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In 2014, Washington state marked a milestone by opening some of the country’s pioneering legal cannabis stores. At that time, Sam Ward Jr. found himself under home detention due to federal narcotics charges. He eventually went to prison to complete a four-year prison sentence.
Fast forward to today, Ward, a Black American citizen, proudly stands as the CEO of Cloud 9 Cannabis, his own marijuana store. Perched atop a colorful blue and gold throne, he extends a kind greeting to customers looking for early 4/20 discounts while reflecting on his experiences as one of the first to profit from Washington’s effort to open up the cannabis market to people affected by the drug war.
“It’s a remarkable feeling knowing that I’m steering a business, with employees counting on me,” Ward stated. “Simply being a part of something bigger brings immense satisfaction.”
A primary rationale behind legalizing recreational marijuana was to mitigate the harm caused by the uneven application of drug laws, which disproportionately affected communities of color such as Latino and Black communities. Studies consistently reveal that despite similar rates of marijuana use, minorities faced higher incarceration rates compared to their white counterparts.
However, efforts aimed at enabling those most impacted to engage in and benefit from the legal cannabis industry have encountered obstacles. While 24 states and the District of Columbia have embraced legal recreational cannabis use, nearly all have implemented social-equity programs to address the injustices of the drug war.
These encompass various measures, including expunging certain marijuana-related convictions, facilitating access to marijuana licenses and financial aid for individuals with prior marijuana convictions, and allocating cannabis tax revenues to affected communities.
Each state has its own criteria for determining eligibility for social-equity cannabis licenses, which may not exclusively hinge on race. For instance, in Washington, eligibility hinges on factors such as owning more than one-half of the entity, residing for a significant period in areas with marijuana-related arrests, unemployment, high poverty rates, or households with below-median income.
These programs’ execution has been hampered by legal challenges, such as in New York. Currently, New York is facing a new lawsuit despite having settled previous ones, that claims prejudice against minority-owned and women applicants and individuals affected by the war on drugs.
Moreover, concerns arise over large corporations with multistate operations obtaining licenses through social equity, potentially undermining its purpose. In Arizona, legislators raised alarms over licensees’ perceptions of being coerced into ceding power by predatory businesses.
Challenges extend to securing suitable locations due to local bans on marijuana businesses and obtaining bank financing amid federal prohibition. Ironically, factors qualifying individuals for licenses, such as residing in impoverished neighborhoods or having criminal records, hinder their ability to secure necessary funds.
David Penn Jr., another recipient of a social-equity license, faces similar challenges in establishing his marijuana business in Pasco, Washington. Despite financial backing from a friend, he grapples with the reality that grants alone may not suffice to overcome the hurdles he faces.
Washington, a trailblazer in marijuana legislation, recently initiated its social-equity initiative in 2020. However, only in recent months have the first licenses under the program been issued, with only two, including Ward’s store, currently operational.
The state, benefiting from substantial cannabis taxes, has allocated $8 million in grants to assist licensees in the social-equity program with expenses such as renovations, security systems and business coaching. Additionally, $250 million is directed toward communities affected by the war on drugs, supporting initiatives including job training, housing aid, violence prevention and business loans.
As states continue to grapple with the complexities of social equity in the cannabis industry, the experiences of individuals such as Ward and Penn serve as both a testament to progress made and a reminder of the work that remains to be done.
As the challenges faced by social-equity initiatives are addressed, other existing benefits will keep growing for ancillary enterprises such as Innovative Industrial Properties Inc. (NYSE: IIPR) that have carved out a niche for themselves by serving entities directly involved in regulated cannabis operations.
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