How Cannabis Equity Programs Are Shaping the Industry’s Future

The face of cannabis will soon be defined.

More and more states are continuing to vote in favor of legalized weed, while a number of new Democrats in Congress have guaranteed legislation that would substantially stabilize the industry by refining aspects of banking, taxes, and industry standards. As legal cannabis expands its reach, the number of companies that stand to make a profit off the Green Rush has exploded. Whereas once the market was filled with small farmers and neighborhood dispensaries, now those who once never dreamed of investing in the plant are suddenly paying attention.

Nothing better exemplifies this reality more than the recent news that Altria — the makers of Marlboro cigarettes — were set to acquire a 45 percent share of the Canadian cannabis firm Cronos Group. Altria’s investment of $1.8 billion suggests that we've arrived at a decisive turning point in the narrative of legalized pot.

Common wisdom has long held that the day tobacco companies entered the legal weed market was the day cannabis would truly be seen as a mainstream commodity. It appears that day has now come, and with it, the groundwork for a pivotal battle that will determine whether small businesses can hope to survive in the face of traditional corporate competition. While the heaviest hitters continue to gain traction in Canada, several cities and counties across the U.S. are attempting to solve the problem of larger corporate interests and mainstream capital flooding the marketplace and washing away small businesses -- especially those operated by individuals previously disadvantaged by the War on Drugs. Their solution? Social equity programs.

In theory, social equity programs serve to ensure that a percentage of the local permits that are required to operate in the cannabis industry are allocated to individuals who have been disproportionately impacted by the War on Drugs. In the case of Oakland, California, for instance, equity permit applicants must live in the city, earn less than 80 percent of the average city income, and meet one of two requirements related either to living in a heavily policed area or being convicted of a cannabis crime in the last twenty years.

Oakland resident Alexis Bronson, who met these requirements, was paired by city officials with two companies who agreed to incubate Bronson’s business for three years in return for getting priority access for their own permits. Speaking with the San Francisco Chronicle in July, Bronson revealed that both those companies — NUG and Joyous Recreation & Wellness Group — had failed to provide the requisite grow space stipulated by their incubation agreement, which had called for 1,000 feet of free business space.

This incident is indicative of a larger trend in equity. While these programs' intentions — to offer the targets of America's largely racist and unscientific prohibition of cannabis an opportunity to participate in newly established legal markets — may be genuine, the path to go from applicant to active business owner is one fraught with complications.

One organization that's risen to the challenge in Oakland is Hood Incubator, which describes its mission as “work[ing] to increase the participation of Black and Brown communities in the legal cannabis industry.” Since launching in 2017, to ensure that the industry doesn't exclude people of color, Hood Incubator offers programs like their Cannabis Business Accelerator, as well as a cannabis industry apprenticeship.

Although nationally focused, Hood Incubator played a key role in developing and implementing Oakland’s own equity program. With co-founder Ebele Ifedigbo recently honored as one of Forbes’ “30 Under 30” in 2018, it’s clear that organizations like Hood Incubator are playing a vital role in helping to prevent the cannabis industry from becoming Silicon Valley 2.0.

Oakland attorney Kyndra Miller sits on the board of NORML and calls herself a “big fan” of what Hood Incubator is accomplishing. Miller also frequently offers counsel to those interested in obtaining permits both within and outside local equity programs in Oakland and San Francisco, which provides her with a unique perspective into where the program stands.

“I think there's still a lot of work to be done with respect to social equity,” Miller told Civilized. “I think it's going to prove to be a very interesting experiment with regards to how successful the programs will be, as well as whether increased diversity leads to increased success.”

Miller also emphasizes that while equity, by its nature, will inevitably lead to greater ethnic diversity in the industry, the program actually exists to ensure class balance.

“It’s important to remember that these social equity programs are based on where you live and on your socio-economic status,” she explained. “It's not a race-based program. It's really about giving those who are at the poverty level — or just above or below — the opportunity to own their own business, or to participate as an owner and not just as an employee.”

Unfortunately, one of the main hurdles many equity applicants in Oakland and beyond must grapple with is something that many folks can’t afford to waste: time.

On November 29, Blunts & Moore officially opened its doors in Oakland, becoming the first dispensary to operate under the city’s equity program. While eleven months may seem like an eternity in an industry that’s evolving on an hourly basis, Miller thinks everyone would do well to remember that this is still a market in its infancy.

“I try to send people off with homework and questions and things to think about,” she said. “I let them decide whether or not they can move forward and whether or not they're going to be patient enough to jump through all of these hoops. If they do though, I think the reward at the end is great.”

The concept of equity is quickly catching on across the country. Both Massachusetts and Maryland have now enacted equity policies, while California is taking the idea statewide following Governor Jerry Brown’s September decision to sign the California Cannabis Equity Act into law, allowing local jurisdictions with qualified social equity programs to write grants for funding.

Meanwhile, as of this moment, the city of San Francisco has yet to approve any of the more than 100 equity applications currently pending review. Part of the delay can be blamed on the myriad changes to cannabis law and regulation that have occurred on the city level since recreational sales went into action in January. There’s also the fact that the legwork required to process permits is, in a word, substantial.

Eugene Hillsman - San Francisco Office of Cannabis deputy director - concedes that patience is required when it comes to getting equity permits in order.

"San Francisco's small business permitting process can be lengthy,” he said. “We are continuously working with our city partners to try to build a streamlined process that allows our equity applicants to move through the permitting process as swiftly as possible.”

He adds that those behind San Francisco’s equity process will continue to learn from other programs and are always looking to improve where possible.

“The Office of Cannabis tracks the development, implementation and outcomes of other equity programs so that we can learn from those programs, avoid unnecessary pitfalls, and replicate successful policies, whenever possible,” Hillsman noted. “We must be critical of our own policies and be committed to regularly iterate them to ensure we are meeting expected outcomes. This sort of self imposed scrutiny serves the best interest of San Francisco's program, but also the development of equity programs across the state.”

With the passage of the California Cannabis Equity Act, desperately needed resources may soon finally be on the way. This new law will allow for the four cities in the state that currently operate equity programs (Oakland, San Francisco, Los Angeles, and Sacramento) to apply for disbursements from a $10 million state fund meant to support those programs. That means Hillsman might be able to hire more help to review equity applications. It means Miller may soon have a number of new clients all eager for her counsel. It also means that California is taking equity seriously.

While issues still remain — there’s the matter of loans and the continued specter of I-280E (a section of the U.S. tax code that prohibits cannabis entrepreneurs from writing off business expenses) — the potential for equity to ultimately shape the industry has arguably never been greater.

At long last, a day when people of all backgrounds are offered an equal seat at the cannabis table may actually be upon us. As it turns out, there is no face of the cannabis industry after all — there are many.

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