at odds with the rules.

New York, Colorado, Nebraska and Washington state have issued similar opinions in recent years.

Justin Corbalis, an attorney in Offit Kurman’s New York office who has developed a regulatory practice spanning all aspects of New Jersey’s cannabis industry, called the committee’s opinion “an invaluable” one. “Substantively, it carefully and clearly carved out a space for lawyers to operate directly in the cannabis industry – and by extension, it expanded awareness and acceptance of cannabis as a legitimate business in the legal world in New Jersey. Practically, it also alleviated an entrenched – or perhaps ossified – hesitation among lawyers to engage with cannabis in any sense, let alone in a direct and participatory manner in the cannabis industry,” said Corbalis.

Singer believes it was “an important signal” that helped “clear any potential murkiness as a result of the continuing disparity between state and federal law related to cannabis.”

It also “sent the right signal to those operating in the New Jersey market that the New Jersey judiciary is aligned with the executive and legislative branches in supporting the state’s cannabis industry,” he explained.

A shifting perspective

As legalized cannabis becomes more widespread in the U.S., Singer believes the “boom of professionals jumping in to service a new industry” is spurring a slow change in the public’s perception of cannabis.

“A large majority of Americans live in states with regulated cannabis programs, and lawyers are often on the leading edge of those movements, whether by advocating at the state level for the implementation of such programs, or by representing clients seeking to obtain licenses and operate compliantly in a new regulatory regime. In an industry that can have significant barriers to entry, lawyers play a vital role in helping lower those barriers to ensure that the cannabis industry is more diverse and inclusive,” Singer explained.

Corbalis agreed, saying, “As we’ve seen in other, more established markets, people usually just need time to understand that cannabis is not the first sign of a coming apocalypse. Quite the opposite: regulated cannabis tends to reduce crime, bring in much needed money to state and local governments, promotes social justice, and ensures quality and lab tested product is norm – not the exception – to adult and medical use of cannabis.

“In addition to ‘time,’ however, seeing white collar professionals, political figures, superstars, or really anyone with a ‘status’ in society jump on the cannabis band wagon can help motivate public perception toward understanding and accepting the cannabis industry as a boon,” he added.

Prove it

For Trent – a well-known cannabis advocate and founder of NJ Cannabis Certified, a 15-hour educational certificate program taught in conjunction with eight community colleges across the state – she doesn’t believe skeptics will change their mind “simply because professionals are behind the businesses.”

“It is up to those professionals to prove over the next few years that they can actually run the business successfully,” she said.

Sarah Trent, the founder and chief executive officer of Valley Wellness, a newly opened medical dispensary in Raritan and certified woman owned business enterprise
Sarah Trent is the founder and chief executive officer of Valley Wellness, a newly opened medical dispensary in Raritan and certified woman owned business enterprise.

Deciding whether to operate such a venture, Trent said, is not to be taken lightly. “I think that a lawyer’s strengths really lie in obtaining licenses – writing applications that show compliance with the regulations and securing land use approvals. Having that background can help you operate, but running a retail shop or a cultivation site also requires skills outside the practice of law,” she said.

“I think some lawyers have the mindset that ‘If I am going to write this application and get municipal approvals for my clients, then I can do this for myself,’” she said. “But then, you have to run the business or hire someone to do it. I think that’s where some lawyers are like, ‘Do I really want to run a retail operation on a day-to-day basis?’”

Not currently a practicing attorney, Trent is the chief executive officer at Valley Wellness, which she describes as a “24/7 job.” She also serves as co-chair of the New Jersey State Bar Association’s Cannabis Law Special Committee.

“Between managing staff, purchasing, inventory — it is hard to find time to think about what is next. I am not sure that there is a lot of balance in my life, I am working all of the time, even when I am not at work or when I am supposed to be on vacation,” said Trent. “But in part, that is what has made Valley Wellness a success.”

Corbalis, who counts himself as a “bona fide fan of the product” because it has helped him deal with treatment resistant insomnia, sees the industry as “an incredibly solid bet — particularly in newer markets like New Jersey, where the combination of unlimited licensing at the state level but limited licensing at the local level will likely ensure a stable, profitable marketplace for a long, long time.”

But right now, the demands of his legal work are too high for him to meaningfully get involved in any separate business – cannabis or not.

“That, of course, may change as the industry in New Jersey gains more and more momentum,” he said.  “In terms of lawyers participating in the industry, I know quite a handful who have been at it for a long time here in New Jersey and in other states. I expect that trend to continue as the New Jersey market continues to flourish and regulations adapt to meet the needs of the public, such as social equity and quality control, and the business side of the industry, such as less constraints on capital investment and ownership.”

