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Friday, September 29, 2023
Sept. 29, 2023

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Social equity in cannabis industry at stake in legislative bills, licensing


Nine years ago, Washington broke major ground as one of the first two states to legalize the recreational use of marijuana. But left out of the conversation in 2012 was something that’s slowly gaining attention – racial equity in the cannabis industry.

Nearly a year after governments and businesses experienced a racial reckoning after the death of George Floyd at the hands of police in Minneapolis, Washington’s Legislature is moving forward – again – to address the issue of equity, including in the business of cannabis.

Duane Dunn says he got lucky when he obtained his cannabis business license in 2014.

Before he opened Emerald Leaves in Tacoma, one of a few Black-owned cannabis retailers in Washington, Dunn supplied medical dispensaries from the crop he grew in his garage, which he said existed in a legal gray area. Though he avoided any issues with the law, a marijuana charge on his record could have prevented him from ever getting a license.

In an industry where 3% of retailer licenses statewide are held by Black people (the number drops to 1% for cannabis producers and processors), Dunn says the system favors wealthy and connected entrepreneurs, often at the expense of people of color and those harmed most by the war on drugs.

While it’s hard for Dunn’s shop to compete with larger cannabis retailers, he said just getting a cannabis license can be a challenge.

He said he sees laws around the country are geared more toward eliminating people of color from the licensing process, whether that’s through exorbitant application fees or asking applicants to have millions in liquid assets.

“I see these laws being crafted almost, in a sense, targeting people specifically to be successful and targeting people specifically not to be successful in this application process,” Dunn said.

In Seattle, the white-owned pot shop Uncle Ike’s stands on 23rd and East Union Street – a corner where countless people of color were once arrested for selling illegal cannabis in the Central District.

Uncle Ike’s, which at one point led the state in cannabis retail sales, has been the subject of recent protests. Some see that location, which opened in 2014, as symbolic of gentrification in the Central District. A mostly Black church near the building filed a lawsuit against Uncle Ike’s and the city, but eventually dropped it.

Now legislators are reopening the conversation about race and cannabis as they push to diversify the legal industry, this time with a bill that would build on a law passed last year to get more cannabis business licenses into the hands of Black entrepreneurs.

HB 1443, which would expand the Marijuana Social Equity Program, could put Washington on par with other legal-marijuana states that are taking steps to correct historical wrongs.

One challenge for bill supporters is the limited number of cannabis retail licenses – the state Liquor and Cannabis Board (LCB) caps them at 569 – and the majority have gone to white businesspeople.

Applicants can be denied for their criminal backgrounds, which some say disproportionately affects people of color – they represent 33% of those denied licenses based on convictions – or be held back by a lack of access to capital and legal resources.

A 2020 report from the ACLU found that even after legalization of marijuana, Black people were twice as likely to be arrested on possession charges than white people in Washington, though the rate of use was roughly equal.

And though Seattle may consider itself a leader in recreational marijuana and progressive policies, none of the nearly 50 marijuana shops in the city are majority Black-owned. Former Sonics star Shawn Kemp has a 5% stake in Shawn Kemp Cannabis, according to his communications team.

Perhaps the largest leap forward for underrepresented retailers was taken last March, when lawmakers passed HB 2870. It created the Marijuana Social Equity Program under LCB to streamline retail licenses to people in communities disproportionately impacted by the enforcement of cannabis prohibition.

The board can now prioritize any leftover licenses to “social equity applicants,” or reissue them to existing licenses that have been canceled, revoked or forfeited. Currently, there are about 34 unassigned licenses up for grabs under the program, according to the board.

Though race is not a factor for the program, bill sponsors hoped it would help close the gap. Under that bill, a social equity applicant must have majority ownership and control by at least one person who has recently lived in a “disproportionately impacted area” for at least five years or has been convicted of a misdemeanor marijuana offense (or has a family member who has).

At the same time, it created a task force to recommend future changes to the program, leaving ample room to take the program further. It also allocated $1.1 million a year for a competitive grant program to help new social equity licensees.

However, the rollout has been kneecapped by coronavirus pandemic restrictions, and the program has yet to get off the ground. So far, no social equity licenses have been issued, but it has given sponsors time to spot weaknesses in the legislation.

HB 1443, which passed the state House earlier and the Senate on Tuesday, would widen the scope of last year’s law. The applicant criteria would be expanded to include more people with drug offenses and their families, and existing license holders who meet social equity criteria would be eligible for grants.

