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What Could Cannabis Legalization Look Like in New Jersey and South Dakota?

By Marguerite Arnold

Published: Nov 19, 2020   
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The American presidential election in November did not just decide the next resident of the White House. In many states, other proposals were offered to voters on a state level, including cannabis reform.

Unlike New Zealand, where a recreational cannabis amendment was recently rejected, similar proposals were all passed in the United States. That moves four more states into the recreational column and means that one third of Americans now live in a state where recreational cannabis is legal.

Every state program, by definition, is different. However, of particular note are the 2020 voter proposals in both New Jersey and South Dakota.

In New Jersey, Public Question 1, the voter mandate was designed to give legislators guidance if not backbone. And in South Dakota, voters approved both medical and recreational reform.

New Jersey

New Jersey already had a medical market, but legislators struggled to craft a bill to take the discussion to the next level. When they could not, they agreed to let the voters decide. The initiative is an amendment to the state's constitution. It will allow those aged 21 and over to buy cannabis and permit local authorities to place additional taxes beyond state sales taxes. It will also establish the rules and infrastructure for cultivation and distribution.

These policies could create one of the most expensive recreational cannabis markets in the country. At 10.75 percent, state sales tax in New Jersey is the third highest in the US. The ability of local municipalities to place additional taxes on the industry may keep businesses out of certain parts of the state.

The bill is currently making its way through the state legislature with a deadline of January 1. Along with this proposal, the state will also pass a bill to decriminalize possession of up to six ounces.

While advocates in the state are already comparing the worth of the market to California, the jury is still out on whether the same problems that have haunted America's most valuable market will arise on the east coast. Particularly given the lack of political gumption by elected representatives to move ahead without first submitting the same to a voter mandate. Speed of implementation alone is not the only issue holding the industry back.

South Dakota

As of November 3, South Dakota did something unseen before in US electoral history; voters authorized both a medical and recreational market at the same time. The latter not only promises access the establishment of a regulatory infrastructure to cultivate and distribute. Like New Jersey, the mandate was a change to the state constitution. However, in part because there is literally no infrastructure from even a medical market, the deadline for establishment is a bit later, April 2022.

What is intriguing about the South Dakota proposition is that it allows individuals to cultivate up to six plants if they do not live in a jurisdiction with licensed retailers. And that is a distinct possibility since local municipalities also have the right to ban the industry outright. Individuals can also possess up to an ounce of cannabis.

Taxes on the industry will also be very high, at 15 percent. And much like Washington state back in 2014, the many problems with patient access may very well be minimized to create a recreational industry right from the beginning.

Trends and analysis

Ten years ago, there was no state market for any kind of cannabis. Today, one third of Americans live in a state where the laws have now changed. So far at least, however, the same issues continue to dog the entire conversation against a lack of forward motion on federal reform.

While constitutional amendments are all the rage, beyond this, there is little appetite to address one of the biggest bugbears in the room: that a state-taxed industry has little chance of succeeding smoothly. For instance, state industries cannot deduct the same from federal taxes. And, more seriously, patients will be taxed at high levels for their medication.

For now, of course, it is a victory that reform has passed in other jurisdictions. But true success is yet to be realized.

Marguerite Arnold is a journalist and author. Her next book, Green II: Spreading Like Kudzu, about the inside story of the German cannabis cultivation bid, will be published on December 1, 2020.

Marguerite Arnold

Cannabis Entrepreneur, Author and Journalist

Marguerite has covered policy and business developments in the legal cannabis industry for several publications, including Analytical Cannabis, High Times, and the Cannabis Industry Journal. Her second book about the cannabis industry, Green II: Spreading Like Kudzu, was published in 2020 and tells the inside story of the first German cannabis cultivation tender bid.


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