A juggling act

No matter what one’s background is, the process of starting up a cannabis venture in New Jersey is “not for the faint of heart,” admitted Singer. As he and his mother-in-law, Jennifer Brandt, prepared for the Sept. 7 grand opening of Queen City Dispensary, they couldn’t be more excited to begin welcoming cannabis fans as well as those who are “canna-curious.”

“For me and my mother-in-law, who was raised here and is the licensee, it’s a real honor to bring legal cannabis to our local community and help educate our customers and others about how cannabis – and the cannabis industry as a whole – can improve their lives and strengthen their community,” the Essex Fells native said.

The big unveiling caps off a nearly two-year process, which he described as “a challenging juggling act.”

Queen City Dispensary is Plainfield’s first adult-use dispensary.
Queen City Dispensary is Plainfield’s first adult-use dispensary.

“It’s a rollercoaster. Literally every day presents me a challenge. And the only thing that sort of keeps my spirits up is just going into it with that understanding that there’s going to be ups and downs every step of the way. Just maintain a positive attitude and surround yourself with the right people. And it’ll all work out in the end,” he said.

Singer – who leads Feuerstein Kulick’s Regulatory Compliance and Licensing practice groups and is considered one of the country’s experts in cannabis licensing, regulations and compliance – said, “That’s where I see a lot of people’s frustration has come in because they haven’t been in the industry that long and they think once they get their license it will be a quick process.”

“If you’ve been in the industry long enough, then you know that you just have to expect there’s going to be those bumps in the road and it’s going to take a long time, but just stick with it. Maintain a positive attitude, surround yourself with the right people and you’ll get there,” he said.

Of all the steps required to launch a legalized retail shop, Singer said getting local support from the municipality for Queen City Dispensary was “probably one of the easier things to do.”

About 400 of the state’s 565 municipalities have opted out of allowing cannabis sales, despite nearly 70% of voters backing the legalization of marijuana in a 2020 referendum. But Plainfield is among the communities that opted in, which “created a very good opportunity from a competitive landscape,” Singer said.

Also considered an impact zone – an area disproportionately affected by the war on drugs – the New Jersey Cannabis Regulatory Commission has prioritized the Union County city when it comes to granting licenses there.

“The city itself was extremely receptive. They saw the opportunity – Mayor [Adrian] Mapp and its whole administration. Very early on – almost two years ago – we started having conversations with Mayor Mapp and his administration about the intention of wanting to open up a dispensary in Plainfield,” stated Singer.

“Anytime I advise clients, I always tell them ‘That is your first stop.’ Once they decide where they want to be, they need to go and have a conversation with the municipality and make sure they’re on board, because if they’re not, you don’t want to start down that road and pick that fight,” he said.

After filing its conditional application for a Class 5 retail license with the CRC in March 2022, the team went on to pursue the necessary approvals from Plainfield. Ultimately, Queen City secured its annual license in July 2023, allowing the business to schedule an official opening for early September.

“That process on the state level took over a year and that was difficult because at the same time we’re raising money, we’re doing construction, we’re building out, we’re hiring team members and trying to parallel path everything to come together at the same time,” he said.

“After you get the license, then you have to get up and running in Metrc [the state-mandated seed-to-sale inventory tracking system] so that you can start bringing in process,” he explained. “In the meantime, we were raising capital, trying to plan for when we think we’ll be able to open and being in the precarious position of trying to make sure you’re able to maintain your cash flow before you can actually start opening your doors. All of that on the sequencing and the licensing process was probably the most challenging part. Trying to juggle all of that at the same time and try to schedule the store to get open. There’s just a ton of moving pieces.”

Dream team

For Singer and Brandt, it was important that the team have hands-on experience working in New Jersey’s cannabis space.

Located at 1353 South Ave., the dispensary – which adopted Plainfield’s nickname – offers a range of products including flower, pre-rolls, concentrates, edibles and vaporizers from New Jersey cultivators, as well as a range of accessories.

Located at the former site of Phoenix Pre-School, which closed three years ago when the owners retired, Queen City Dispensary’s staff includes General Manager Kristal Marko, a seasoned cannabis retail executive who has opened and operated multiple successful cannabis stores in New Jersey.

Queen City Dispensary is Plainfield’s first adult-use dispensary.
Located at 1353 South Ave. in Plainfield, Queen City Dispensary offers a range of products including flower, pre-rolls, concentrates, edibles and vaporizers from New Jersey cultivators, as well as a range of accessories.

