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New Jersey Approves Rules for Dispensary Consumption Lounges

The new rules could be a boon for the state's bottom line and individuals who can't consume cannabis at home.

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On January 17, 2024, New Jersey's Cannabis Regulatory Commission (CRC) approved rules for cannabis consumption areas during a public meeting. The new rules create a framework for medicinal and adult-use cannabis operators who want to add cannabis consumption spaces to their dispensaries.  

Consumption lounges are a new opportunity for cannabis operators, and the CRC hopes they provide an economic boost for the state's cannabis industry. While the $29 million in medicinal sales in Q3 was a nearly two-year low in New Jersey, recreational sales continued to climb. They almost reached $177 million, an all-time high since recreational sales began in April 2022.

The rules will take effect upon approval by the New Jersey Office of Administrative Law. Dispensary operators will need municipal authorization to have a consumption area to get an endorsement from the CRC. 

According to CRC Executive Director Jeff Brown, consumption areas will provide a communal experience for legal cannabis users and help the industry realize its billion-dollar potential, which may take some time as sales in Q3 2023 eclipsed $206 million. 

Consumption lounges must be attached to the dispensary, and operators will be limited to a single consumption area, regardless of the number of dispensaries they own. 

Operators must have robust HVAC systems to ensure proper ventilation and prevent smoke or vapors from affecting neighbors. The sale of food, alcohol, tobacco or nicotine products is prohibited on premise, though patrons will be allowed to bring in or order food and nonalcoholic beverages. 

Medicinal-use patients must be allowed to bring in cannabis products from other licensed retailers, while recreational users may only bring in personal-use cannabis authorized by the retailer. 

Fees associated with consumption area endorsements are $1,000 for the initial or renewal fee for a microbusiness and $5,000 for the initial or renewal fee for a standard consumption area. CRC endorsements are valid for one year and must be renewed annually. 

Businesses can choose hours of operation, fees to enter and priority access for medicinal patients; they can also authorize paid events. However, all operators must adhere to any restrictions their municipality imposes, like the number of consumption areas allowed in town, business signage regulations and communication with municipal emergency services.  

"It's great to see the industry continuing to move forward. I know there are mixed sentiments about the rules, but this is historically how New Jersey rolls out new policies and initiatives. Slow or low and adapt when more compelling arguments present themselves. I'm not arguing if it's right or wrong; I'm simply saying no one should be surprise," says Alyza Brevard-Rodriguez, founder and CEO of The Other Side Dispensary, which has a pending application for a cannabis lounge license in New Jersey. "However, I do believe we are a state that doesn't mind doubling back or changing our opinion as new information is available. Our governor's most recent disparity study examining public contracting opportunities for minority and women-owned businesses illustrates the commitment to improving processes at the state level through statistical assessment and not based on opinion, so I have hopes for our progress."

CRC Chairwoman Dianna Houenou says the new rules are particularly significant for renters or other individuals who can't consume cannabis at home.

"We have seen the social consumption lounge model slowly develop in different parts of the country with varied reviews, but I see them being a successful addition to the New Jersey market, particularly the ones like ours that open in urban areas," Brevard-Rodriguez adds. "Black and brown communities, as well as patients, need a place where they can go safely and legally consume free from harassment."

New Jersey currently has 95 licensed cannabis dispensaries, 14 serve only medicinal patients, 45 serve only recreational users, and 36 serve both.

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