Social equity programs try to level playing field in state’s cannabis industry

  • In this March 25, 2018 file photo, a convention visitor examines a marijuana sample at the New England Cannabis Convention in Boston. AP FILE PHOTO/STEVEN SENNE

For the Gazette
Published: 5/31/2022 2:20:41 PM

For many, the prohibition of cannabis has meant a lifetime of being labeled a criminal. Before the first states voted to legalize recreational use of the substance in 2012 and even to this day, being convicted for marijuana-related offenses has caused undue difficulty in finding employment, brought crippling fines, and even years of jail time for millions of Americans.

States like Massachusetts have sought to right this wrong by implementing social equity programs to help individuals convicted for marijuana offenses acquire licenses to open and operate cannabis businesses. These programs provide capital, education, and technical training to those who qualify.

The regulatory body responsible for overseeing the industry is the Cannabis Control Commission, a state agency that grants licenses to companies, distributes social equity benefits, and monitors legal compliance.

Social equity programs are meant to acknowledge and “repair the harms that the drug war did to people” in vulnerable communities, who tend to be people of color, said Shaleen Title, who served as a CCC commissioner from 2017 to 2020.

“It helped to make sure that entrepreneurs that came from communities harmed by the drug war have some extra benefits to opening a business,” she said. 

Title is now co-founder and CEO of the Parabola Center, a nonprofit think tank “which creates drug policy that is not influenced by corps and focused on people.”

As the industry has grown, so have concerns of big businesses dominating the market. Part of the CCC’s work has been devoted to keeping the playing field level for prospective social equity applicants.

The market is kept fair by limiting individuals and businesses to holding up to three of each type of license: retail, manufacturing, and cultivation. Medical licenses encompass all three of these categories.

According to the CCC’s current executive director Shawn Collins, the industry’s economic landscape could soon be shaken up by social consumption in “cannabis cafes” and, later down the road, federal legalization.

Collins said cafes are the “next step in legalization,” and would require a new type of license that would be available “exclusively” to social equity applicants for a three-year period. Before this can happen though, he said certain issues have to be ironed out.

More research must be done into the effects of secondhand marijuana smoke, he said, as well as better methods for preventing and detecting driving under the influence of cannabis.

Another major development in the Bay State cannabis industry is delivery. Devin Alexander is the CEO and co-founder of Rolling Releaf in Newton, and was among the first to receive a social equity license. Alexander, 28, was arrested in high school for marijuana possession.

Rolling Releaf delivery opened earlier this year. Alexander said the hardest aspect of opening a cannabis business is accumulating the funds to compete with larger companies.

“It comes down to access to capital,” he said. “We need a robust social equity program.”

James Smith, a partner at the public policy law group Smith, Costello, and Crawford, has been working with and representing cannabis-related clients since 2012. The company currently represents nearly 40 clients.

Smith reaffirmed the importance of capital in successfully opening a cannabis business, an asset in short supply even with the proliferation of social equity benefits. He also said business acumen and “passion for the product” as must-haves for entrepreneurs.

“If you don’t have those three items,” he said, “I don’t care who you are, you’re not going to make it.”

Even if an individual has the knowledge, passion, and capital, the market’s cutthroat competition and “remarkable” cost of doing business still imposes a significant barrier to success. By limiting the number of licenses a company can acquire, it’s difficult to point out a single dominating marijuana purveyor.

As opposed to the monolithic Big Tobacco, Smith said the emergence of “big marijuana” is unlikely given the current legal and economic landscape of the market. He thanked the state’s social equity laws for keeping the industry at least somewhat accessible, and expressed the hope that they are here to stay.

State Rep. Daniel Donahue, D-Worcester, a member of the Legislature’s Cannabis Committee, shares Smith’s hope for the future and believes there will “still be a need” for social equity as the industry continues to grow and change over time.

“We’re cognizant of justice issues,” he said, adding that the continuation of the social equity program can be part of the solution to these ongoing issues.

Some legislators from across the aisle have also reaffirmed the importance of a social equity program in a functioning marijuana market.

State Sen. Ryan Fattman, R-Sutton, said in a statement, “I believe that it is important to be inclusive and equitable for all that are trying to work in this industry … we must be persistent in our pursuit of equity of opportunity in our economy today.”

Other Republicans, though, still have reservations about the equity program.

State Rep. Paul Frost, R-Auburn, said that he supports the idea of making capital more accessible to people who otherwise wouldn’t be able to afford the cost of breaking into the industry, but not necessarily to those with a criminal record.

“The only people who seem to be able to get the backing to get into the industry are very wealthy people,” he said, adding he would like to see more support for “mom and pop” shops.

As for social equity applicants, though, he is not so sure.

“I understand there can be people who may have been doing something recreationally, by themselves, and got busted for it 20 years ago,” he said, and doesn’t think this should disqualify applicants from opening up shop.

What concerns Frost are individuals who may have illegally sold marijuana, or were otherwise involved in the black market.

“That concerns me because you broke the law back then, how do I know you’re not going to break the law now?” he asked.

He emphasized there are changes to the social equity program still making their way through the legislative process, and once this is done he’ll be able to better decide who should be granted special licenses.

Frost, Donahue, and others in the Legislature are keenly aware of the economic obstacles prospective entrepreneurs face when trying to break into the market.

In addition to a lack of capital, Donahue said entrepreneurs are at risk of falling victim to “predatory loans or capital schemes” that can make their situation even worse.

Warren Lynch, a 47-year-old social equity applicant from Malden experienced similar pitfalls when he tried to open a cannabis business in 2017.

Lynch thinks his troubles are thanks to the host community agreements municipalities and potential cannabis enterprises must abide by in order to do business.

“A lot of cities and towns make it really hard for small businesses on purpose because they want to maximize income,” he said.

In Massachusetts, municipalities can require cannabis businesses to pay fees in order to operate. Social equity applicants can get “squeezed out” by exorbitant fees, which is what Lynch said happened to him when he tried to open a business in Salem.

Despite the perceived hostility from cities and towns around the state, Lynch is optimistic about the future of cannabis and will keep trying to break into the rapidly growing industry.

“This is our home,” he said. “We live here, and we’re going to try really hard to open here.”

Jackson Ripley writes for the Gazette from the Boston University Statehouse Program. 

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