The team also includes Assistant General Manager Ariell Hunt, a lifelong Plainfield resident who once served as director of Phoenix Pre-School. After Phoenix closed, Hunt enrolled in cannabis training courses offered by NJ Cannabis Certified at Union County College and then worked her way up the ranks of a dispensary in South Jersey before joining Queen City.

As director of the pre-school for two years, Hunt admitted it’s “surreal” to be back in the building that is familiar yet different, and that she initially was hesitant about her return.

In particular, Hunt was unsure how the neighborhood parents of the children she used to care for would react and whether they’d be “disappointed” in her for pursuing a cannabis career.

“The response that I’m getting has been the total opposite. They’re so excited. They’re like, ‘This is a new chapter for you. You dominated it as director of the preschool and you’re going to dominate this.’”

Queen City Dispensary is also making education a central part of its mission.

“That’s how you combat stigma. People may not know what it means when a dispensary comes to their neighborhood, how does it operate and what are the rules and regulations. That’s why we put a huge emphasis on getting out into the community, putting on seminars and presentations for groups like the senior center,” Singer said.

“There are still a lot of misconceptions you have to deal with, but not as much as there used to be. And what I find is when you go out into the community and you engage in the conversation, you’re usually able to combat a lot of that stigma and win people over. You’re not proselytizing, obviously, people are going to have their own ideas and conceptions, but we just want to at least get people armed with facts about what’s true and what’s not about cannabis and the cannabis industry,” he said.

Ample growth?

While the CRC has been criticized over the pace at which the state’s industry is advancing, Executive Director Jeff Brown is confident it is poised to become a $1 billion market within the next year.

As of Sept. 6, New Jersey had 47 recreational dispensaries, up from 11 when adult-use sales began in April 2022. It also has 46 medicinal stores, a slight uptick from the 32 open for business a year-and-a-half ago.

According to the state, 1,301 of the 2,084 applications submitted for licenses have been approved, with the majority of them conditional. Additionally, 315 conditional license holders have gone on to secure the necessary local approvals and have since applied to convert to annual licenses so they can open.

In August, the New Jersey Cannabis Trade Association released a report on the overall status of the industry, saying it believes New Jersey is “falling short and lagging significantly behind” when compared to cannabis markets in Montana, Oregon, New Mexico and Arizona due to a combination of slow licensing and weak regulatory enforcement of the illicit market.

Citing sales figures from the first quarter of 2023, the NJCTA projected that for “every retail store the CRC delays opening, New Jersey stands to lose $1.8 million in potential annual revenue.”

“At the outset of the State’s adult-use cannabis program, the New Jersey Legislature explicitly established a clear timeline for license issuance, identifying that annual applications must be approved ‘not more than 90 days after the receipt of the application.’ However, the CRC stalled for over 210 days before issuing its first approvals. This delay created a supply headache for cultivators and resulted in hundreds of small business owners and social equity licensees incurring financial losses due to unopened operations,” the NJCTA said in its report.

CRC Executive Director Jeff Brown

In response, Brown said in a statement that “New Jersey’s innovative law calls for the Social Equity Excise Fee to increase as prices fall. This ensures low taxes at the outset of the market but will lead to double or triple state revenue in the future, increasing investments in communities disproportionately impacted by cannabis prohibition. We are also encouraged that the NJCTA highlights the need for lower prices and more competition. We hope their membership heeds their own call to action. High prices keep consumers out of the legal market and keep tax revenue low.”

Singer believes the CRC is “doing the best they can with the way the system was set up.”

“I don’t know that they anticipated, especially because of this conditional versus annual process, they had a thousand conditional licenses and they have to administer all of that. So, I think that’s slowed things down and they’re understaffed, and I know that they’ve been asking for more funding so that they can’t staff up.”

“But, by and large, everyone that we deal with at the CRC, it’s a collaborative experience. Everyone is rowing in the same direction. Everyone that we work with is trying their best to help facilitate getting folks open, but they are just at the mercy of the system the way that it was built and there’s only so much that they can do.”

Singer continued: “They don’t control the macro forces at work – which is in the entire industry. It’s extremely hard to raise capital right now and the valuations are way down from where they used to be, so those are the headwinds that everyone is facing.”

“It’s not like if the CRC just gave everybody an annual license, then all of the sudden you’d have this proliferation of operators. You need a lot of time, experience and capital to get those off the ground and it’s not easy to cobble all those things together,” Singer said.

Editor’s note: This story was updated at 12:32 p.m. ET Sept. 11, 2023, to clarify a quote about Metrc.

The post Why attorneys and the cannabis industry are a natural fit (updated) appeared first on NJBIZ.

This content was originally published here.