The task force will also make recommendations to the licensing board about opening the program up to cannabis producers and processors.

Sponsor Rep. Melanie Morgan, D-Parkland, says the bill will better address gentrification and bring applicants with drug convictions to the front of the line.

“Cannabis … was historically demonized, and many Black African Americans and other communities of color were arrested and over-sentenced,” Morgan said. “My hope is that this bill will help the task force to ensure that this industry is equitable.”

Morgan sits as co-chair of the task force, as does Paula Sardinas, a commissioner on African American Affairs in the state.

Sardinas said that the bill is a healing process for the Black community, which she said had the door closed to it when Washington originally legalized recreational marijuana.

Black entrepreneurs were left out of the initial rush, she said, partly due to lack of access to capital and trouble navigating the highly regulated licensing process. Though the state missed an opportunity to incorporate equity from the jump, she said, this latest bill can help correct that.

“This bill not only takes into consideration the unfair, very predatory and discriminatory war on drugs that was predicated on the African American community, but it takes into consideration that we often don’t have the tools and resources in our communities to be competitive,” Sardinas said at a public hearing Feb. 5.

Sardinas said people will praise the bill when looking back at the history of cannabis in the U.S. as it is “probably without question one of the most excellent pieces of cannabis social equity legislation I’ve seen,” comparing it to policy in the other legal-cannabis states.

With the passing of HB 2870 to create the Marijuana Social Equity Program last year, Washington joined the ranks of Michigan, California, Illinois and Massachusetts as having a social equity program for recreational licensees.

But as more states legalize marijuana, some are baking equity into their licensure frameworks. Illinois broke ground in 2019 when it legalized recreational marijuana in conjunction with a social equity program, but was criticized when it mostly failed to increase minority ownership.

One provision passed in Ohio to direct 15% of all medical marijuana licenses to applicants of color was struck down as unconstitutional in 2018.

Sardinas pointed to another popular bill introduced in the Legislature this year that she said could have helped address social inequity, though it died before it got the chance: HB 1019, which would have legalized homegrown marijuana.

The bill would have allowed adults to grow up to six cannabis plants on their own property for personal use, so long as they are kept from public view and not “readily smelled.”

Washington and Illinois are the only legal-cannabis states that still have a statewide ban on residential plants. While exceptions are made for some authorized medical patients, keeping cannabis plants for recreational use is currently a Class C felony under state law.

Sardinas said the measure could have decreased people’s interactions with police officers, keeping people out of the legal system.

It also had support from the production side of the cannabis industry. In particular, from the only Black-owned producer operating in the state – Hollingsworth Cannabis, a family farm in Mason County.

As the company’s operations director, Joy Hollingsworth said, its business model has never been intimidated by the potential of home-grow. People can also grow their own vegetables, she said, “but do they choose to do it?”

She thinks residential grows could diversify the industry by introducing cannabis farming to those who wouldn’t normally have the resources to start a production business.

“If you want to grow, start at your house,” Hollingsworth said. “That can be people’s first introduction to the cannabis industry.”

When the Hollingsworths applied for a producer license, there was no social equity program in Washington. Instead of having to pull money from her dad’s retirement, she said, extra cash by way of grants and some guidance with the bureaucratic application process would have helped them at the beginning.

Since opening, she said, she has watched other Black producers in the state drop out of the business.

She added that other states have tangibly committed much more to equity, like Illinois, which has allotted more than $30 million compared to Washington’s $1.1 million for grants.

But, Hollingsworth said, money is one thing but true equity is another.

“Social equity doesn’t mean just handing Black people and the BIPOC community money,” she said, “it’s actually developing intentional programs that will build up communities disproportionately harmed by the war on drugs.”

The state took another step toward equity in 2019, offering to wipe misdemeanor marijuana convictions from people’s records.

“Washington state has to come to the table and dedicate rebuilding the Black community,” Hollingsworth said.

That’s also why statewide legislation is so important, she said. People of color live on both sides of the mountains, and “should all have access to social equity in cannabis.”

She said they do sell to Uncle Ike’s, the subject of the gentrification debate in the Central District where the Hollingsworth family is from. But she said her business relies on selling to who they can.

Dunn said he believes the social equity program, if done correctly, can improve the industry, where the amount of diversity is “almost laughable.”

“If the social equity process is intended to help people of color get into this industry that is almost 99% white, and sets them up for success and not failure… they will give them a good starting point,” said Dunn.