Court ruling underscores the need for sensible hemp rules in New Jersey

Following a federal court ruling last month, the partial suspension of New Jersey’s recently adopted hemp law could be a golden opportunity for lawmakers to refine their approach to intoxicating hemp products.

Signed by New Jersey Gov. Phil Murphy in September, the law, passed as Senate Bill No. 3235, granted the Cannabis Regulatory Commission (CRC), which currently regulates the state’s legal medical and adult-use marijuana markets, oversight over hemp products with THC. The Cannabis Regulatory Commission was given six months to construct a new regulatory regime governing intoxicating hemp products.

Since hemp was federally legalized in 2018, the market for hemp cannabinoids, like cannabidiol (CBD), delta-8 THC, and hemp-infused drinks, has boomed. However, that growth has led to anxiety among state lawmakers about the quality and safety of products, as well as youth access. While many states responded with prohibitionist policies, outlawing hemp with any amount of THC, New Jersey’s law took a more balanced approach.

Rather than prohibiting THC hemp products or restricting sales to cannabis dispensaries—a limitation that could harm CBD patients—New Jersey’s law offered the possibility of a more open market. Though dependent on the rules CRC adopts, the law at least maintained the possibility of a framework allowing qualified manufacturers or retailers, including liquor stores, to participate in the legal market.

The law, which took effect on Oct. 12, mandated the removal of all THC-containing hemp products, including CBD, from retail stores unless sold through licensed cannabis dispensaries. Manufacturers and retailers could only resume production and sales after obtaining a license from CRC.

However, two weeks after Gov. Murphy signed the law, producers of hemp-based drinks filed for a preliminary injunction, arguing the law violated interstate commerce federal rules by expressly limiting legal products to those made in New Jersey. U.S. District Court Judge Zahid N. Quraishi agreed, writing in his opinion that the state cannot enforce the provisions of the law that excluded otherwise compliant out-of-state intoxicating hemp and hemp products from New Jersey’s market. 

As a result, the Cannabis Regulatory Commission delayed enforcement of the law, except for its ban on selling intoxicating hemp to minors. This gives lawmakers time to amend the law to comply with federal rules and offers an opportunity to make improvements supporting a genuinely competitive hemp market.

A crucial step the legislature should take is to ensure that Cannabis Regulatory Commission rules do not impose overly restrictive barriers to entering the legal hemp market. As a recent Reason Foundation study suggests, a streamlined licensing process open to all qualified businesses would discourage market concentration, help smaller businesses thrive, and lower prices for consumers. Lawmakers should ensure that a fast, simple application process is available.

Additionally, New Jersey should adopt measures allowing out-of-state hemp producers to comply with state rules to avoid future lawsuits and ensure consumer access to safe, regulated products. Kentucky’s approach, which requires out-of-state producers to register with the state and meet equivalent processing, testing, and labeling standards, could provide a model for how New Jersey could maintain oversight while fostering a robust interstate market.

Finally, New Jersey lawmakers could use this moment to consider broader marijuana regulatory reforms. Due to federal prohibition, marijuana businesses face higher costs and regulatory burdens than hemp producers, giving hemp products an artificial competitive advantage. Lawmakers could level the playing field by seeking ways to reduce burdens on marijuana businesses, for example, by making the licensing process more accessible and affordable. 

If lawmakers seize this opportunity to impose a balanced cannabis regulatory regime, New Jersey could become a national leader in the cannabis space, one that promotes fair and vibrant competition in both the hemp and marijuana industries, keeps prices low, and ensures consumer access to safe products. 

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