By some estimates, sales of legal cannabis in the United States are expected to top $30 billion by 2025. If cannabis is de-scheduled, this nascent industry is well-positioned to burgeon into the next great American capitalism story. The obvious question is: “Who will benefit?”
In an attempt to answer this question, while recognizing the lingering effects of years of systemically disparate criminalization of the use and possession of cannabis in Black and Brown communities – including as part of the so-called “War on Drugs” – some states have created social equity programs (SEPs). These programs target communities that were disproportionately impacted by the so-called War on Drugs (Disproportionately Impacted Communities) and seek to provide additional resources to members of such communities who seek licensure for their cannabis businesses in those states.
Much like cannabis legalization and regulation, SEPs vary from state to state; however, some common eligibility criteria for participation in these programs include, but are not limited to, the following: (i) a prior cannabis conviction, (ii) residency for some specific period in a Disproportionately Impacted Community, (iii) low-income status, and/or (iv) 51% ownership of the applicant company by a member of a Disproportionately Impacted Community. Additionally, some common characteristics of SEPs include, but are not limited to, the following: (a) reduced application fees, (b) availability of unlimited licenses, (c) reinvestment of tax revenue from cannabis sales back into Disproportionately Impacted Communities, (d) expungement of cannabis convictions, (e) training, (f) priority or weighted applications and (g) low-cost loans.
While these programs represent an unprecedented effort by the cannabis industry to address historical wrongs and create greater opportunities for inclusion in this nascent industry, their effectiveness to date is limited at best. Some challenges SEP applicants face include: (i) limited enforcement of laws against unlicensed businesses, (ii) market saturation, (iii) high barriers to entry (including extensive costs), (iv) predatory practices, (v) technological issues with the application process, (v) heavy regulation across multiple regimes, including city, state and federal laws, and (vi) information gaps and lack of access to expert counsel. As a result, although we are still in what may be considered an infancy stage of SEPs and the cannabis industry itself, it is abundantly clear that a focus on increasing the number of minority applicants for cannabis licenses in a particular state does not necessarily translate into increasing the number of thriving minority-owned cannabis businesses in that state.
In Episode 92 of the Nota Bene Podcast with Michael P.A. Cohen, we discuss some of these realities and offer some thoughts on improving the effectiveness of SEPs – both in the current state by state version of the cannabis industry and with an eye to eventual federal legalization.