Is the Coronavirus Crisis Slowing Down Social Equity in Cannabis?
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Is the Coronavirus Crisis Slowing Down Social Equity in Cannabis?

Advocates and business owners are concerned that the fallout from the COVID-19 pandemic is delaying the creation of an equitable cannabis industry.

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August 5, 2020

As several states see record-setting cannabis sales despite a global economic downturn, advocates and business owners are concerned that the fallout from the COVID-19 pandemic is delaying the creation of an equitable cannabis industry.

While smaller equity applicants from marginalized communities are denied access to the market, police departments and major corporations are cashing in on ancillary cannabis contracts worth multiple millions of dollars.

In Massachusetts, only three out of 70 equity, economic empowered and disadvantaged business enterprises awarded cannabis licenses have been able to open as of July. Shaleen Title, one of the state’s four Cannabis Control Commissioners with a record of fighting for inclusivity, recently told Boston Public Radio she was “embarrassed” by the state’s equity efforts. In the spring, Massachusetts was one of the only states in the country not to declare recreational cannabis essential amid the coronavirus outbreak.

Massachusetts’ statewide budget for social equity training and technical assistance is $300,000. But that figure pales in comparison to the administrative fees and private security contracts paid to police and municipalities by cannabis companies. Since 2016, cannabis company New England Treatment Access (NETA) has paid police $1.1 million in extra salary in the city of Northampton and $1.58 million in overtime officer pay in the city of Brookline.

These law enforcement contracts are in addition to the $2.6 million “impact fee” NETA has paid to the city of Northampton since opening, a 3% tax created to offset the additional liabilities that come with dispensaries, such as increased foot traffic and security needs. In Brookline, public budget documents show $435,000 of NETA’s impact fee will go to the town’s police department.

Illinois licenses on hold

In April, Illinois Gov. J. B. Pritzker announced the indefinite postponement of the next round of 75 dispensary licenses – one that was meant to prioritize equity applicants. On June 30, the state Department of Agriculture (IDOA) similarly suspended the awarding of craft grower, infuser and transporter cannabis licenses.

Both Pritzker and IDOA Director Jerry Costello II blamed COVID-19 for the setbacks. 

The licensing delays come as Illinois’ cannabis business booms. In the first six months of recreational sales, which began in January 2020, cannabis brought the state $52.8 million in tax revenue, according to the Chicago Sun-Times. For the month of July alone, revenue from marijuana stores in the state surpassed $60 million. Projections for next year have cannabis becoming a $1-billion business in Illinois.

 

"Identify the most marginalized and oppressed groups, find out what they need to be effective in the space, and we stick to those principles so the playing field is even."

- Ru Johnson, chair of the Marketing Committee of the Minority Cannabis Business Association

 

License applicants in Illinois – who were advised to lease property, create payroll systems, and invest in other business costs before applying – seem to be indefinitely locked out of a market that just grew by over $13 million in a month. 

RELATED: After Licensing Delay, Illinois Social Equity Applicant Remains Optimistic, Outlines Enterprising Plans 

But the story is different for the Dutch consulting conglomerate KPMG. The Sun-Times reported last month that the $30-billion-per-year professional services firm was awarded nearly $7 million in no-bid contracts to audit cannabis license applications. But because of a KPMG internal travel ban, the status of these audits is up in the air since a mandate in the contract requires applications to be picked up by hand.

Advocates call on the industry to stay the course

The dire situation of cannabis equity applicants across the country, combined with heightened social tensions amid COVID-19 and the high-profile police murders of Black Americans like Breonna Taylor and George Floyd, make now a critical time to continue the fight for equity, according to cannabis industry representatives that spoke to Cannabis Business Times for this article.

“Coronavirus is generally exposing the lack of equity across many industries,” said Ru Johnson, chair of the Marketing Committee of the Minority Cannabis Business Association (MCBA) and founder of Roux Black Consulting. (Editor's note: The author is a marketing assistant with MCBA.)

“I think we solve the lack of equity in cannabis the same way we said we’d do it before – resources and equity. … Identify the most marginalized and oppressed groups, find out what they need to be effective in the space, and we stick to those principles so the playing field is even,” she said.

Tahir Johnson, Head of Diversity, Equity & Inclusion for the National Cannabis Industry Association (NCIA), agreed. “Coronavirus has caused setbacks across most industries, and cannabis social equity programs are no exception,” he said.

“As legalization is considered at state and federal levels this year and next, it is important that social equity remains at the top of the conversation. … The fact that communities of color have been ravaged by the war on drugs yet make up less than one-fifth of ownership of a multi-billion dollar industry is something that must be corrected,” he said.

John Bailey, founder of the Black Cannabis Equity Initiative (BCEI) in Colorado, called the state’s progress in cannabis social equity “a work in progress,” in an interview with Westword. Bailey, a political consultant who founded BCEI in 2019, said he joined the industry to “be the reasonable adult in the room, and engage these young white kids dominating the industry with the conversation that they're drinking from a well they didn't dig.” 

Although well-respected for its early-mover position in cannabis, Colorado is also notorious for diversity struggles. In Denver, a recent study showed three out of four cannabis companies were white-owned, with just 6% owned by African-Americans. 

The issuing of delivery licenses for medical sales was supposed to create another opportunity for microbusinesses and social equity applicants. But like licenses of all types in so many states, the city of Denver has yet to officially adopt medical delivery. Under Colorado law, recreational cannabis delivery is not allowed until 2021.  

Some encouraging signs

It’s not all bad news for cannabis equity. The city of Boston is set for the opening of its second recreational dispensary, Berkshire Roots. The company has outlined a plan to hire local staff and “provide training, mentoring, professional and technical services for disproportionately-impacted individuals.”  

Nationally, the House of Representatives appears set to vote on the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act this fall. Part of the MORE Act includes the creation of a Cannabis Justice Office, which would be responsible for executing a Community Reinvestment Grant Program, “to provide eligible entities with funds to administer services for individuals most adversely impacted by the War on Drugs, including job training, reentry services, literacy programs,” and more.

But if tangible steps to reinforce fair access to the industry are not taken – pandemic or not – cannabis equity is at risk of going the way of this summer’s conferences, concerts and festivals: postponed or cancelled because of coronavirus.