The Evolution of Social Equity in Cannabis – And Where We Go Next

by | Feb 28, 2022

Whether focusing on state legislation and regulations or the way cannabis brands engage with one another, social equity has become a key focus in building a diverse, equitable, and inclusive legal cannabis industry – but that effort hasn’t been without its challenges.

This Black History Month, we’re acknowledging the advancements gained by social equity advocates, examining the evolution of social equity as the legalization movement has gained ground, and identifying the progress yet to be made and how members of the cannabis industry can contribute to furthering the conversation.

What is social equity in cannabis?

Social equity refers to efforts in the cannabis industry to ameliorate harms caused by Prohibition-era policies and inequitable enforcement targeting Black and brown communities. Over time, the definition of social equity has expanded to also include discussions about equitable ownership and employment to build a representative cannabis industry that includes minorities, women, veterans, and other underrepresented groups.

“Social equity started in California, and the early adopters of social equity were really focused on those individuals and communities most harmed by the War on Drugs,” said Roz McCarthy, founder and CEO of Minorities for Medical Marijuana (M4MM) and Black Buddha Cannabis. “It wasn’t just about equity ownership but also bridging the gap by re-engaging communities disproportionately impacted by investing tax revenue coming from the legal industry.”

Today, states are engaged in the development of social equity measures as part of their efforts to legalize cannabis. These provisions vary from state to state but include elements like streamlined licensing applications, automatic expungement of cannabis convictions, and state financial aid and public grants for social equity license holders.

How social equity has evolved as legalization expanded

Over time, social equity has become more robust and more central in conversations regarding cannabis legalization. Along with this shift in perspective as to what social equity means, so too have states learned from the successes and failures of those who preceded them, adapting legislation and regulations to devise their own social equity frameworks. 

“Cannabis is now a big business,” McCarthy said. “The whole purpose of social equity originally was to provide an opportunity for those most impacted and allow them to be early adopters. But it’s one thing writing a bill and another thing promulgating the rules to facilitate a program – that can be just as important as the intention in putting it together.”

McCarthy pointed to states like Illinois, where she said policymakers were deliberate about creating thoughtful social equity programs. However, challenges in executing those programs led to limitations in their effectiveness. 

For example, the State of Illinois initially faced criticism and lawsuits following its first social equity licensing application lottery, which saw only 21 of the 75 available social equity licenses awarded, some of which went to connected white applicants. 

The state has since worked to mitigate these shortcomings, establishing additional dispensary licenses for social equity applicants, working through hundreds of thousands of conviction expungements, and establishing community investment funds. In recent months, licensing of social equity applicants in Illinois has increased but key challenges remain; many have said they are unable to open due to legal constraints and financial barriers, potentially forcing them to sell their license.

“There are so many people in cities who were early adopters just sitting with a license but they can’t do anything with it,” McCarthy said. “It’s like having a dream deferred. How do we get them back on track to realize the possibilities of their dreams?”

That’s been the challenge of states that have followed. As the cannabis legalization movement has migrated to the east coast, it remains a major focus for policymakers, advocates, and entrepreneurs. Let’s take a closer look at New York and New Jersey – both of which are home to CannaContent – which are both working now to establish social equity measures and bring their adult-use cannabis markets online 

Social equity in New York

New York legalized adult-use cannabis with the adoption of the Marijuana Regulation and Taxation Act (MRTA) on Sept. 22, 2021, eliminating criminal and civil penalties for possession of up to three ounces of cannabis. The MRTA also set the stage for the establishment of a $4.2 billion cannabis market, projected to be one of the largest in the country. 

Since then, the state has gotten to work developing the rules and regulations for the adult-use cannabis industry, with a major focus on social equity measures. Under the state’s definition, social equity businesses would include minority-owned, women-owned, and service-disabled veteran-owned operations. 

The state’s target is to award 50% of cannabis licenses – required to operate cultivation facilities, dispensaries, testing laboratories, and manufacturing facilities – to social equity applicants. It would also award these licenses based on geography, prioritizing neighborhoods and communities disproportionately targeted by Prohibition-era policies.

In New York City, Black and brown residents made up 94% of cannabis arrests in 2020, according to a data analysis by the Legal Aid Society, underscoring the inequitable enforcement of cannabis prohibition policies. And although legalization will put an end to these arrests, the lasting impact of a near-century of this style of policing is still felt throughout Black and brown communities nationwide. 

