No Free Pot: AG Grewal Issues Cease-and-Desist Letters to Businesses that Evade State’s Cannabis Laws by Providing Free Marijuana “Gifts” to Customers

As New Jersey implements the State’s new adult-use cannabis law, Attorney General Gurbir S. Grewal today announced that the Division of Consumer Affairs has issued warning letters to businesses that claim to offer free “gifts” of marijuana or cannabis items with purchases of snacks, baked goods, or other products. The letters state that New Jersey will enforce the limits of the adult-use cannabis law to protect the integrity of the regulated market from competition by unlicensed businesses.

In letters warning four New Jersey-based vendors – Sky High Munchies, Slumped Kitchen LLC, LLC, and West Winds Wellness – to cease and desist unauthorized business practices, the Division informed the companies that they are under investigation for violation of the Consumer Fraud Act, which prohibits unconscionable business practices, misrepresentation, and deception in the marketplace.

The Division’s warning letters note that, despite the vendors’ characterizations of their business models, the “gifts” they offer consumers appear to be central to the sales transaction and, thus, not really gifts at all.

“In legalizing adult-use cannabis in New Jersey, the Legislature made it clear they were creating a regulated market with restrictions on how that market operates,” said Attorney General Grewal. “Instead of waiting for those regulations to be established, some vendors have decided to move forward on their own, in ways that the law does not allow. Today we’re making it clear that we will not permit these entities to undermine the regulated cannabis marketplace the Legislature created or to compete unfairly with properly licensed cannabis businesses.”

The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, signed by Governor Murphy in February, legalizes and regulates cannabis use and possession by adults 21 years and older and authorizes adult-use cannabis sales by certain businesses licensed by the Cannabis Regulatory Commission (“CRC”).

“The CRC is committed to establishing a safe marketplace of cannabis products,” said CRC Chairperson Dianna Houenou. “Those trying to preempt the rules and transfer unregulated and untested marijuana items jeopardize public health and undermine confidence in the forthcoming regulated cannabis industry.”

The CRC’s licensing scheme was “designed to eliminate the problems caused by the unregulated manufacturing, distribution, and use of illegal marijuana within New Jersey,” to “strike a blow at the illegal enterprises that profit from New Jersey’s current, unregulated illegal marijuana market,” and to “prevent the sale or distribution of cannabis to persons under 21 years of age,” among other objectives.

The CRC has not yet adopted rules for the licensing of adult-use cannabis retailers or issued any licenses to such businesses.

By inaccurately claiming to give free “gifts” of cannabis or marijuana along with the purchase of snacks, baked goods, or other products – generally at exorbitant prices – a company may violate the Consumer Fraud Act, the Division’s Advertising Regulations, and other laws or rules.

Under the Consumer Fraud Act, each misrepresentation in the sale or advertising of merchandise constitutes a separate violation, and violators may be subject to a penalty of $10,000 for the first violation and $20,000 for each subsequent violation.

“We will not allow vendors to misrepresent what they’re selling,” said Kaitlin Caruso, Acting Director of the Division of Consumer Affairs. “Under our consumer protection laws, vendors are subject to fines and penalties for making false or misleading statements about what they’re selling. We have warned these companies about our concerns, and to stop conduct that could violate our laws.”

The warning letters are the latest efforts by Attorney General Grewal to protect the integrity of New Jersey’s adult-use and medical cannabis regulated industries by enforcing the limits laid down by the Legislature.

In December 2018, the Attorney General filed an Administrative Complaint against Dr. Anthony Anzalone, who advertised as “NJGreenMD,” alleging that he had failed, over multiple years, to comply with the rules of New Jersey’s Medicinal Marijuana Program. The Complaint asserted, among other things, that Anzalone engaged in fraud, gross negligence, and professional misconduct by indiscriminately authorizing medicinal marijuana to large groups of people who attended conferences he held in hotels around the state, charging each an initial consultation fee of $350 and subsequently charging each quarterly fees of $100-$150 for continued authorization of the drug.

In January 2019, Anzalone voluntarily agreed to a temporary suspension of his medical license, and has not practiced medicine in the State since that time.

In April 2021, the State Board of Medical Examiners accepted Anzalone’s permanent retirement from the practice of medicine, which was deemed to be a suspension of his medical license without the opportunity to reapply in the future, in order to resolve the allegations of the Complaint, without Anzalone making any admissions.

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