Make No Mistake: Cannabis Equity Can’t Wait

In 2020, states with legal adult-use and medical cannabis laws are flooding with cash, from Nevada and Massachusetts to Illinois. They’re also troublingly behind on quality, consumer access, and especially their social equity.

As state leaders like New York Governor Andrew Cuomo prepare to launch new cannabis platforms of their own, industry and community members warn that, without acknowledging the drug war’s harms but also the history of US cannabis use generally, regulators and private industry will still be missing the big picture, and inevitably pay the price.

In short, experts say, social and racial equity must become foundations rather than buzzwords in cannabis — and be treated as complex processes, needing patience and investment — if this entire industry is going to succeed. A key reason is that our nation’s giant cannabis industry is a patchwork of underground and state-level or municipally legal sources, with a long history of mostly being innovated and (literally) cultivated by, and weaponized against, people of color.

Yet most legal adult-use and medicinal cannabis operations are still quite new, and mostly aren’t being led by members of those Black and Brown communities (who’ve been criminalized for their cannabis work and use for over a century), nor by legacy operators, medical patients, women, or members of other historically significant groups in cannabis. The same is often true in cannabis lawmaking.

As a result, cannabis regulations, business models, and even social equity programs often don’t account for critical factors that will continue to impact whether these groups can join the legal industry at all — and whether US cannabis users, suddenly faced with soaring prices, geographical limits, and an unfamiliar culture, will bother to shop there.

During the Minority Cannabis Business Association’s recent Tri-State Cannabis Equity Summit in New York, speakers and activists from across the country emphasized this point, and how changing one or two laws won’t give people of color and other minority groups meaningful access to the industry. Gia Morón, president of Women Grow and moderator for the panel “Why Equity Can’t Wait,” noted to the group, “I don’t expect governments to know everything, but I do expect them to listen.”

Attendee Grizzly Bocourt, an NYC cannabis activist who serves as President of New York Cannabis United and Creative Director of the Cannaware Society, said that regulators still lag behind on providing resources that equity applicants need to compete with big firms, including in his home state.

“The lack of equal access leads to corporations and out-of-state operators dominating the market, and many small businesses miss out on the opportunity to enter the market while it’s still emerging,” Bocourt said by email. “We also need to bridge the gap between regulators and stakeholders [and] communities who have truly, disproportionately been affected by the war on drugs. New York is in need of extensive preparation before we reach full legalization,” he added.

According to the event’s speakers, making the necessary changes in New York and elsewhere also means tackling multiple specific, major problems with equity programs to date.

These include any number of lesser-known state or local laws enacted around cannabis legalization that effectively bar people of color from the industry.

For example, numerous states have attempted (with or without success) to block persons with a record of drug-related or -adjacent arrests from getting a license, or even working in the industry — in such cases, rather blatantly ignoring key aspects of both the drug war and cannabis cultivation. But legal hurdles for Black and Brown industry aspirants aren’t always so obvious, speakers said.

Panelist Margeaux Bruner, a Michigan-based lobbyist, consultant, and MCBA Board Member, pointed out that the use of a so-called ‘morality clause’ in her home state even derailed former Detroit Lions wide receiver Calvin Johnson, with his worldwide fan-base and ample personal capital, while applying for a license (in his case, over a warrant issued for unpaid parking tickets he later paid).

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Such clauses are used at local authorities’ discretion, and rule many folks out. And when ‘regular’ and especially marginalized folks sink hundreds of thousands of dollars into a venture that then falls through, they can’t usually afford a second chance.

At the same time, businesses requiring non-compete clauses from cannabis-industry workers have become “a huge issue” in her state and others, Bruner said in a phone interview.

“People are clamoring for these jobs, taking pay cuts to work in this industry, and even people with entry-level jobs — even budtenders — are having to sign non-competes that say they can’t work at another [cannabis operation] for three years.”

