In the most recent November elections, fully 67% of New Jersey's adult voters came out to say yes to legalize cannabis.

The new cannabis law, signed by Governor Phil Murphy in February, had a deadline of Aug. 21 for the New Jersey Cannabis Regulatory Commission to create its rules and regulations. The commission complied.

However, out of the state's 565 municipalities, several have chosen not to allow the creation of recreational cannabis program. These municipalities, however, hold the right to change their decision in the future and jump in to create recreational programs.

Cantor Fitzgerald analyst Pablo Zuanic shared his “Brief thoughts on the coming New Jersey rec (or is it wreck?) program” in his Tuesday note.

“We fear New Jersey may not live up to expectations, at least initially,” Zuanic began.

New Jersey's cannabis sales are expected to start on Feb. 15 at the latest, according to an announcement from state regulators.

Lethargic Start

Referring to the NJ state cannabis commission as being “far from nimble,” approval of new license applications will be slow, said Zuanic, adding that the main concern is not only a sluggish start but a low number of shops. “Only eight stores for a population of 9 million, plus ‘visitors’ from Pennsylvania, Connecticut and New York.”

As a comparison, Zuanic looked at Arizona, population 7 million, which had 70 stores up and ready to sell adult-use cannabis on the first day of the program. And despite that, the “long lines made TV headlines.”

“We fear a 'hiking' trip to the Berkshires in western Massachusetts may be more time eﬃcient (and healthier) than standing in line for hours in one of those eight New Jersey towns come February,” Zuanic pointed out.

TerrAscend Gets Exclusivity In Two Places

There are several publicly traded cannabis operators positively positioned for the new cannabis program in New Jersey, such as AYR Wellness (OTCQX: AYRWF) and Verano Holdings (OTCQX: VRNOF), Zuanic noted. Both companies hold two of the 10 licenses for medical marijuana operations in the state. Of the other eight, six are publicly traded - Acreage Holdings (OTCQX: ACRHF), Ascend Wellness (OTCQX: AAWH), Curaleaf (OTCQX: CURLF), Green Thumb (OTC: GTBIF), TerrAscend (OTCQX: TRSSF) and Columbia Care (OTCQX: CHWTF).

What gives Ayr Wellness and Verano a competitive advantage? They have three stores each in areas where the state recreational cannabis program has been approved.

To make things more complicated comes the exclusivity some cannabis operators have obtained due to the rules set. For example, in Phillipsburg, the town council chose to opt out and ban all future recreational stores, though it would allow the existing alternative care center (ATC) to sell both medical and adult-use cannabis, explained Zuanic.

The ATC in Phillipsburg is owned by TerrAscend, which in this manner would be granted exclusivity in this town. The same thing is happening in the township of Maplewood, added the analyst.

“We understand these types of decisions may eventually be challenged in court, and on the surface also seem contrary to what the New Jersey Cannabis Regulatory Commission (CRC) is trying to accomplish regarding social equity participation. Yes, the CRC gives towns the right to opt out, but does it give them the right to oﬀer exclusivity to certain operators?” Zuanic asked.

Photo: Courtesy of Manisha Raghunath on Unsplash

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