Social Inclusion in the Cannabis Industry: Which States Are Leading the Way?

by Stu Waters,

 

The events of the past few weeks are challenging peoples’ preconceptions about race and equality. While many communities have yet to engage in meaningful discourse about the best way forward, some are doing their best to lead the way in trying times with programs designed to include via social equity programs.

The story of cannabis in the United States can’t be told without understanding racism. Cannabis laws were used to perpetuate racial discrimination during the “reefer madness” craze of the 1940s and 50s, and again during the Nixon era.

The long-term effects of these policies still impact the community to this day. According to the ACLU, there were 8 million cannabis-related arrests between 2001 and 2010. Although cannabis use is roughly equal across demographics, the average arrest rate for people of color during that time was almost four times higher. In some high-density urban neighborhoods studied, the arrest rate was 10 to 30 times greater for black and brown people.

Cannabis industry employers – and the lawmakers who regulate their activities – have an important role to play ensuring that today’s society is more equitable than the one we’ve had in the past. Social equity programs and minority-owned associations are two of the vehicles that will drive this progress in the cannabis community.

Social Equity Programs in the Cannabis Industry by State

Some states and cities are taking action to counter the historic bias in cannabis law enforcement by offering social equity benefits to members of communities that have been targeted by these biases. Three states stand out from the rest when it comes to social equity programs for disproportionately impacted communities in the cannabis industry:

California

California helps its municipal governments secure loans, grants, and technical assistance for cannabis license applicants. Its largest and most diverse cities – like Los Angeles, Oakland, and San Francisco – provide low- and no-interest loans to businesses, cannabis industry entrepreneurial training, and material assistance for completing the application process. California’s state government also passed an expungement initiative, clearing low-level cannabis offenses from its penal record.

Illinois

Illinois has one of the most progressive cannabis licensing frameworks in the United States. The state has expunged low-level cannabis offenses from its records, and it awards significant advantages to members of disproportionately impacted communities who apply for cannabis licensing. It’s worth noting that all of the state’s 15 medical marijuana licenses were awarded before these social equity measures were introduced – every single one of them went to a White male. However, the fees these medical cannabis license holders pay go into the state’s Cannabis Business Development Fund, which provides low-interest loans and grants to applicants from disproportionately impacted communities.

Michigan

Michigan reduces licensing fees for applicants from minority communities and aims to see at least 50% of its licensees benefitting from its social equity program. The state’s expungement initiative has not yet passed as of June 2020, but legislation is underway.

Fast Followers and Slow Burners: Examples of Social Equity in Other States

  • Colorado: Social equity is not directly addressed in cannabis licensing, but cannabis tax revenues are used to fund social equity programs.
  • Maryland: Although one out of every three Maryland residents is Black, none of the state’s first 15 cultivation licenses went to Black-owned businesses, even though Maryland’s cannabis laws require diversity to be considered during applicant evaluations.
  • Massachusetts: While the state’s cannabis control commission states that it supports social equity initiatives, only 1.2% of its cannabis industry businesses are minority-owned. None of the state’s first recreational licenses went to members of disproportionately impacted communities.
  • Nevada: Social equity is not directly addressed in cannabis licensing, but cannabis tax revenues are used to fund social equity programs. Nevada has an expungement initiative in effect.
  • Ohio: Ohio has an expungement initiative in effect, and initially promised to award 15% of its licenses to minority-owned businesses. This promise was redacted after the state’s Supreme Court deemed it unconstitutional.
  • Oregon: Only the city of Portland offers reduced fees for social equity cannabis license applicants. License holders pay a 3% tax that funds economic and education programs for disproportionately impacted communities.

Are Social Equity Programs Enough?

The effectiveness and legality of social equity programs is still being discussed. Most people agree that it is better to take these kinds of actions rather than do nothing at all, but there is not enough data to say whether these programs predict successful outcomes in the long term.

Some beneficiaries of state-sponsored social equity programs have lamented the lack of action taken on their behalf, accusing the programs of under-delivering on their promises. In Los Angeles, for example, social equity applicants have waited more than two years for their licenses to be granted, paying rent for empty storefronts in struggling neighborhoods while White-owned prestige brands opened glamorous enterprises in the city’s most opulent districts.

Maryland’s cannabis commission requires license holders to report on shareholder demographics with the goal of meeting the state’s social equity laws. The latest report shows that Black shareholders make up only 10% of investors. The company whose leadership contains the highest number of Black investors (34 individuals) is only 21% owned by those investors.

Massachusetts, like Los Angeles, has suffered multiple-year-long delays in granting social equity licenses to applicants. Of the state’s 122 Economic Empowerment applicants, only five have obtained the provisional licenses required to rent a storefront and complete the final round of evaluations. As of May 2020, only one of these applicants has managed to open its doors and begin serving customers.

Across every state that has discussed social equity legislation, activists, entrepreneurs, and lawmakers have pointed out legal and demographic loopholes that allowed people to take advantage of equity programs. 

Non-profit organizations like the Minority Cannabis Business Association (MCBA) are stepping in to compensate in areas where state-sponsored programs are under-delivering on their promises. One of the current items on the MCBA’s list is lobbying state governments to divest cannabis tax dollars from police funding. It also holds events connecting minority entrepreneurs with the resources and expertise they need to navigate the complex world of cannabis license registration.

By advocating for better policies and fighting the economic disenfranchisement that minority communities continue to suffer, the cannabis community can play a pivotal role in building a more just society for all of its members.