The year is 2012. Colorado and Washington become the first states to legalize adult-use cannabis. The entire nation rejoices and a domino effect begins now that other states want in. But something was missing: there were no plans for expunging cannabis-related records, no community investment programs and no equitable solutions that help people of color break into the industry.
Since then, 16 other states have legalized adult-use cannabis and learned a valuable lesson from those first two: social equity is just as important to the success of the cannabis industry as it is to the communities that have been affected.
What is social equity?
The goal of social equity programs is to create pathways into the cannabis industry for communities that have been disproportionately impacted by the war on drugs.
Social equity applicants also include distressed farmers, veterans and minority and women-owned businesses.
Why do social equity programs exist?
All social equity programs have one underlying purpose: to right the historical wrongs of cannabis prohibition. And you cannot talk about the need for social equity without first acknowledging how we got here.
The Marihuana Tax Act of 1937 federally banned cannabis in all states and taxed its sale and cultivation. Harry Anslinger, the head of the Federal Narcotics Bureau, claimed a majority of its users were Black, Hispanic, Filipinos and entertainers whose “satanic” jazz and swing music was a result of cannabis use.
Then on June 17, 1971, President Richard Nixion began the war on drugs by declaring cannabis as “public enemy number one.” Low-income Black and Latino communities were heavily targeted as a result.
For the next 50 years, these policies halted cultivation and resulted in mass incarceration and disproportionate policing in Black and Brown communities in the United States.
What challenges do social equity applicants experience?
Despite the rise in social equity programs, less than 2% of cannabis business owners are Black and Brown. Here are some barriers that social equity applicants face.
1. Cannabis licenses are inaccessible to low-income social equity applicants
In Connecticut, social equity growers are required to pay a $3 million fee for a permit. The application costs for cannabis licenses are expensive, and often out of reach for applicants who qualify under lower income criteria. Combined with operational costs, licensees need millions to run a retail cannabis business.
2. A lack of community reinvestment plans
Last year, a Portland auditor found that 79% of cannabis tax revenues were not distributed to communities impacted the most by cannabis prohibition, but instead went to the police bureau. Those funds were initially allocated to invest in community rehabilitation centers, parks and after-school programs.
3. Limited access to capital
Cannabis is still federally illegal and classified as a Schedule I substance. As a result, social equity licensees cannot access the banking system and obtain grants or low-interest loans. That sometimes creates a situation where a small social equity business owner gives up part ownership to a larger MSO in exchange for capital.
Fyllo’s Alchemy podcast guests on how we can get social equity right
Ericka Pitman, former CMO at Viola
Ericka Pitman knows true diversity starts at the top.
“People always ask me, ‘how do you diversify your company?’ And I say, ‘you diversify your c-suite. People engage and employ people like them a lot more than we know. People tend to recommend their warm network.
“The key is to be intentional and premeditated about diversifying your leadership pool and what will naturally and organically happen is you will have a warm network affinity - that people will start to recommend other people that are of similar backgrounds and experiences.”
Ben Larson, CEO at Vertosa
Vertosa CEO Ben Larson stresses how important it is to right the wrongs of cannabis prohibition through supporting expungement programs and community reinvestment plans.
“We [Vertosa] support programs like The Last Prisoner Project, where not only are we helping expunge people’s records and get them out of prison, but provide paths to employment inside and out of the cannabis space.”
“We were lucky to find one of our fantastic employees who has been making a great name for herself in this space.”
Meredith Mahoney, President at Lantern
Meredith Mahoney understands the importance of creating a diverse and equitable culture through mentorship programs that provide opportunities for social equity entrepreneurs.
“We incubate, accelerate and mentor entrepreneurs of color in the cannabis space and it’s been incredible. The amount of talent that’s out there, we would be fools in this industry not to include that community in a really meaningful and honestly aggressive way.”
“We need to make sure we have the people that are starting these businesses at the table and lending their expertise to us.”
Learn more about social equity reform by listening to these Alchemy Podcast episodes and more at hellofyllo.com/podcasts.