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Knee Deep In The Weeds

Navigating The Legal Pot Landscape

 

Rosemarie Moyeno Matos’ journey to becoming a cannabis industry legal expert came about rather unexpectedly. Having practiced in the highly regulated areas of environmental, insurance and business law, Ms. Moyeno Matos ventured into this new area in 2018 when she was approached by cannabis industry leaders Wanda James of Simply Pure, Al Harrington of Viola Extracts and Todd Scattini of Harvest 360 to assist them in submitting two applications for vertically-integrated alternative treatment centers in New Jersey.

She jumped at the opportunity to work with the Simply Pure NJ team, especially since it consisted largely of minorities, women and veterans. An encounter with a like-minded lawyer Jessica Gonzalez during the process resulted in the pair establishing Moyeno Gonzalez & Associates PC, a women-owned boutique firm specializing in cannabis, corporate and intellectual property law.

Ms. Moyeno Matos recently spoke with WellWell on all things cannabis law, including the prospects and potential pitfalls for those companies, individuals and investors wanting to get involved.

Is this a good business for a law firm?

This is a good business for everyone, including law firms. It is virtually impossible to navigate this space without the assistance of an attorney that not only understands cannabis law and applications process but also issues that are specific to the operation of a cannabis business, including federal restrictions, protection of intellectual property rights, and tax, real estate and land use issues that are frequently encountered by cannabis businesses.

What’s allowed in New Jersey now?

NJ currently limits legal marijuana consumption for medical use only. Patients with qualifying debilitating conditions must establish a bona-fide relationship with a doctor authorized by the DOH to prescribe medical marijuana and they must purchase their marijuana from one of six currently operating ATCs. More are on the way. Between permits awarded or pending during the last two years another 10 vertically-integrated ATCs, 15 dispensary and 5 cultivation endorsements could be on the horizon.

What qualifies a patient for medicinal access?

The number of qualifying debilitating medical conditions has risen in recent years from four to nearly 20 categories, including anxiety, depression, PTSD, migraines, chronic pain, glaucoma, migraines, opioid use disorder, cancer and other terminal illnesses, to name a few.

How many patients are involved?

Tens of thousands. We should be nearing the 100,000 mark soon. When Governor Christie left office in January 2018, the number of registered MMP patients was around 14,400. Since then patient count has grown to well over 60,000.

What’s happening on the recreational marijuana front?

Currently, we are in a holding pattern. The last push to legalize adult use was sidetracked by politics. In May 2019 after Governor Murphy’s announced that he was moving forward with expansion of the medical marijuana program, the legislature announced that the adult use bill would be tabled indefinitely and would go to referendum in 2020.  In August 2019, it was announced that the legislature may revisit the bill before the end of the year during the lame duck season, but reports indicate that there may still not be enough votes to pass it. If it goes to a referendum, it is strongly believed that the measure will pass as nearly 60% of voters reportedly support legalization.

New Jersey may be an intriguing marketbut getting involved can’t be easy, even for individuals and companies with money to invest.

Nothing about this space is easy or cheap.  Because the industry is still very new in New Jersey, the laws, regulatory oversight and the landscape are constantly changing.  All of this will take some time.

Depending on your business model and your plans, you will likely need to anticipate costs for construction, adding security measures, securing permits, licenses and approvals from local government, as well as other start-up costs such as purchasing equipment and products and hiring employees.  At the very low end, you may be looking at between $10-$15 million for a full vertical operation.  A dispensary alone, depending on the size, can cost as little as a million dollars to get started, but more likely it’s $1.5 to $2 million because you need sufficient padding for unanticipated issues that may arise.

What are the issues beyond money?

Competition is fierce in New Jersey because there is a competitive application process. You may only apply when the state publishes an RFA and then there is a limit to the number of licenses that will be awarded under that RFA.  Moreover, you are graded based on scoring criteria provided to a group of anonymous judges.

In non-competitive states, if you want a license you just submit an application at any time and if you meet the criteria set forth by the state and local government, you are likely to get a license.  It does not work that way in New Jersey.  There is no guarantee that you will get a license even if you check off all the boxes.

Just how competitive is this?

I can tell you this. Last year 106 companies submitted 146 applications for only 6 licenses. Sometimes the difference between winning and losing is a fraction of a decimal point, literally.  Although the DOH has not published any official numbers from the 2019 RFA, I have heard that approximately 200 applications were submitted for the 24 permits to be awarded.  While those odds are better than in 2018, I have also heard that the DOH has taken a significant amount of time to review applications for timeliness, completeness and disqualifying criteria before commencing with grading the applications that make the final cut.  This means that the number of applications that are disqualified before being “judged” will likely be higher than in 2019.  It’s a gamble for sure.

So that’s tougher than getting into Harvard?

Yes, I would say so.

What advice would you give to anyone thinking about entering the field, even if they have the money?

Do your research, but more importantly consult with an experienced attorney before you invest a significant amount of money.  We are often approached by prospective clients after they have already created and started building a business entity, only to inform them that they’ve made operational and branding mistakes that wind up costing them more time and money in the long run.  People also need to understand that cannabis is still federally illegal and this creates lots of unique challenges for start-ups, like opening bank accounts, getting a mortgage, securing insurance or property without a “cannabis premium.”

The other issue is compliance. Compliance is the key to avoiding federal prosecution. The federal government has taken the stance that you will not be prosecuted for conducting a federally illegal business so long as you are operating legally within in the confines of the laws of your state.  Therefore, you must be sure to stay in complete compliance with the state and local laws where you are operating and you must continue to stay on top of those laws, because they change all of the time.

 

 


About Rose Moyeno Matos

Rosemarie Moyeno Matos is a founding partner at Moyeno Gonzalez & Associates, LLC, a firm that represents both for-profit and non-profit organizations, rendering a wide range of legal services from entity selection and formation to regulatory compliance advice and commercial transaction representation. Currently, she represents several entrepreneurs and start-ups in the medical and recreational cannabis space.  Through her corporate and regulatory background, she has developed a keen awareness of the issues of the cannabis industry, allowing her to successfully helps her clients navigate them.

Please visit www.mgalawpc.com to learn more.

 

 

 

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