Cannabis Q & A: What are Social Equity Programs in Cannabis Licensing?

August 17, 2021

Welcome to our Q&A with partner, Jennifer Gumer!

As a partner at CGL and our Regulatory and Compliance Practice Lead, Jennifer provides strategic counseling, practical advice, and expert advocacy to clients with production needs. As an Adjunct Professor of Law and Bioethics, she is uniquely qualified to handle all interactions with federal, state, and local regulators who oversee product development, manufacturing, and marketing activities, including the FDA and Local Hemp Regulators.

Q: What are Social Equity Programs in Cannabis Licensing?

A: Since the war on drugs began in the US in the 1970s, underprivileged and underrepresented minorities have disproportionately been penalized by drug legislation and enforcement. Consider this statistic: Black people, for instance, are 3.6 times more likely than white people to be arrested for marijuana – despite similar rates of usage.  

Social equity programs seek to provide opportunities in the legal cannabis market to those who have historically been most impacted by criminal enforcement. In a sense, these programs open doors for the populations and communities that might not otherwise be able to enter the legal cannabis market.  

While the programs do differ between cities and counties, they are generally provided for the benefit of lower income individuals and to those who have criminal convictions as a result of past cannabis possession, distribution or other cannabis-related offences.

In Los Angeles, for instance, social equity grants are accessible for cannabis licensees who meet two of the following three conditions: 

  • They are categorized as low income. 
  • They were arrested or convicted of a cannabis-related offence in the past. 
  • They live in a disproportionately impacted geographic area. 

 

Cannabis equity applicants who meet this criteria may be able to apply for cannabis licences at a reduced rate, while receiving low/no interest loans and/or grants, and technical assistance. Another big benefit is that in local jurisdictions that have social equity programs, they often reserve a certain portion of license for social equity candidates, giving them better access to limited licenses. This assistance is designed to help disadvantaged applicants overcome the barriers to entry to the legal market. It may also help California reduce the illicit cannabis market by bringing more people into the legal marketplace.

Despite positive movement in the right direction, social equity programs have a long way to go. In California, the very high tax rate for cannabis businesses makes it difficult for any licensee to succeed. This is true even where significant advantages are offered to social equity program licensees – like the restriction of delivery and retail licenses processed in Los Angeles to only social equity program applicants. 

While this is a step in the direction of equity, it does overlook some significant hurdles prospective social equity licensees face. The first issue is corruption. All too often people who don’t qualify under the social equity program find someone who does, use them as a figurehead for the company during the licensing period, then cut them out.

For those who don’t fall victim to predatory investors, the cost of compliance is very high – even where the licences are provided at a reduced or waived fee. The mandatory camera systems are likely to be in the realm of $8,000, and real estate is often very expensive too. These issues are compounded by the fact that minority and disadvantaged cannabis licensees aren’t able to easily access reliable (and non-predatory) funding. 

To summarize, social equity programs are designed to reduce the barriers for certain historically disadvantaged populations to enter the legal cannabis market. These programs are relatively new and will need to be further developed and improved, but they are a start. 

 

Disclaimer

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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