As legislators continue working to set up a legal retail market for recreational cannabis, there’s a chess game playing out between authorities and regulators, and entrepreneurs who aren’t waiting around to set up shop.
For one, the current move is free weed.
Gary Bozzini, owner of Sky High Munchies LLC, said the online vendors he’s been using for payment processing have frozen about $140,000 in customer payments in their systems, barring him from withdrawing it to his bank.
So he’s issuing refunds.
“They’re holding up a lot of money on us, because they’re saying we sell marijuana. We don’t sell marijuana, we sell munchies,” Bozzini said. “We’ll give it back,” he said, rather than let the companies keep it.
The Williamstown-based company’s situation illustrates one major challenge that has cropped up in state after state as legalization expands. Because it’s still illegal at the federal level, federally-insured banks don’t want to deal with marijuana money.
Sky High is one of several companies that until recently called themselves “gifting services,” because customers order merchandise like food and clothing and then choose a “free gift” of smokeable or edible cannabis.
That was until the state Attorney General issued cease-and-desist letters, saying the companies could be in violation of New Jersey’s Consumer Fraud Act, which bars gifts that require a purchase. The cease-and-desist notices issued on June 15 don’t address marijuana possession, sale, or distribution but do mention potential violations of “other laws and regulations.”
In an online discussion with the site BreakingAC, owners of several of the companies said they’re providing services that fill gaps in current legal medical cannabis distribution and aren’t doing anything illegal. One company’s owner described the whole thing as a “wording issue” and predicted it would end in lawsuits.
Since the AG’s move, Bozzini retooled SkyHigh’s website and radio commercials to remove references to gifts. Now, the site offers a snacks-only option and shows the cannabis products as order options, like toppings on a pizza.
Another service, Slumped Kitchen, now simply offers “cannabis incentives” in exchange for “donations” and has seemingly scrapped the baked goods entirely.
It’s a game Bozzini and other business owners are playing carefully, and one step at a time, and with no guarantee they won’t end up in court, jail or broke.
To Bozzini, Gov. Phil Murphy isn’t the problem — he said he counts the governor as an ally in the movement to bring legal weed to New Jersey residents who voted for it.
“The law says we’re allowed to transfer marijuana to anyone 21 years of age and older,” Bozzini said.
Bozzini, a medical marijuana card holder, said he first learned about the idea of cannabis “extras” while on a road trip from Tennessee back to New Jersey. He’d run out, was in pain, and still far from home. A Google search led him to a detour through Washington, D.C., where he could legally purchase weed products if he also sat in on a seminar about the strains he received.
“As I got into the car with a shopping bag in my hand and a receipt in my hand I said to my fiancee, “Let’s move to Washington, D.C. We did not move to Washington, D.C., but when the law went into effect [here] I started reading into it.”
SkyHigh Munchies began operating on March 5 and now counts 15 workers who do order processing, customer service and delivery. Bozzini says he and other operators know they’re operating in a bit of a gray area but are banding together to stay in business.
“I have accountants, and I have lawyers, and we try to keep things 100 percent businesslike,” he said.
Edmund DeVeaux, president of the New Jersey CannaBusiness Association, said businesses jumping ahead was inevitable in a process that has taken its fair share of time in an industry where most of the supply is coming from unregulated sources of cannabis.
While the New Jersey Office of Attorney General claims that operations like Bozzini undercuts the market, DeVeaux said it’s hard to make such an argument when the market is not fully set up.
“We do not have an adult-use program yet, so you can’t undercut what doesn’t exist,” he said.
Where does Bozzini get the weed and edible products? That’s currently the one area he doesn’t talk about. He says while the products aren’t tested and certified like the medical stock at dispensaries, the items they offer are authentic and quality tested by staff.
One concern with companies like these is the potential effect on the legal medical marijuana market, where product supply can be limited and pricey. And the class of license that would allow those dispensaries to deliver doesn’t even exist yet.
Bozzini said his company waives its $50 delivery fee for state medical marijuana card holders.
“Our drivers never have more than five ounces on them, ever. And if they do, there’s a second guy in the car with them” both for security and to stay within the current personal possession limits.
Bozzini said he’s not escrowing sales tax on the marijuana, because he sells prepackaged food, not weed. If and when a sales tax is settled on for retail pot, he said, he’ll revamp the business and pay the sales tax.
“We want to pay our taxes, we want a license. We are doing everything that we have to do,” he said.”