On March 9, 2025, the Jersey City Police Department Quality of Life Unit, along with municipal, county, and state agencies, engaged in targeted enforcement of five businesses allegedly conducting unlawful activities including the sale of cannabis without a license. The city reported confiscating 13 pounds of marijuana and thousands of untaxed tobacco products from these illegal shops.
Jersey City is one of many municipalities in the state that have stores that may appear to be legitimate from the front but are actually illegal cannabis dispensaries. These five businesses in Jersey City were not operating in the shadows; they were located in storefronts on the well-trafficked roadways of West Side Avenue and Martin Luther King Boulevard.
Some argue that taking aggressive action against unlicensed cannabis shops perpetuates the War on Drugs, which the legalization of cannabis is attempting to unwind. But permitting such operations to continue through acquiescence defeats the whole purpose of legalizing and regulating cannabis for adult use. It actually harms licensed businesses, particularly social equity licensees, operating in compliance with the law. Moreover, municipal governments are resource constrained, making it difficult for towns, particularly densely populated areas, to conduct broad-based enforcement against unlicensed actors.
Since New Jersey made the policy decision to enact an extremely comprehensive regulatory system for the manufacturing, distribution, and sale of cannabis, it needs to also own the enforcement that inevitably results when individuals decide to skirt those regulatory structures. This article contends that state enforcement can occur more effectively if the legislature transfers the New Jersey Cannabis Regulatory Commission (CRC) from being in but not of the Department of the Treasury to the Department of Law and Public Safety, while simultaneously enhancing the CRC’s powers. This would place the CRC in the same department as its peer agencies that regulate alcoholic beverages and gambling, and enable the CRC to take the lead role in statewide enforcement. The legislature should also take action on pending legislation to improve the licensing process and increase penalties for unlawful production and distribution of cannabis. This holistic approach of enforcement against bad actors and support for those seeking to lawfully enter the market can make the state government a leader in combating unlicensed sales, similar to efforts that have occurred in New Mexico.
Transferring the CRC from Treasury to Law and Public Safety and Enhancing Its Powers
The broad statutory mission of the CRC, which is established in but not of the Department of the Treasury, is to regulate the medicinal and recreational cannabis industry. N.J.S.A. 24:6I-24. In order to accomplish this mission, the CRC is vested with a set of powers that includes the ability “[t]o investigate and aid in the prosecution of every violation of the statutory laws of this state relating to cannabis and cannabis items and to cooperate in the prosecution of offenders before any State court of competent jurisdiction.” N.J.S.A. 24:6I-34b(3). This specific power is not applicable solely to those licensed by the CRC but any person “who buys, sells, cultivates, produces, manufactures, transports, or delivers any cannabis or cannabis items within this state.” N.J.S.A. 24:6I-34a.
While it may have been advantageous to establish the CRC in but not of the treasury at the outset of cannabis legalization, both for independence and citizen perception, this structure is no longer viable if the CRC is to support legal sales by curtailing the illegal cannabis marketplace. The Department of Law and Public Safety is much better suited to house the activities that the CRC is statutorily charged with undertaking.
The role performed by the CRC is similar in nature to the divisions and commissions under the Department of Law and Public Safety that regulate vices, namely the Division of Alcoholic Beverage Control (ABC), Division of Gaming Enforcement (DGE), and the New Jersey Racing Commission (NJRC). The ABC is the most analogous to the CRC as both regulate intoxicating substances that rely on strict licensure, production controls, and age verification to promote public safety. It is well-established that the ABC plays a critical role in identifying criminal activities and has a long connection with law enforcement. See N.J.S.A. 33:1-4d (granting law enforcement powers); In re Schmidt & Sons, 79 N.J. 344 (1979) (holding the ABC, “unlike most other licensing agencies,” is vested with considerable law enforcement powers). The CRC needs to be on par with that level of enforcement authority in order to be effective in stopping unlicensed sales.
Improving the Licensure Process and Increasing Penalties for Illegal Sales Is Another Element
Applicants seeking a cannabis business license not only complain about the time it takes for licensure, but also navigating the patchwork of rules that exists in the communities that have opted to permit cannabis businesses to operate within their boundaries. If one of the goals of cannabis legalization is equity, as stated by the CRC, then eliminating bureaucratic barriers is key, particularly for persons not accustomed to interacting with government. One bill currently pending in the legislature attempts to do just that. Senate Bill 4074, sponsored by Senate President Nicholas Scutari, makes various changes to the licensing process so Class 5 retail licenses can be more efficiently permitted and opened for business. This will forge both new channels for cultivators and manufacturers to sell their product and more opportunities for those seeking to get a retail license to successfully enter the market.
But as the state offers the proverbial carrot, it must also furnish the notorious stick, which it can do by increasing the penalties for unlawful sales. The intent should not be punish the purchaser of the product, but rather go after the individual or business entity that has not availed itself of the legal means to sell cannabis. Current law does subject an unlicensed entity selling cannabis to criminal penalties under Title 2C of the New Jersey Statutes. See N.J.S.A. 2C:35-5. But increasing the penalties for those in charge of unlicensed cannabis businesses serves as an additional incentive to get persons into the legal marketplace. Senate Bill 4145 is an example of one such bill that provides for increased penalties for unlawful sales.
The most important element, however, is ensuring that any law is properly enforced. This makes the aforementioned changes to the CRC the cornerstone of any plan to close illegal shops. Licensure process changes and increased penalties serve as supporting elements.
A Southwestern State Provides a Template
New Mexico is a recent example of a state giving additional authority to its cannabis regulatory body. Senate Bill 6, enacted by Governor Michelle Lujan Grisham on March 1, 2024, expressly gives the Cannabis Control Division of the New Mexico Regulation and Licensing Department more enforcement powers to protect against unlicensed and illegal cannabis activity. 2024 Bill Text NM S.B. 6 (Chapter No. 38). The new law also increases penalties for unlicensed cannabis activity and trafficking of cannabis.
In signing the bill into law, Governor Lujan Grisham and top regulators in the state publicly acknowledged that the purpose of the legislation was to give the Cannabis Control Division additional authority to help further eliminate the illicit market in New Mexico, while also giving industry participants reassurance that the state will support law-abiding licensees by removing illegal actors. See Press Release, N.M. Regul. & Licensing Dept., Governor signs bill making changes to the Cannabis Regulation Act (March 1, 2024) https://www.rld.nm.gov/2024/03/01/governor-signs-bill-making-changes-to-the-cannabis-regulation-act/. This is precisely what New Jersey should do: empower the regulator and take action to deter participation in the illegal marketplace.
Conclusion
During the debates on cannabis legalization, a familiar refrain from supporters was that cannabis should be brought out of the shadows and regulated just like alcohol. If that is true, then the state’s regulatory framework to stop illegal sales should be the same for both products. The CRC must become part of the Department of Law and Public Safety, with the same oversight and authorities as the ABC, and the CRC must be encouraged to exercise those powers. Coupling this structure with licensing reform and increased penalties for unlawful sales, the state can lead the effort to reign in the illegal market and support licensed businesses. The status quo will otherwise result in more municipal governments having illegal shops operating in plain sight.
Michael D. DeLoreto is a director in the government & regulatory affairs group at Gibbons P.C. His wide-ranging legal practice includes state and federal legislative and strategic counseling, administrative law, economic development, and commercial litigation. He is the firm’s go-to lawyer-lobbyist for the cannabis industry and other highly-regulated businesses. DeLoreto has authored several articles for and been interviewed by notable legal and business publications about the New Jersey cannabis industry. mdeloreto@gibbonslaw.com