As part of the MRTA, New York State will establish what is called the Community Reinvestment Fund. This fund will allocate tax revenue raised from the cannabis industry with social equity reparations in mind. After covering costs for the Office of Cannabis Management and law enforcement public safety training, 40% of remaining funds will be directed to communities impacted by the inequitable War on Drugs enforcement, 40% will be directed to public education, and 20% will be directed to drug treatment programs.

To help bolster disproportionately impacted communities and social equity applicants, the Community Reinvestment Fund would help support public grants, low-interest loans, and business incubator programs for social equity cannabis businesses. The goal of these programs would be to ensure that social equity applicants who obtain licenses can actually use them in an industry filled with financial and regulatory barriers. 

New York State also included automatic expungement in its legalization bill, which eliminates arrest and conviction records for individuals who were previously charged with possession of three ounces of cannabis or fewer. The expungement process must be completed within two years of the passage of the law, offering a fresh start for those whose records were marred by non-violent cannabis convictions under prohibition.

Social equity in New Jersey

New Jersey, which legalized cannabis after a successful voter referendum in 2020, has established the Cannabis Regulatory Commission (NJCRC). The social equity office under the NJCRC is known as the Minority, Disabled Veteran, and Women Cannabis Development Business Office, which is geared at creating rules and procedures to promote diversity, equity, and inclusion in the Garden State’s cannabis industry. 

In New Jersey, social equity measures include prioritizing licensing applications for entrepreneurs in impact zones disproportionately targeted for enforcement under the War on Drugs, as well as minority-owned, women-owned, and veteran-owned businesses in economically disadvantaged areas. Additionally, individuals convicted of a non-violent cannabis offense cannot be disqualified from licensing based on their prior conviction, a measure intended to provide pathways to ownership for those targeted by the War on Drugs.

In order to support entrepreneurs without the massive resources typically needed to apply for licenses, New Jersey has also carved out rules for microbusiness licenses, which are those businesses that would have up to 10 employees and 2,500 square feet of space. Microbusinesses would later be eligible to apply for expansions as well.

In terms of expungement, the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization (CREAMM) Act includes the expungement of arrest and conviction records for those charged with non-violent cannabis offenses. It also required all local, county, and state prosecutors to dismiss any pending non-violent cannabis charges.

Advancing the conversation around social equity in cannabis

While the expansion of social equity has contributed to some meaningful advances in the industry, McCarthy said the conversation has become a bit muddied. Getting back to the core goals of social equity – providing opportunities to people who were directly impacted by the War on Drugs who otherwise would have been the pioneers of the legal industry – remains a critical goal.

“Social equity has been a bit of a buzzword, so at M4MM we’re adapting the idea of ‘social economics’,” McCarthy said. “What are the other ways of making an impact outside of social equity?”

According to McCarthy, the cause of social economics could be advanced by state efforts like reinvesting tax revenue in the health and education of local communities, as well as business partnerships between members of those communities and the broader industry. For example, McCarthy suggested offering tax breaks to social equity cannabis businesses to remove one financial challenge facing social equity license holders starting up their business. 

“How can we support social equity businesses more? Let’s remove taxes for them, that’s one less barrier,” McCarthy said.

But social economics is about more than just public policy, she added. It’s also about entrepreneurs supporting social equity brands. To that end, M4MM has created the Social Cannabis Brand Look Book, which highlights some of the cannabis and hemp industries’ social equity-aligned businesses. McCarthy encouraged entrepreneurs in the cannabis space to prioritize partnering with companies like those listed there to help build an inclusive and representative industry while also advocating for policymakers to improve upon existing social equity measures.

“Everyone needs to become an advocate – Black, brown, white, purple, it doesn’t matter,” she said. “We all have to advocate and normalize this industry. I am not a social equity business, but I am social equity-aligned. It doesn’t have to be one group speaking out over the other – we all need to find out who are really making the decisions and provide the education and resources they need to make informed decisions.”

Roz McCarthy is the founder and CEO of Minorities for Medical Marijuana, an organization focused on diversity, equity, and inclusion in the cannabis industry. Its chapters span 27 states, three countries, and two Historically Black Colleges and Universities. She is also the founder and CEO of Black Buddha Cannabis, a sustainable cannabis wellness brand.