New Jersey marijuana consumption lounge rules present challenges

New Jersey could be the next market to issue marijuana consumption lounge licenses after regulators recently approved a litany of new regulations for such venues.

Under the challenging rules adopted by the New Jersey Cannabis Regulatory Commission, consumption spaces must be attached to a licensed cannabis retailer.

Operators will be limited to one consumption space.

Microbusinesses will pay $1,000 each for an initial fee and an annual renewal fee; standard businesses will pay $5,000 apiece for initial and annual fees.

Consumption spaces in New Jersey are required to install heating, ventilation and air conditioning systems “to ensure proper ventilation and prevent smoke or vapors from affecting neighbors.”

Installing and acquiring these systems, which can cost hundreds of thousands of dollars, is one of the main reasons Nevada operators have failed to open consumption lounges in and around Las Vegas, despite rosy outlooks that they would be up and running last summer.

Several other rules might also present some significant challenges for New Jersey retailers to drive revenue at lounges, including:

• Prohibiting the sale of food and beverages, while allowing consumers to bring them in. Alcohol and tobacco are restricted.
• Allowing consumers and medical patients to bring and use their own cannabis products on-site.

Businesses are given some flexibility, including:

• Hours of operation.
• Charging admission fees.
• Granting priority access to medical patients.
• Authorizing paid events.

However, operators must adhere to any restrictions imposed by municipalities, including limiting or banning consumption venues outright, outdoor advertising and communicating with emergency services.

Retail operators will need municipal approval before gaining an endorsement from state regulators. 

The consumption rules will take effect upon approval by the New Jersey Office of Administrative Law.

The state’s Cannabis Trade Association published a report in August that the industry  was caught in a “doom loop” because of slow licensing processes, among other factors.