Who will control legal marijuana sales in N.J.? Local players or big companies?

African Americans have little ownership in the industry nationally, even though they were far more likely than whites to be arrested for cannabis during prohibition.

Manuel Caban, who grew up on Camden's East Side, spent a year in prison a decade ago for selling marijuana. Now, he and two business partners, also from Camden, want to get a license to open a store on Market Street across from City Hall. New Jersey authorities have said they want people like Cuban and his partners to be prioritized when licenses are awarded.Read moreThomas Hengge / Staff Photographer

by Harold Brubaker

Published Oct. 23, 2021, 6:10 a.m. ET

Manuel Caban is a lifelong Camden resident who was arrested twice for marijuana offenses and a decade ago spent 30 days and then a year in prison for dealing.

That, he figures, makes him an ideal candidate for a license to sell cannabis now that New Jersey has legalized it with a focus on giving individuals who suffered under cannabis prohibition a solid path into the industry.

“I’m not a bad kid. I just got caught up selling weed,” said Caban, 38, who now runs a small catering business and intends to apply for a license to open a cannabis store in the city with two Camden friends, who also grew up poor in rough neighborhoods.

“If they want to right their wrong, this is their opportunity,” Caban said at a cafe, a few blocks from where he and his partners, Aaron Streater, 44, and Keith Glover, 37, want to open their store, Loud House, in a closed coffee shop across from City Hall.

Other states that have legalized recreational cannabis in recent years, such as Illinois and Massachusetts, have been trying to make such amends for people with marijuana convictions, as well as for people of color and women.

But so far those efforts, in an industry expected to generate $24 billion in sales this year, have had only limited success, said Tahir Johnson, a Trenton native and director of social equity and inclusion at the United States Cannabis Council, a Washington group that lobbies nationally for cannabis legalization.

“African Americans have very little ownership in the industry,” perhaps as low as 2% nationally, Johnson said, even though African Americans were 3.6 times more likely to be arrested for cannabis than whites in 2018 despite similar usage rates, according the American Civil Liberties Union.

Illinois, which legalized marijuana for adults in 2019, had one African American, 4 Hispanic, and 12 Asian cannabis dispensary owners as of June 30 — compared with 209 Caucasian owners, according to the state’s Cannabis Annual Report 2021.

Massachusetts has had more success, Johnson said. The latest data show the state with 10% “minority-owned businesses” as of Oct. 13. But the state legalized recreational cannabis in 2016, and the first stores opened three years ago, giving it more time to help people of color break into the industry.

Social-equity advocates and individuals trying to get a foothold in the industry said there is much to like about New Jersey’s effort to diversify its cannabis industry.

A big help is the New Jersey Cannabis Regulatory Commission’s creation of a conditional license, which is a preliminary approval that allows applicants extra time to find a location, win local approvals, and gather the money needed to open.

“I think that allows for a lot more opportunity, especially for small businesses to come in and get some of those moving pieces together,” said Precious Osagie-Erese, chief operating officer of Roll Up Life Inc., an East Orange company that plans to apply for a cannabis delivery license and is already delivering products with CBD, the nonintoxicating part of cannabis.

But there’s plenty to worry about, observers say.

New Jersey’s refusal to cap the number of licenses — with the exception of cultivators until February 2023 — was seen as a positive, as it was supposed to create a less competitive environment.

But many municipalities that have let cannabis businesses open within their borders are capping the number of licenses, “making it competitive at the local level,” said Chirali Patel, a cannabis lawyer at Pashman Stein Walder Hayden PC in Hackensack.

Municipalities also get to tell the commission which applicants they favor. That is good for towns, but it adds a layer of politics that many inexperienced business people may find daunting. Towns had the option to opt out of cannabis or to allow only limited types of cannabis businesses to open.

Amanda Terpstra, who wants to open a cannabis store in Woodbury, where she grew up and still has family, had to persuade town leaders to opt in.

“We’ve been working with that town since 2019, and we still had to battle to the end. They had considered opting out, and we had to kind of rally and make our case and get the approval done,” said Terpstra, who lives in Parsippany and has a partner in Best Buds LLC, which is now selling CBD products online.

In another move to help new entrepreneurs, New Jersey created micro licenses with strict limits on the amount of space a business can occupy, the amount it can sell, and how many people it can employ.

Terpstra didn’t like that option for retail. “I don’t see how you’re supposed to operate with 10 employees full time and compete with a large multi-state operator that’s open 12 hours a day,” she said.

Patel sees other problems for small-time applicants, as well.

The commission will prioritize applicants with a criminal record related to cannabis, those from communities with high unemployment or large numbers of marijuana arrests, as well as those owned by women, disabled veterans, and Blacks and other people of color.

The cannabis legislation also requires that at least 15% of licenses go to certified minority-owned businesses and 15% to firms owned by women or by disabled veterans. And the commission decided that such applicants will be reviewed first. But they don’t get extra points during the scoring for being in those categories, Patel said.

“The biggest problem is nobody knows how to transition the legacy to legit,” said Patel, referring to those who sold illegally. “We’re giving them applicant status. We’re not giving them money. We’re not giving them a separate application. We’re not making it easier for them at the local level. So are we really helping?”

It is still unclear when New Jersey’s recreational marijuana sales will start. The State Cannabis Regulatory Commission (CRC) issued preliminary rules on Aug. 19 but missed a Sept. 18 deadline to begin accepting applications. The agency hasn’t set a new date.

Meanwhile, Streater, one of the three partners in the proposed Loud House store in Camden, said they have been seeking help with the license application, and were shocked by what consultants said.

“They wanted to charge us $30,000, $20,000, just to fill out an application that hasn’t even come out yet,” Streater said.

State application fees will be as low as $100, while annual license fees range from $1,000 for micro businesses to $50,000 for large cultivators. Municipalities have separate application fees.

Streater and his partners, all of whom have small businesses, said they wouldn’t need to borrow money to open their 1,800-square-foot store. Streater and Glover said they rent out a few houses each.

They estimated that it would cost $25,000 to $30,000 to fix up the space they plan to rent. “We want it to be tight, man. We want people to come in there and not want to leave,” Glover said.

Glover and his partners hope to survive the rush of outsiders who will likely enter the cannabis business in Camden.

“These guys just want to come in and make money off of stuff that we’ve been doing time for and getting pulled over and getting harassed. That was my big concern,” Streater said.

“We really should get the shot first. That’s what they’re saying, so hopefully the CRC lives up to their word,” he said.