Cannabis legalization laws have forever been intertwined with racial tensions; the War on Drugs has profoundly impacted the ability of minorities to reap the benefits of canna-business ventures. Minority entrepreneurs, even in states with strictly enforced social equity provisions, are at a high risk of imprisonment for engaging in the same business practices that Caucasians are flying under the radar for. States that have implemented social equity initiatives within their state legalizations are projected to have annual sales of $12.7 billion in 2022, compared to $4.1 billion for states without such provisions.
Alarming 2015 statistics out of Oakland, CA found that, while constructing a race and equity analysis report, African-Americans comprised 30 percent of the city population, but were 77 percent of cannabis arrests, compared for a mere four percent for Caucasians. Unfortunately, this was not an isolated issue; arrest data between 1998 and 2015 found that African-Americans made up 90 percent of overall arrests. These statistics are exacerbated in states, like Maryland, where the population is composed of 30 percent African-Americans, who make up 58 percent of marijuana possession arrests in 2013.
California, a progressive state in the marijuana legalization landscape, took to the streets of Oakland in May 2016 to test a revised equity permit program. The goal was to fix the resounding inequalities of minorities engaging in canna-business. Oakland City Council implemented the Equity Permit Program, designed to set aside half of the city’s dispensary licenses for low-income residents who have gotten caught up in the War on Drugs. These “equity applicant” citizens must have either been convicted of a cannabis-related crime, bring in an annual income of less than 80 percent of Oakland’s average median income, or have lived at least 10 of the past 20 years in one of 21 specific neighborhoods which have been recognized as “police beats.” These police beats were chosen because they had fallen victim to 150 or more marijuana-related arrests in the past 20 years. By July 21, 2017, 81 people had applied for licenses, excluding dispensaries; 35 of which qualified as “equity applicants,” but only 10 had brick and mortar locations.
Oakland allows applicants to apply without a precise location, but a caveat requires a concrete business venue before a final permit. This creates a discrepancy even for well-off minority entrepreneurs. This monetary issue is remedied by $3.4 million in no-interest loans and technical assistance set aside from cannabis license tax revenue. Additionally, Oakland created the Equity Incubator Program, in which general applicants receive permit priority if they offer equity applicants free rent on a minimum of 1,000 square feet of operational business space.
Statewide, Oakland was the catalyst for additional program implementation in San Francisco and Los Angeles. LA’s application process is broken into three phases and qualifying applicants are split into three tiers. As with Oakland, Los Angeles has been sectioned into 33 police reporting districts, pulled from a social equity analysis report detailing disproportionately impacted areas. Phase One offers those established co-ops who have been active since the 1996 state legalization priority on licensing. New retail can also apply if they have filed a Business Tax Registration Certificate and prove taxes paid in 2016 and 2017 and proper canna-business zoning. Phase Two is for those in manufacturing, cultivation, testing, etc. space. Lastly, Phase Three is for those who don’t qualify for Prop M or Social Equity.
Maryland legalized medical marijuana in October 2014 but struggles to nail down social equity provisions exist to this day. Ninety-six out of 100 people arrested for cannabis possession in 2015-2017 in Baltimore were African-American, a rundown of 1,450/1514 arrests. When medical marijuana licenses were being distributed in 2016, none of the 15 licenses awarded by the Natalie M. LaPrade Maryland Medical Cannabis Commission went to minority canna-businesses. This lack of diversity went against clear language within the law, which required regulators to seek “racial, ethnic, and geographical diversity.” At the time, Gov. Larry Hogan ordered a diversity study, which concluded the obvious: a racial disparity caused by a bias against racial and gender minorities. Even still, the Maryland General Assembly concluded the session in 2017 without passing a bill designed to increase canna-business diversity.
Two companies are suing the state due to repercussions from being denied licenses, and the Black Caucus called for a special session to parse the legislation out, but Annapolis politicians denied. Senate President Thomas V. Mike Miller brought up that giving these companies the licenses they seek will allow the geographic diversity issue to work itself out. Still, House Speaker Michael E. Busch argued that it was inappropriate to assist specific businesses. To this day, social equity provisions remain gridlocked.
Ohio’s medical marijuana program’s ownership “racial quota” was eventually decided to be unconstitutional, but before the ruling, Ohio’s medical market had more than 16 percent of licenses held by minorities. The racial quota, created when Ohio passed its medical marijuana law in 2016, allowed priority licensing for African-Americans, Hispanics, American Indians, and Asian-Americans, labeling these groups as “economically-disadvantaged.” The provision required that 15 percent of licenses go to minority-owned firms. Legal experts were wary of the racial profiling that would have to occur, and whether or not the “quota” provisioning would stand up in court, an issue that would soon come before the law.
Licensing techniques were brought into question when cultivation businesses Greenleaf Gardens and Pharmacann were deprived of rights to licensing because two minority-owned canna-businesses were selected ahead of them. Pharmacann was eventually awarded a license, making the business the 13th level 1 licensed cultivator in Ohio. In 2018, Franklin County judge Charles Schneider struck down the provision because Greenleaf Gardens had been discriminated against and caught in the crossfire of minority advancement. In legal terms, the quota system violated the Ohio constitution’s equal protection clause because it gave minorities preference as opposed to selecting licensees based on a scoring process. The state asked the court to reject the suit, citing that obtaining a license to grow cannabis wasn’t a federal right.
