Is Legal Cannabis Really Delivering Social Equity?

The fact is, the cannabis industry is becoming big business; and, while the industry grows and gains acceptance, there is a distinct feeling that a number of people and communities are being left behind, most notably BIPOC (Black, Indigenous and People of Color) communities. Here’s a quick breakdown of what’s holding back efforts towards a more equitable playing field in the cannabis industry.

Minorities in the Cannabis Industry: Some Numbers

  • 17% of executive positions are held by minorities, compared to an all-US business average of 13%.
  • 4.3% of marijuana business owners are African-American. 5.7% are Hispanic/Latino. 6.7% are listed as “Other”, and 2.4% Asian
  • Relative to their share of the U.S. workforce, both women and minorities are underrepresented in executive positions – and the disparity is even more acute for women of color
  • When broken down by business type, 2.7% of African-American cannabis business owners are on the plant-touching side of the industry, and 5.6% are in ancillary businesses. For Hispanic/Latino owners, 5.3% are involved with the plant, 6.0% in ancillary businesses. These numbers (including the ones above) are from the MJ Biz Daily Report, 2017.
  • Despite roughly equal usage rates, the American Civil Liberties Union (ACLU) states that Black people are 3.73 times more likely than whites to be arrested for marijuana.
  • In California, Hispanics accounted for nearly 42% of those arrested for cannabis possession, followed by black people, at 22%, with whites at 21%.

Some states have a more diverse number of executives than others. California has the highest concentration of minority-owned businesses in general, with some estimates putting this figure around 40%. In other states that are less racially diverse, this figure is much lower. In Colorado, for example, approximately nine out of every 10 cannabis company owners/founders are white, but this is not surprising considering Colorado’s demographics.

So What’s Going Wrong With the Cannabis Industry and Social Equity?

Many states have put grants and other programs in place in order to increase the number of black- and minority- owned businesses. Yet, there is still little take. In Massachusetts, for example, 27 of the 122 applicants initially given “economic empowerment priority” by regulators in 2018 ended up applying for licenses, Politico reported last year, and only eight received them. There are a number of reasons why this is the case, including:

  • Prior convictions – those with criminal records are often prevented from applying for cannabis business licenses. As black and Hispanic/Latino people are more likely to be arrested for cannabis possession, this means that many who would otherwise be perfect candidates for working in the cannabis industry cannot do so.
  • The heavily regulated nature of the cannabis industry makes it more difficult for new entrants into the market. Only those with the capital to afford lawyer’s fees and other startup costs can start cannabis businesses.
  • Those with more money are likely to have more connections to policy makers and others in power. Unfortunately, they can influence policy and who gets licenses, which has led to accusations of corruption.
  • Badly-worded and poorly implemented social equity programs have led to rafts of litigation.
  • Some licensees unwittingly sign predatory contracts with investors, shutting them out of majority ownership of their business or making them vulnerable to a buyout.
  • As most states limit the number of licenses they issue for dispensaries and cultivators, there is a lot of competition for very few places. Moreover, regulators prefer giving licenses to those who have already displayed some modicum of success, whether in their own or another state. Such a market tends to favor those who already have a foothold in the cannabis industry.
  • It can cost a lot to operate a cannabis business, let alone to keep it compliant. The amount of red tape and bureaucracy involved can make it extremely difficult to work in the cannabis space for those with low incomes.

What’s Being Done to Overcome These Problems?

There are a number of solutions that have been proposed and implemented to some extent, including:

  • Setting aside medical marijuana grants, loans and licenses for low-income applicants
  • Removing cannabis-related crimes from criminal records
  • Mentorship
  • Residency requirements
  • Income limits for grant, loan and license applications

Have the Solutions Helped Overcome These Problems in the Cannabis Industry?

Put simply, “Not really”, at least when it comes to state regulations. The fact is, even with all the help available, legal cannabis is a difficult and very expensive industry to operate in. This is on top of the fact that the glacial pace of reform means that many applicants give up on any social equity program they’re a part of. After all, it’s a lot of money to put on the table for something that may not even be allowed to operate by regulators.

For a lot of people, the risk is too high and the price of failure too costly. This will likely not change until cannabis becomes federally illegal. Unfortunately, though, by the time this happens, it’s the companies that have cornered a highly regulated market during more strict times who have the biggest starting advantage. If we want to see this change, current oligopolies will need to be broken down, and cannabis will need to be legalized on a national scale.

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