Court Upholds Initial Cap on New Jersey Marijuana Dispensaries, Nonprofit Requirement

A company that hopes to launch cannabis dispensaries in New Jersey has lost a court battle over whether the state has the right to cap the initial number of medical marijuana centers at six and require owners to operate them as nonprofit entities.

Natural Medical Inc. claimed the state acted illegally, arbitrarily and/or unreasonably in creating the restrictions, arguing that the health department should accept all applications meeting basic requirements in New Jersey’s original MMJ law.

But a three-judge panel with the Superior Court of New Jersey’s appellate division backed the state, saying its rules are permissible under the New Jersey Compassionate Use Medical Marijuana Act.

“Appellants have made no showing that this decision is arbitrary or unreasonable,” the panel wrote in its ruling. “We do not consider it unreasonable to fix a minimum number [of dispensaries] at the outset of the program while gauging the need for
additional (centers) once the program becomes operational.”

The ruling also states that “it is undisputed that the (health) department would not accept, let alone process and review, applications for … permits from for-profit entities.”

New Jersey officials received 35 applications from 21 entities for dispensary permits. They announced the six finalists in the spring of last year.

Natural Medical wants to open three locations and operate under a for-profit model. The company said six dispensaries is not enough to meet demand given the state’s sizable population.

Talk about putting the cart before the horse: Not a single dispensary has opened its doors in New Jersey yet, more than 18 months after finalists were chosen and nearly three full years after the law went into effect. The individuals and groups that won permission to operate dispensaries have had enough trouble just opening one, let alone three. At the same time, just 239 patients have registered for MMJ cards – which is extremely low by any measure. Numbers will have to rise significantly and quickly to support more than one or two dispensaries.

Under the current rules, the state’s health department will allow additional dispensary permits as it sees fit – based on demand – after the initial six open.

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