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Social Equity Programs in Cannabis – Worth their Weight? – JD Supra

As the legal cannabis industry has expanded across the US over the past decade, green is the most prominent color seen in this space. In addition to the color of the flower, sales are projected to reach up to $30.4 billion in the US by 2023, States have generated as much as $369 million in cannabis tax revenues in a single year, and legal cannabis is said to support over 240,000 American jobs.

The colors that aren’t seen as frequently in the industry are black and brown.

It’s no secret that the prior prohibition of cannabis disproportionately and adversely impacted people in communities of color. In an attempt to counter this history of disparity, many states and cities have implemented social equity programs in connection to the legalization of medical or adult cannabis use. Although taking such action is arguably better than taking no measure at all to increase opportunities for individuals and communities who were previously harmed from inequitable cannabis arrests and convictions, the question still remains as to whether such programs are effective in the long run. Below is a scale that measures the likelihood that the legalization of cannabis in a state (whether medical or adult use) has positively impacted communities that were disproportionately arrested in connection to previous cannabis prohibition (“Disproportionately Impacted Communities”). This evaluation also considers whether or not the state has a program to expunge low-level cannabis offenses (“Expungement Initiatives”), due to the positive impact such programs would have on Disproportionately Impacted Communities. States that have no legalized use and no Expungement Initiatives in process have been excluded from the evaluation.

Low Impact

States:

Alaska, Hawaii, Maine, Oklahoma, Pennsylvania, Vermont, and Washington

Rationale:

In Alaska, Hawaii, Maine, Vermont, and Washington, both medical and adult use is legal, but none addressed social equity in its legalization. In Alaska and Maine, however, Expungement Initiatives are pending, and in Hawaii, Vermont, and Washington, Expungement Initiatives are currently in effect.

In Oklahoma and Pennsylvania, medical cannabis is legal, but the state did not address social equity in its legalization. However, in Oklahoma, although social equity is not explicitly addressed in its medical legalization bill, the low licensing fees and unlimited number of licenses has led to a diverse applicant pool. In Pennsylvania, 10% of the points awarded in the evaluation of medical cannabis license applications are given to applicants with diversity plans. Also, non-medical use is still illegal and criminalized in these states (no Expungement Initiatives).

Moderate Impact

States:

Colorado, Delaware, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, and Rhode Island

Rationale:

In Mississippi and North Carolina, both medical and adult use is illegal, but both have an Expungement Initiative in process.

In Delaware, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, New York, North Dakota, and Rode Island, medical use is legal, but recreational use is still illegal. Missouri, New Hampshire, and New Jersey have an Expungement Initiative pending, and the remaining states have Expungement Initiatives in effect.

In Maryland, medical use is legal, but recreational use is still illegal, and the state has an Expungement Initiative in process. Maryland’s legalization law requires diversity to be considered in its medical license applicant evaluations. However, none of the first 15 growers licenses were awarded to black-owned companies, even though 1 in 3 residents of the state are black.

Ohio, which has only legalized medical use, initially set aside 15% of medical licenses to be awarded to minority-owned businesses. This allocation method was later deemed to be in violation of the State’s constitution. Prior to being deemed unconstitutional, however, more than 16% of licenses were held by minority business owners. Additionally, Ohio has an Expungement Initiative in effect.

In Massachusetts, both medical and adult use has been legalized, and the state’s Cannabis Control Commission states on its website that it would offer training and priority licensing for applicants that have been disproportionately impacted by drug arrests. However out of the state’s first 19 recreational licenses, none were awarded to representatives of Disproportionately Impacted Communities, and only 1.2% of marijuana businesses in the state are owned by minorities. Massachusetts does not have an Expungement Initiative.

In Oregon, although both medical and recreational use is legal, no statewide social equity programs were implemented. The city of Portland, however, which is home to over half of the population in the state, implemented reduced fees for social equity applicants and a 3% tax to go toward economic and education programs in communities where drug laws were disproportionately enforced. These line items were not included in the city’s 2018 budget, and a 2019 audit revealed that a large portion of the tax revenues were used to fill gaps in the city’s own budget and to fund law enforcement. Oregon also does not have an Expungement Initiative.

In Colorado and Nevada, both medical and adult use of cannabis is legal. Although Colorado and Nevada don’t have social equity programs baked into their licensing procedures, cannabis tax revenues in both states have been invested to fund programs focused on their homeless population. Additionally, an Expungement Initiative is currently pending in Colorado, and Nevada has an Expungement Initiative currently in effect.

High Impact

States:

California, Illinois, and Michigan

Rationale:

Both medical and recreational use are legal in these states, and they all have robust social equity programs in connection to its legalization of recreational use.

In Michigan, licensing fees are reduced for applicants living in Disproportionately Impacted Communities, and the state aims to have at least 50% of licensees in certain communities benefiting from the program. Michigan’s Expungement Initiative is currently underway.

California assists municipalities in the provision of loans, grants and technical assistance to cannabis license applicants. Cities such as Los Angeles, San Francisco, and Oakland have created social equity programs that provide low- or no-interest loans to businesses, training on how to run businesses in the cannabis industry, and assistance through the license application process. The state legislature also passed an Expungement Initiative.

Illinois is said to have “one of the most progressive marijuana business licensing frameworks in the country” – not only does the state have an Expungement Initiative, but Illinois awards a significant number of points in its recreational license evaluations to members of Disproportionately Impacted Communities. Also, although all 15 of the medical licenses were awarded to white men prior to the recreational legalization and the social equity measures under the bill, in exchange for being first to hold recreational licenses in the state’s recreational market, existing medical license holders pay fees to fund the Cannabis Business Development Fund, which will be used to provide low interest loans and grants to applicants from Disproportionately Impacted Communities that are awarded licenses.

Notably, none of the states have yet to implement a social equity system in its cannabis legalization process that garners diversity in both the medical and adult use cannabis industries. Hopefully, an ideal program is on the horizon, to set the standard for the new states that will soon join the legalization list – and perhaps even for the country.

Written by homegrownreview

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