When Florida legalized medical marijuana in 2014, the state was immediately sued by African-American farmers who claimed racial discrimination; only one of the ten marijuana grow licenses were being allotted to minority farmers. In 2017, a similar suit to Ohio’s was brought to the Leon County circuit court. A Panama City farmer, Columbus Smith, challenged the system, alleging the new ruling detailing who could obtain an exclusive license to grow and distribute medical marijuana, was “unfairly narrow.” Smith explained that a small portion of African-American farmers even qualified. To qualify, farmers must be members of the Black Farmers and Agriculturists Association, which has ceased new member acceptance.
“There is no rational basis for limiting the opportunity of black farmers to obtain a medical marijuana license to only the few members of that class of black farmers who are also member of a specific private association,” the lawsuit read.
Although Colorado was the first to legalize recreational marijuana, in 2014, industry trends are not calculated. These seem somewhat counterproductive, especially when the cannabis industry brings in millions in revenue a year, and sales contribute to state education and health care initiatives, including mental health services and drug prevention programming for disparaged youths. Increased job opportunities and decreased crime rates have also sprouted from legalization, and yet no social equity provisions have been instated. It should be noted, though, that select businesses have programs in place to employ minorities, but no state or city mandates.
Although there are no mandates in effect, Oklahomans in medical marijuana reap the benefits of low licensing fees and no caps on the number of canna-business licenses that can be issued.
Pennsylvania followed Colorado’s lackadaisical legislation tracking system but used the point system to incentivize licensing applicants to include plans that bolster diversity. Ten percent of available points will be awarded on applications that have procedures in place. Furthermore, the Pennsylvania Department of Health created policies that ensure that medical cannabis organizations layout specific diversity plans for ownership, employment, and contracting in their business applications.
When Massachusetts legalized recreational marijuana, a portion of the law was dedicated to minority inclusion. This legislation is the first of its kind, as it differs from Oakland, CA’s ruling by being a state-enforced law. The program is divided into four distinct tracks: one for owners/entrepreneurs, one for management executives, one for entry-level job-seekers post-incarceration, and one for people who possess skills deemed “transferable” to the cannabis industry. These transferable skills could be anything from accountants and plumbers to lawyers and electricians.
The Cannabis Control Commission’s job is to give priority licensing to those it defines as “economic empowerment” applicants. This jargon is essentially the same as the previous states, who labeled this same demographic “economically disadvantaged” and “equity applicants.” In 2018, the CCC dedicated $300,000 to the equity program.
To qualify for the MA version of the Social Equity Fund, applicants must check off one of the following boxes: having a past drug conviction or being a spouse or child of someone who has, having lived in Massachusetts for at least the last 12 months or reside in an area of disproportionate impact for at least five years, or have an income below 400 percent of the federal poverty level. These 29 “areas of disproportionate impact” have been clearly defined as Abington, Amherst, Boston*, Braintree, Brockton, Chelsea, Fall River, Fitchburg, Greenfield, Haverhill, Holyoke, Lowell*, Lynn, Mansfield, Monson, New Bedford, North Adams, Pittsfield, Quincy, Randolph, Revere, Southbridge, Spencer, Springfield*, Taunton, Walpole, Wareham, West Springfield, and Worcester*. If an address falls within the asterisked towns, a quick census search must be conducted, which breaks down the four large cities into smaller tracts.
In July 2019, the Michigan Marijuana Regulatory Agency announced plans to enforce a social equity program in 19 communities: Albion, Benton Harbor, Detroit, East Lansing, Ecorse, Flint, Highland Park, Hamtramck, Inkster, Kalamazoo, Mt. Morris, Mt. Pleasant, Muskegon, Muskegon Heights, Niles, Pontiac, River Rouge, Saginaw, and Ypsilanti. Following $42 million in sales within the first four months post-legalization, Michigan legislators devised a plan to increase minority input in the booming industry. Disproportionately impacted business owners who qualify for this program can reap benefits such as a 60 percent discount on licensing fees, industry education, and easier access to government agency help. The state hopes to allocate half of the licenses awarded to applicants from the social equity program.
Simultaneously, State Senator Jeff Irwin presented a bill potentially instituting automatic expungement for those with low-level cannabis-related misdemeanors; this could affect 235,000 Michigan residents.
Portland businesses that are owned by staff with prior marijuana convictions are eligible for lessened licensing fees. Additionally, a three percent city marijuana sales tax was passed by Portland voters in 2016. Tax revenue is to be allocated to drug and alcohol treatment, public safety initiatives, and small business support.
Illinois is the newest state to join the recreational cannabis climate with a bang. Gov. J. B. Pritzker called for the expungement of drug-based criminal records, established a Social Equity Fund for applicants, and established “disproportionately impacted areas” on similar statutes as the demographics mentioned above. After making $3.2 million on the first day of sales, Illinois will continue to finetune the process, so that’s something to keep an eye on. Only time will tell.
In early January 2020, the Washington Cannabusiness Association requested that legislation regarding the implementation of a Social Equity Fund be withdrawn. Two bills, one which removed barriers to capital for minority owners and one which eliminated the residency requirement, were both withdrawn in favor of consideration later this year.