New Jersey marijuana operators struggling to survive

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When New Jersey voters elected to legalize adult-use marijuana by an unprecedented 67%-33% margin in November 2020, it was widely hailed as a watershed moment in the development of the cannabis landscape in the United States.

New Jersey’s ideal location at the geographic center of the Northeast megalopolis, its status as the state with the second-highest income in the United States and its place as the most densely populated market in the nation were viewed as the perfect recipe for the commercial success of a regulated marijuana industry.

However, nearly five years after New Jersey voters signaled their desire for a robust marijuana marketplace, the state’s cannabis ecosystem remains underdeveloped and underperforming.

An unfavorable market comparison

In 2025, New Jersey is on pace to generate $1.3 billion in cannabis sales.

By contrast, Missouri – a low-income state with 40% lower population than New Jersey and whose voters approved a recreational marijuana market a full two years later – will generate more than $1.6 billion in cannabis sales in 2025. That’s a whopping 25% more than New Jersey.

The stunted development of New Jersey’s cannabis market is the result of local and state policy decisions that unduly burden licensed marijuana businesses while ignoring, and often facilitating, the proliferation of illicit operators.

Moreover, a recent proposal by Gov. Phil Murphy to substantially increase cannabis taxes has the potential to further advantage the illicit market.

But if New Jersey begins to take affirmative steps to support its licensed marijuana businesses, its cannabis market might yet reach its immense potential.

Until then, its legal marijuana market will continue to underperform and its illicit market will continue to thrive.

High prices, too few cannabis cultivators

According to Connecticut-headquartered research and analysis company Cannabis Benchmarks, the wholesale price of marijuana in New Jersey is currently $2,600 per pound, substantially higher than the national average of $1,050 per pound.

New Jersey’s Cannabis Regulatory Commission (CRC) reports that the average cost of flower at the state’s marijuana retailers is approximately $10 per gram, two or three times the price in most mature markets.

Pricing remains high in New Jersey because of limited supply.

There are roughly 50 operational cultivators in New Jersey today, a remarkably low number considering most mature cannabis markets have several hundred licensed cultivation operations.

New Jersey’s municipal approval process for cannabis cultivators is significantly more cumbersome than other states, with more restrictive local ordinances, complex zoning hearings and burdensome community outreach requirements.

The limited number of operational cultivation facilities in the state has, in turn, buoyed marijuana prices.

To be clear, New Jersey’s high pricing has made it an attractive state for many cannabis brands.

Award-winning cultivators with roots in West Coast markets with depressed pricing – California’s Clade 9, Garden Society and Lowell Farms, Oregon’s Grown Rogue as well as several others – have flocked to New Jersey to capture the substantially better unit economics in the state.

Still, this high pricing has come at a cost, contributing to a persistent illicit market, with large numbers of cannabis consumers reporting they are unable or unwilling to patronize licensed retailers – where an eighth of premium flower regularly exceeds $60, after taxes.

The fact that New Jersey’s per capita sales are substantially lower than in other adult-use states is a sure sign of the endurance of New Jersey’s illicit market.

A patchwork marijuana retail landscape

According to the CRC, there are approximately 250 licensed marijuana stores open in New Jersey.

However, of the 564 cities in New Jersey, only 160 (28%) allow cannabis retailers to operate in their jurisdiction.

Sensitive to the concerns of some local residents, many city councils in the state have been hesitant to allow cannabis businesses to operate within their borders.

Other elected leaders have preferred to take a “wait and see” approach, observing marijuana’s impacts in neighboring cities before deciding to allow cannabis businesses in their municipalities.

Notably, some adult-use states, such as Michigan, have adopted strong financial incentives for cities to allow cannabis dispensaries.

However, New Jersey has no direct grants or penalties tied to municipal participation in the legal marijuana market, eliminating a key incentive for local leaders to permit commercial cannabis activity.

As a result, many of New Jersey’s licensed marijuana retailers are crowded into a small number of cities, including Atlantic City, Bloomfield, Camden, Franklin, Newark and Jersey City.

Most cities in the state remain “cannabis deserts,” where marijuana cannot be purchased legally, further contributing to a persistent illicit market across much of the state, while most legal operators face fierce competition in oversaturated local markets.

Governor’s plan would doom New Jersey market

New Jersey’s legal marijuana market has the potential to deteriorate further if cannabis taxes continue to increase.

In 2024, the CRC voted to raise the cannabis cultivation tax from $20 to $40 per pound, effective January 2025.

Then, in March 2025, Gov. Murphy proposed that the CRC further increase the tax rate an astounding 500%, from $40 per pound to $240 per pound.

Simply put, such an increase would be disastrous for the licensed marijuana operators in New Jersey.

Given New Jersey’s already high pricing, a tax increase would make the price disparity between legal and illicit cannabis businesses even more dramatic, pushing more consumers toward the illegal market.

Potential help for state’s cannabis industry

A recent bill proposed in the New Jersey Legislature, S4154, could help deter illicit cannabis activity by making it illegal to sell marijuana without a license from the CRC and creating an offense for knowingly purchasing such products from an unlicensed business.

Still, this bill has predictably drawn criticism from cannabis advocates as a return to the criminalization of marijuana that the voters emphatically rejected in November 2020.

A more sensible, and less controversial, solution might be for New Jersey to begin taking affirmative steps to support its legal marijuana businesses:

• Adding supply to bring down cannabis prices.
• Ensuring robust retail access across the state through municipal incentives.
• Reducing cannabis taxes.

New Jersey still contains the ideal recipe for the commercial success of a legal marijuana industry, but it is up to the state’s policymakers to realize, rather than squander, that opportunity.

Hirsh Jain is the director of market intelligence at Los Angeles-based Verdant Strategies, a financial services and solutions company whose list of national cannabis clients includes operators in New Jersey. He is also a principal at Los Angeles consulting firm Ananda Strategy. He can be reached at hirsh@anandastrategy.com.