Possessing marijuana is legal in N.J. but these ‘gray’ market operators got busted

Originally published in NJ.com on November 1, 2021.

Six months ago, Dan Kessel of Berkeley Township talked openly about Bud Hub, the cannabis gifting and delivery business he ran with his sister, almost daring law enforcement authorities to investigate and musing about “my goal to be legal.”

Today, Kessel sits in the Ocean County Correctional Facility where he’s been held without bail since Oct. 20. Berkeley Township Police arrested him on money laundering and marijuana distribution charges. They confiscated his jeep, with its Bud Hub signage, $400,000 in cash and an unknown quantity of marijuana from his Berkeley home and a property in Toms River.

Kessel, 36, is the latest person to be caught operating in the “gray” cannabis market — the sale of goods and services that are technically legal, but are not authorized to be sold.

Marijuana possession up to six ounces is legal, but until state regulators sign off, there are no licensed retail stores permitted to sell it in the Garden State.

In June, the New Jersey Division of Consumer Affairs sent cease and desist letters to four such operators: Sky High Munchies; Slumped Kitchen LLC; NJGreenDirect.com LLC; and West Winds Wellness.

The division is also investigating five complaints against gifting operators: Bud Hub; CBD of Newton; Dirty Jerzey Supplies in Randolph and Butler; and Gifted Jawn in Medford, state Consumer Affairs spokeswoman Lisa Coryell said.

Kessel’s arrest outraged some patients, recreational customers and activists on social media, who say they rely on these unsanctioned businesses to buy cheaper cannabis while they wait for New Jersey’s legal market to open sometime next year.

Board members from the Coalition for Medical Marijuana-New Jersey, a consumer activist organization, released a statement to NJ Advance Media Friday stating it “does not condone illegal activity, even as we recognize and respect civil disobedience in the face of unjust laws.”

Kessel’s arrest also elicited praise from some professionals from the medicinal marijuana program and who are preparing to enter the future adult use market.

“Good,” said cannabis attorney Steve Schain of Smart-Counsel upon hearing of the Bud Hub operator’s arrest. “Gifting perpetuates the black market. It’s a blemish on the industry.”

“We are a legitimate industry. Every time one of these renegades subverts the law, it sets the industry back a little bit,” he said.

Customers visit gifting and delivery business’ websites and pick from a menu of cannabis products that are free — with the purchase of baked goods, a tee-shirt or some other innocuous item.

It’s a loophole that has worked for years in Washington D.C., where cannabis is legal but not for sale. No one can estimate the value or size of the gray market, but it exists alongside the traditional illegal or black market, said DeVaughn Ward, senior legislative counsel for the Marijuana Policy Project.

In the early days in Colorado this happened,” Ward said. “It speaks to the need for a regulated market and reasonable way to get into that market.”

Most gifting and delivery operations are generally small-time — gatherings in parks where a small amount of product is traded and shared, Ward said. Upon hearing that police had seized $400,000 in cash, Ward said this was not a typical example.

“That is not a gifting operation — $400,000 is a significant amount of cash,” he said.

“I don’t think this gentleman should serve any prison time,” Ward added, saying he hoped Kessel can someday use his “clear business acumen” in the legal market.

“You have folks doing this because they don’t feel like there are avenues for them,” Ward said.

Bud Hub is not the first gray market bust. The Bergen County Prosecutor arrested four people last month who were allegedly running THC JARZ, an unlicensed dispensary in Garfield. After undercover detectives purchased weed at the shop, county and local police recovered “a substantial amount” of marijuana, edibles, THC wax and oil and about $15,000, the prosecutor’s office announced.

Law enforcement officials announced the arrests with similar statements that acknowledged marijuana possession (up to six ounces) is legal in New Jersey, but selling it is not.

“Despite the recent changes to New Jersey’s marijuana laws, the unregulated sale of marijuana and THC products remains illegal. We encourage the public to be mindful of the law and to report such sales to local law enforcement,” Bergen County Prosecutor Mark Musella said.

The Berkeley Township Police said in a statement that they “respect and acknowledge the fact that the marijuana laws have changed significantly in the past year with its structured legalization. With that being said, it is still unlawful to distribute this marijuana outside the confines of the new laws.”

One of Kessel’s bases of operations was in the senior community Holiday City West, where Berkeley police said they had received complaints about excessive foot and vehicle traffic.

Attempts to reach Kessel’s family and friends were unsuccessful.

Kessel’s supporters started a petition on change.org to release him from jail. One supporter pointed out on social media (and we verified online) Bud Hub was a vendor at Soulsational in Bayville in July, an open-air market featuring natural products, craft and alternative treatments. The event was sponsored by the Berkeley Township Recreation Department.

Opinions about Hub Bud and other gray market operators vary, even among members of the Coalition for Medical Marijuana - New Jersey, a group that has helped pass medical and adult-use legalization laws.

“Some board members of CMMNJ are of the opinion that the product, the service, and the price obtained from the gray market can be exceptional,” according to a statement released by Coalition Executive Director Ken Wolski. “But these are the kind local entrepreneurs who should be working towards legal distribution licenses that will enrich the local community.”

“In the newspaper reports of the case of the recently busted Bud Hub, it seems the decision to shut this business down was not only that the operation was illegal, but that it was acting in a way that annoyed its neighbors,” the statement said. “That should be a lesson to other gray market entrepreneurs.”

A version of this story first appeared in NJ Cannabis Insider.