National Trends for Social Equity Programs in the Growing Cannabis Industry
As people begin discovering gold at the end of the cannabis rainbow, some communities have been missing out on the bonanza. Notably, people of color, women, veterans, those with prior cannabis convictions, and members of communities hardest-hit by the war on drugs have faced barriers to entry to the profitable cannabis industry.
Every state that has a legal cannabis market is continuously deliberating about how to license, regulate, and oversee their cannabis industries. Now, with several examples of successful cannabis legislation, states are shifting their focus to conversations around matters of social equity and justice.
Only very recently has the business landscape started to improve for those that have been left behind. Since 2016, of 18 states that have made cannabis legal, six have taken measures to boost diversity in the cannabis market by implementing social equity programs.
Not only do social equity programs serve to begin righting wrongs of our legal system’s past, but projections also show that markets with these programs are projected to grow larger than those without.
To maximize your potential for success in the cannabis market, learn about social equity programs in your state or city. Here are some common themes to be aware of, along with figures that illustrate the power of including previously underrepresented individuals in this booming industry.
Learning from Existing Social Equity Programs
According to Marijuana Business Daily, “States that legalized medical and/or adult-use cannabis since 2016 and included social equity provisions are projected to have total annual sales of $12.7 billion in 2022, compared with $4.1 billion combined for those without a social equity program.”
Social equity provisions vary by state – a trend we anticipate continuing as we all navigate this new terrain. As new states legalize, they’re able to look back and learn from other states, including what worked, what didn’t, and how we can improve into the future.
For example, Ohio adopted a quota system that required no fewer than 15% of its licenses to be granted to members of certain “disadvantaged groups.” However, the law was deemed unconstitutional and thrown out by a judge. As we’ve learned so far, quota systems are unsuccessful while optional social equity programs that provide additional points in the application process have proven promising.
However, we’ve also noticed that by lowering barriers for candidates who are eligible under specific social equity criteria, we’re also seeing an increase in the number of applicants attempting to include social equity candidates in their businesses. Oftentimes this is positive, but in some cases, social equity candidates are being used as token partners in an aspiring cannabis business.
Erik specializes in Minority Cannabis Consulting as well as being an expert and published author on Social Equity Programs in cannabis.
Prominent Themes in Cannabis Social Equity ProgramsSimilar themes have emerged among states and cities when it comes to defining those applicants who may qualify to take advantage of benefits like reduced license application and renewal fees, grants, low-interest loans, business training, and additional application points in a highly competitive licensing process. When filling out your application, visit your state or city’s licensing entity website to research the specific criteria for social equity qualifying applicants. If you’re not sure if you qualify or how to satisfy social equity criteria, consult with experts who specialize in writing applications, like Higher Yields Cannabis Consulting. Depending on the state, an applicant may need to meet only a single requirement to be considered a social equity candidate, but additional points may be awarded for being able to check multiple boxes. Most programs share similar qualifiers. Regardless of the state, social equity applicants are typically:
- Individuals with prior cannabis arrests, convictions, or adjudications that fall within certain guidelines, or family members of those individuals (such as a spouse, parent, child, or another dependent).
- Individuals who have been residents for a minimum number of years – typically 5 of the preceding 10 – of designated areas that have been disproportionately impacted by prohibition or are deemed economically disadvantaged.
- Applicants who own a certain percentage of equity in the company applying for the license – typically 51%. Illinois is the only state that requires both 51% ownership and control.
- Applicants whose income falls below a certain threshold. This is not a stand-alone requirement but may help the applicant qualify for social equity status.
- Individuals from certain racial, cultural, or ethnic backgrounds and small businesses owned by these individuals and/or women and veterans.
- Businesses with a majority of employees or contractors who live in designated disadvantaged areas.