“This industry is so new and fast-involving that if I were a budtender who left my dispensary today, and couldn’t work in another one until 2023, who knows what the industry will have evolved into by then; will my skills still be useful?”

It’s exactly these kinds of regulatory decisions that states should be making more carefully, Bruner said — and the devil’s in the details.

“It may be just one piece of legislation, but it creates a domino effect: when you change marijuana from an illegal to a legal substance, you have to change a hundred different laws, which may differ for medical and adult use,” she added. “I’ve had the opportunity to take that walk in my own state.”

Shanel Lindsay, owner and CEO of ARDENT and a member of the Massachusetts Cannabis Advisory Board, said that cannabis reform advocates also “shouldn’t be afraid to push for exclusivity” for equity applicants in markets’ first few years, given that resources and training only help if you’ve got a seat at the table, and enough time to use it.

She remarked during Morón’s panel, “What good is training if applicants are up against a huge company that’s able to come into a municipality [with new adult-use laws] and say, ‘We’ve already been here operating [in medical cannabis], we have experience in your state, and we’ll give you money’?”

In a phone interview, Lindsay said that states have struggled to both define and enforce qualifications for equity license applicants, who generally include people of color and members of historically criminalized communities, veterans, medical patients, and others who can offer cannabis experience rather than venture capital.

Regulators may be hesitant to qualify equity applicants based partly on race, for example, fearing that such rules could be called discriminatory or unconstitutional — though historical data make clear that Black and Brown communities have paid the most under prohibition.

But there are other methods for qualifying equity applicants that “can have a ripple effect” to include those communities, Lindsay said, such as whether applicants lived in certain areas during certain years, or have a particular need for, or history of, economic empowerment. In Massachusetts today, she said, “That includes many white groups.”

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Regardless of the reason for equity applicants’ status, regulators must also be ready to carefully vet those kinds of license applications, which — thanks to shell companies, ‘front men,’ and seemingly underhanded investors — have already faced criticism over their authenticity (in letter or spirit) in multiple state markets.

Doing so requires time, funding, and specialized, nuanced knowledge that many regulators don’t yet have — even as they increasingly turn to technology to help track and manage whatever happens, which may or may not promote equity.

Another big problem for equity license applicants is finding property for their businesses, Lindsay said. It’s one of the factors she credits for the current demographic breakdown of Massachusetts cannabis businesses, more than 63% of which are white-owned (likely at least 65%), and many of which are run by large operators.

To that end, Lindsay said, regulators should ensure that zoning “isn’t too strict” for cannabis businesses, and will allow for reasonable growth in the future. “When people with money realize that [cannabis business] is going on in a state, they move in on the real estate, and once all the properties are gobbled up, equity businesses are really dead in the water.”

At the end of the day, Lindsay said, “You’ll find you’re really swimming against the stream if you try to push forward an agenda that’s at odds with regulatory structures.”

If regulators want this industry to succeed, they also need to make a serious effort to help secure and provide funding for people of color, women, and other minority groups who want to enter it, she said. “Those groups make up small business and medium-sized business in cannabis, and if they’re not included, we’ll end up with Big Cannabis, and the kind of sub-quality products we’re seeing in Massachusetts now,” Lindsay added.

“The two are inextricably linked: when you have a variety of types of folks in the industry, that’s when you start to see real competition, and the cream of the crop rising to the top. You won’t have that in monopolistic scenarios.”

Regarding the fact that out-of-state and large operators have moved into states and municipalities where others spent years fighting for change, or simply being over-criminalized, Lindsay recalled a suitably American expression: “Pioneers get slaughtered, settlers get fat.”

Event panelist Imani Dawson, Executive Director of the Cannabis Education Advocacy Symposium and Expo (CEASE) and National Communications Director for Minorities for Medical Marijuana (M4MM), echoed the point that bringing serious funding to equity ventures should be among lawmakers’ top goals.

