What can the cannabis industry do to foster social equity?

Entry into the cannabis market is difficult, especially for the part of the population that has been disproportionally affected by the war on drugs.  While approximately 60% of the US population is white, 81% of the cannabis industry is owned by white people.  Only 4.3% of African Americans, 5.7% have ownership Hispanic, and 2.4% Asian have ownership interests in cannabis companies.¹ This is quite a discrepancy between the white population and minorities. There are many reasons for this discrepancy, including such things as starting capital requirements, license applications and fees, as well as general economic disadvantages. Because of this, new cannabis programs need to address the social inequity that seems to plague the cannabis industry.  Two ways of doing this includes offering small plot growing licenses and boutique processor/manufacturing licenses, as well as adding considerations for disadvantaged economic area in the application process.

The first way to ensure economic equity in the licensing process is to offer different sizes of cannabis businesses. For instance, instead of a major growing operation that states require starting capital around $1M, the state can offer small plot licenses with much less capital requirements. These plots can be limited to 25 acres, ensuring that economically disadvantage people can raise enough capital.  Instead of having millions of capital required, small plots can require a much smaller startup cost – more around $50,000 – $100,000. As well, states can offer “boutique” licenses for processers. In this same line of thinking as small agricultural plots, boutique processors can start small, filling a unique niche for customers. Again, a small processor would not need nearly as much capital.  The state, though, would still need a license cap for businesses, as too many can flood the market and cause supply and demand issues.

The next way to help achieve social equity in the licensing process is to offer extra consideration to economically disadvantaged areas. For instance, during the application process, an applicant can gain points for living or working in prior specified disadvantaged locations.  These points would be added to a total score to compete against other applicants. The state should avoid an affirmative action type of applications process, as these can easily be deemed unconstitutional for failing to provide equal consideration under the law.¹ A points based system would allow for social equity to be more easily integrated into the process.  Points can also be awarded for planning to locate a cannabis business in an economically disadvantaged area. Other considerations to advance social equity in the cannabis industry can include expedited application process for minorities, application fee waivers, and application grants.

References:

1. Swinburne, M, Hoke, K. State Efforts to Create an Inclusive Marijuana Industry in the Shadow of the Unjust War on Drugs. Journal of Business & Technology Law. 2020;15(2):235-280.