Yahoo Finance Legal weed in New Jersey will blaze a trail for surrounding states, New Frontier Data says
Marijuana sales will become available in New Jersey beginning early next year, according to analysts from New Frontier Data, a research data and analytics company focused exclusively on the cannabis industry.
The legalization of cannabis in New Jersey has been a work in progress since November 2020, when a public referendum to legalize its recreational use was passed by a significant majority. The effective legalization has been delayed for several months, however, as dispensaries around the Garden State await the go-ahead to open their doors to regular retail customers.
“As far as I know, February 2022 is still the date for available sales of adult-use cannabis in New Jersey,” John Kaiga, chief knowledge officer at New Frontier Data, told Yahoo Finance.
And once that happens, Kaiga said, an influx of consumers from nearby states can be expected. In addition, he believes that full recreational legalization in New Jersey will push states like Maryland, Delaware, and Pennsylvania to do the same.
Growing pains
The illicit market in New Jersey and the surrounding areas has had a heavy influence on weed prices. Even when dispensaries do begin sales to retail customers, however, Kacey Morrissey, New Frontier Data’s senior director of industry analytics, said that regular, heavy consumers will still continue to purchase the majority of their cannabis from the illicit market.
“There's an extremely strong illicit market in New Jersey, New York. There will be, obviously, no matter what the prices are,” Morrissey said. “There's always, in every new market, sort of the novelty of now purchasing from the legal market. So there's always a big hustle-bustle in the beginning.”
In addition, Morrissey expects supply chain issues to accompany the anticipated February 2022 initialization of sales. This is caused by the influx of consumers who want to try legal cannabis for the first time.
“The beginning usually causes some product shortfalls,” she said. “But after a few months of that initial excitement and prices are set, with tax policy accounting — prices people are seeing are much higher than the illicit market — that demand will then taper off and people will have bought a couple products in the legal market as novelty.”
Products with concentrated delta-8 tetrahydrocannabinol, also known as delta-8 THC, have also gained popularity in the tri-state area recently as the substance exploits a cannabis loophole in state law, making them readily available at smoke shops and other stores. They can come in the form of gummies and chocolate bars to pre-rolled joints and even beef jerky. The FDA recently issued a warning regarding delta-8 products, stating the cannabis products may pose “serious health risks.”
According to Morrissey, the full legalization of cannabis in New Jersey will significantly diminish the demand for delta-8 products in the state.
“Once you legalize the full plant I don't think people are seeking out something like delta-8 in isolation,” Morrissey said. “I think it's kind of a workaround for legalization or ‘getting high’ because there is some small, however diminished, psychoactive effect for delta-8.”
NJ setting a precedent
In the case of “weed pilgrimages,” Kaiga believes that New Jersey will experience an ability to draw consumers from surrounding markets where recreational cannabis laws may be more stringent, for the time being. Given that there may be a period in which New Jersey is the only fully operational adult-use market in the mid-Atlantic corridor, he expects New Yorkers and Pennsylvanians alike to flock to the Garden State.
Kaiga stated that the volume of cannabis tourism will depend on the number of businesses approved for sale as well as where these businesses are located in relation to surrounding states.
“The ability to draw consumers from New York, Pennsylvania, Delaware, Maryland, et cetera, I think will be an important opportunity for the state's adult-use market, at least until New York and other surrounding markets start to activate their own adult use programs,” Kaiga said.
Currently, 18 states have legalized marijuana for recreational use, while 13 other states have decriminalized it. The legalization process in New Jersey may lead to other states embracing marijuana, Kaiga said.
“We absolutely think it's going to have an effect [on other states’ policies],” he said. “So, in fact, the passage of the dope use measure in New Jersey, we think, served as an accelerant to the legislative debate around legalization in New York.”
New York, which became adult-use legal in 2019, is still in the process of formalizing the regulations. “They are moving more slowly than New Jersey in that regard,” Kaiga said. “But I think part of the impetus to finally address this issue in New York was the approval of adult use in New Jersey.”
In the adjacent states Maryland, Delaware, and Pennsylvania, recreational use is still illegal, though developments have been made in the past few years. Earlier this year, Delaware Representative Ed Osiensk introduced a bill to legalize recreational adult-use cannabis to the general assembly.
“It does tend to be [a] regional contagion effect, where [when] one jurisdiction will legalize [recreational marijuana], the surrounding municipalities or jurisdictions will see there are consumers going into that market and spending money [there] that their home state could have been earning,” he added. “And that tends to serve as an accelerant for the discussion.”
Once New Jersey’s legal environment for adult recreational use of marijuana becomes more fleshed out, Kaiga said, other states may be forced to reconsider their positions. “We do think that's going to exert quite a bit of pressure on the surrounding states to also follow suit.”
Thomas Hum and Ihsaan Fanusie are writers at Yahoo Finance. Follow them on Twitter @thomashumTV and @IFanusie.
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