“Obtaining a marijuana license is practically impossible without a million dollars [or more], which is why there are only a handful of women- and person of color- (POC) led dispensaries. We aren't reflected in venture capital spaces, and it's clear how much representation matters,” Dawson commented by email.

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“There's a very narrow profile for cannabis entrepreneurs launching well-funded businesses,” she continued. “Legislation and regulation must attempt to close that gap by providing grants and low-interest loans that allow underrepresented entrepreneurs, particularly those from communities most harmed by prohibition, to launch plant-touching businesses.”

And particularly in New York and nearby states, Dawson said, lawmakers need to grasp that millions of US voters — including cannabis users and people harmed by cannabis prohibition, but also the growing number who support them — aren’t going to accept sub-par legislation.

Last year, for example, New York advocates and community members “waged a fierce battle for the MRTA [bill], which represents our best chance for marijuana justice,” Dawson said, and ultimately chose not to support the state’s proposed alternative, which didn’t end up detailing a social equity plan. “We were [also] able to join together community stakeholders, advocacy groups, farmers, hemp associations, and Registered Operators to push for legalization rooted in racial and economic justice.”

Dawson continued, “2020 is an election year, and we are poised to build on that momentum and [bring about] legalization that allocates a portion of [marijuana] tax revenues towards community restoration and access to resources for disadvantaged entrepreneurs, an issue that galvanizes voters.” 

“It was clear from the Tri-State Equity Summit that many states face the same challenges, namely, how to codify social equity in a way that actually benefits those most harmed by prohibition,” she added. “That begins with day-one equity.”

Effectively ignoring cannabis history and the needs of equity applicants definitely won’t help this young industry ‘beat the black market’ either, experts agreed. Going forward, Dawson said, “We must provide pathways for the legacy market to enter the legal cannabis industry, rather than demonization and further criminalization.”

Tainted Love BK co-founder Saki Fenderson, who spoke on a panel about criminal justice reforms and community reparations in cannabis, also told the audience, “I have no problem with the term ‘Black Market,’ because it’s [been] our market.”

Faced with cannabis’ complicated history and numerous significant hurdles in today’s market, Fenderson said, “You cannot be in this space and not be an activist.” She added, “If you’re someone who intends to operate in this space and not participate in the advocacy, you are my enemy.”

Jason Ortiz, President of the MCBA and one of the event’s hosts, commented by email, “If we do not center the opportunities for those impacted by the racist war on drugs, our communities will continue to purchase from and support unlicensed sales, and marijuana will continue to be seen as a clear example that the United States is racist in its policy and racist in its economics.”

“[The] cannabis industry is providing us a chance to turn the corner and begin the process of healing [but not] without a full accounting of the damage done, and public policy that directs resources to heal that damage. Until we get there, there will continue to be a divide between communities of color and the wealthy white- dominated corporations of ‘the industry,’” Ortiz wrote.

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Bruner said she also believes that failing to understand cannabis culture, quality, and purchase patterns is “a fatal flaw, in this particular industry” for any organizations operating therein. “If you’re in California, you understand this particularly well.”

“When the stats say that 80% of cannabis sales are in the underground market, it sounds like a failure, but it’s not. These are established purchase patterns going back years, and states need to evolve, be robust, and hire people from the traditional market for proper absorption.”

Regarding the wider impacts of equity and inclusion in cannabis business, Bruner commented, “This is not a philanthropic thing you’re doing; you’re helping yourself by looking at your whole market. If you want people to be part of your customer base, then you definitely have to address that.”

Drawing more customers to legal markets will also require having people of color, women, medical patients, and members of other underrepresented groups in decision-making roles, not just entry-level ones, or as unpaid consultants.

“Social equity has to be completely braided into your organizational structure, not just for people of color and minorities, but for all the people you plan to serve as customers,” Bruner said. “If your board just has Caucasian males, and your customers include women and people of color, you may have lost perspective.”