By John Schroyer
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Social equity in the marijuana industry has been picking up steam for years now as cannabis prohibition continues to be repealed state-by-state across the United States.
Early on the path to legalization, social equity was an afterthought. But now, the concept is often woven into licensing structures by lawmakers or regulators as they craft new state-level marijuana industries, and certain criteria is often established in order to prioritize licensure for entrepreneurs who can demonstrate a legitimate harm from marijuana prohibition.
Such criteria – and the definitions of which entrepreneurs are eligible and which are not – vary greatly from state to state. There’s no definitive database yet that tracks social equity businesses or licenses nationwide, Green Market Report found, let alone how many of those businesses are operational or profitable, making it difficult to discern how much progress has been made by social equity programs.
By the Numbers
But it’s clear that thus far at least 2,303 social equity business permits have been issued in at least 15 states that have equity programs, according to an analysis of intelligence from Cannabiz Media, a 2022 report by the Minority Cannabis Business Association (MCBA), and another 2022 report from the state of California.
That only represents about 5% of marijuana business permits nationwide, however, according to numbers from Cannabiz Media, which reported a total of 42,319 active cannabis business licenses across the U.S. as of Halloween.
The 2,303 social equity permit count includes:
26 in Arizona
619 in California
59 in Connecticut
2 in Florida
144 in Illinois
392 in Massachusetts
2 in Michigan
42 in New Jersey
10 in Nevada
781 in New York
226 in Vermont
There are also state-run social equity programs in Colorado, Maryland, New Mexico, Pennsylvania, Washington state, and Virginia, according to the MCBA. But specific data about the licensing under those programs is still hard to come by.
What that means is the 2,303 tally is almost certainly off. The figure also doesn’t include up-to-date statistics from California, Michigan, and some other states, sources said, in part because a legislative report in California that was due in July hasn’t yet been published, while Michigan regulators are hesitant to share specific social equity license data, Cannabiz Media reported.
There are also new social equity programs being created nearly every year, with more such permits becoming available in states like Missouri and Maryland, and more upcoming in New York, while social equity programs are being considered by lawmakers in Hawaii, Minnesota and other states that are poised to legalize marijuana.
While Florida is included in the list above, its so-called social equity licenses are a result of litigation, and not direct policy written by lawmakers, and so the MCBA doesn’t count Florida as a social equity state. Cannabiz Media counts the permits as social equity because they’re reserved for Black farmers.
The figures also don’t necessarily include some social equity license holders that may have already sold their permits or exited the industry, which means the size, scope, and success of social equity programs is inherently tough to judge.
Still, the 2022 MCBA report – which harshly criticized many of the existing social equity programs and concluded that none of them had led to a truly equitable market – remains relevant today, said former MCBA President Amber Littlejohn, who is now an attorney in private practice.
“The situation has declined since then. While we may have more programs that are discussing social equity, the diversity of the industry is still headed in the wrong direction,” Littlejohn summarized in an August interview. “We still have people who are participating in social equity programs that are struggling to get started or to survive.”
The report from the MCBA concluded that “Of the 15 state social equity programs, not one has resulted in an equitable cannabis industry across all four pillars of equity (industry, justice, community, and access).”
Shortcomings
While there’s a broad range of flaws and issues, often depending on the specific state or program, one of the most easy-to-identify problems is that programs are more often than not tied directly to limited-license markets that only allow a certain number of entrepreneurs into the industry, said current MCBA President Kaliko Castille.
That creates incentives for those not eligible to game the system by persuading someone eligible to partner with them, often on predatory terms, because those who do qualify for social equity often don’t have the startup capital they need to actually put such licenses to use.
“We’ve been operating in limited license market places, and when you have limited license markets, it artificially inflates the value of those licenses, makes it so the most well-capitalized players flood those markets, and makes it hard for social equity folks to get involved,” Castille said. “That’s why, up to this point, social equity as a conversation has really focused on having some sort of carve-out or percentage of licenses for communities that have been most adversely affected (by the war on drugs).”
Amber Senter, another major proponent of social equity and a longtime California cannabis entrepreneur and activist, said a widespread issue with social equity programs has been unrealistic expectations and promises made to license applicants.
Many stakeholders get excited at the thought of translating their past cannabis trauma into a successful business venture, but they lose sight of the fact that standing up a new business can be expensive and tricky – and that can and has led to negative outcomes, said Senter, who founded the nonprofit Supernova Women and is also CEO of cannabis brand Makr House.
“Many of the social equity programs, the way they were rolled out, the expectations were not managed appropriately,” Senter said. “It really ended up distorting the reality for many folks, and the reality is that cannabis is a small business, it’s a mom and pop business, and it always has been, and folks did this to just provide for their families.”
The entire notion of social equity is so new and tricky that “It’s hard to say that one person got it all right,” Castille said.
But social equity has caught on with many policymakers, particularly lawmakers of color who represent communities that were hard-hit by the War on Drugs, including U.S. Sen. Cory Booker and other members of Congress who have been pushing to include social justice and equity as part of either the SAFE Banking Act or some other federal marijuana reforms.
Which means it’s not going anywhere, and if anything will only continue to get more refined in coming years, as cannabis reform continues its march forward.
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