Regulators from various states came together last week to discuss the current state of social equity in the legal cannabis industry. This discussion took place during the third meeting of a commission established by the National Academies, which is focused on exploring the evolving landscape of cannabis legalization.
The recent two-day gathering of the Committee on Public Health Consequences of Changes in the Cannabis Policy Landscape, which builds upon previous meetings, primarily centered around social equity and justice.
Discussions revolved around the impact of marijuana regulatory models on various aspects such as employment, tax revenues, economic indicators, criminal justice interactions, the unregulated market, and access to prevention and treatment resources for cannabis use disorder. The meeting included a diverse range of speakers and panels, each addressing specific topic areas.
During a panel titled “State Government Strategies for Social Justice in Cannabis Legalization,” representatives from regulatory agencies in New York, California, New Jersey, Missouri, and Illinois came together to discuss their respective efforts in making sure that the cannabis industry, which is projected to be worth billions of dollars, benefits small businesses and individuals who have been disproportionately affected by cannabis prohibition.
Damian Fagan, the chief equity officer of New York State’s Office of Cannabis Management (OCM), recognized the significance of social equity and its relevance in New York.
He highlighted the impact of marijuana enforcement, which has disproportionately affected people of color and resulted in severe penalties for millions of individuals.
According to Fagan, the state has a long history of harsh prohibition measures. He highlights past practices such as stop and frisk, the Rockefeller drug laws, and the staggering number of arrests over four decades, reaching 1.2 million. Fagan also emphasizes the significant disparities in arrest rates compared to other states.
He also mentioned that if you were Black in New York, your chances of getting a cannabis arrest were 17 times higher compared to a white person. Fagan believes that the politically and emotionally charged background, coupled with New York’s extensive history in the marijuana market, is colliding with the tremendous economic potential that everyone now desires a share of.
Fagan connected past events with the present state of marijuana policy, highlighting that while efforts to restrict alcohol consumption in the past aimed to free Black communities from the negative effects of exploitative capitalism, the lawmakers in Albany have crafted a cannabis framework that places emphasis on supporting small businesses. These businesses are based in the community and are owned and operated by individuals from those very communities.
In order to achieve these goals, the state has implemented automatic expungement provisions for previous cannabis offenses. Additionally, it has allocated 40 percent of state revenue to a reinvestment fund that specifically targets communities that have been disproportionately impacted.
Priority licensing, as well as support services such as incubators for small businesses, have also been established to enhance opportunities for equity businesses to thrive in New York’s highly profitable legal market.
According to Fagan, officials intentionally designed the state’s regulatory system to not only prioritize economic development in historically marginalized communities but also to involve them in shaping the future of the legal industry.
During the first day of sessions last week, a state-level panel took place. The panel featured discussions from cannabis justice and equity advocates, such as Jason Ortiz from the Last Prisoner Project, an organization dedicated to providing legal relief for individuals with criminal convictions. Shaleen Title, a former Massachusetts marijuana regulator who now heads the cannabis policy think tank Parabola Center, also shared her insights during the event.
The state discussion was succeeded by a roundtable of local regulators responsible for promoting equity initiatives. Representatives from the city of Los Angeles and the Michigan cities of Pontiac and Grand Rapids shared their insights on how local programs can support equity-focused business applicants, address the issue of corporate dominance, and prevent marijuana advertising from disproportionately targeting minority populations.
During the latest meeting of the National Academies of Sciences, Engineering, and Medicine (NASEM) commission, other panels also discussed various topics related to cannabis.
One of these panels focused on the negative consequences of cannabis policy, while another explored how public health strategies can effectively manage the risks and benefits of marijuana use. Additionally, there was also a panel dedicated to supporting individuals with cannabis use disorder.
During a state-level panel, Eugene Hillsman, the deputy director of equity and inclusion at California’s Department of Cannabis Control (DCC), highlighted the evolving standards of equity in state cannabis laws.
He pointed out that California led the way by incorporating decriminalization and expungement provisions, which have since served as a model for other states to build upon.
According to Hillsman, California has made significant changes to its expungement process. Previously, individuals had to file petitions to have their records expunged. However, the state has now shifted to a process where the burden is on the courts to identify and automatically expunge the records.
Hillsman emphasized the importance of this change in reducing the burden on individuals to have their convictions removed. This issue has also become a key point of discussion in debates on legalization in other states.
In California, eligible equity businesses receive valuable assistance and financial relief. For instance, retailers may retain a portion of the excise tax they collect, and they may also qualify for a $10,000 tax credit through the state’s Franchise Tax Board.
Additionally, California has committed $200 million to support local nonprofits and health departments. This funding will be used for various important projects, including mental health and substance use disorder treatment, job placement, and legal services.
According to Abigail Vivas, the chief equity officer at Missouri’s Division of Cannabis Regulation, Missouri’s marijuana social equity efforts are not as extensive as those in New York and California. However, the state does allocate some cannabis revenue towards state expungement initiatives, and it also has a social equity program through the microbusiness program.
Microbusiness licenses are gaining popularity as a moderate solution in certain states, like the recently proposed Virginia legalization bill. These licenses are tailored to prioritize specific groups, including veterans, farmers, individuals from low-income areas, and communities that were disproportionately affected by marijuana criminalization during prohibition. The specifics of these licenses differ from state to state.
A ballot initiative, which Vivas played a key role in promoting, has led to a constitutional requirement in Missouri. This requirement entails developing a plan to promote ownership and employment opportunities in the marijuana industry for individuals from disproportionately impacted or economically distressed areas.
“We are working on a tight schedule to implement the adult use passage by the fall of 2022,” she explained. “Sales began in February of this year, and we recently granted our first microbusiness licenses in October.”
According to her, state regulators are currently in the early stages of exploring alternative options to offer assistance and support to their microbusiness licensees.
According to Vivas, criminal expungements in Missouri are not completely automatic. “According to her, the expungement of nonviolent misdemeanors was scheduled to be completed by June 8. As for felonies, individuals had until December 8 to make their requests. However, she emphasized that incarcerated individuals had to personally request the expungement or petition for their release from prison, as these processes were not automatic.”
Wesley McWhite, the director of diversity and inclusion at the Cannabis Regulatory Commission in New Jersey, also spoke on the panel. New Jersey legalized marijuana through a 2022 ballot referendum.
According to McWhite, social equity in New Jersey is not viewed as a standalone program or policy. Instead, it is considered a framework that is integrated into various administrative practices, outreach efforts, and implemented policies. This approach ensures that social equity is embedded throughout the entire system rather than being addressed through a single policy.
Regulators meet with stakeholders and advocates on a monthly basis, according to the spokesperson. Moreover, they have established a dedicated legacy workgroup with the aim of providing recommendations to assist individuals who are currently or have previously operated in the unregulated market to transition smoothly into the regulated market.
According to McWhite, although there is noticeable growth and success in the business sector across New Jersey, there are still significant challenges that hinder entry and achievement in this industry. These challenges primarily involve hurdles at the municipal level, difficulties in obtaining sufficient capital, and a shortage of suitable real estate with appropriate zoning.
Erin Johnson, the cannabis regulation oversight officer at the Illinois Department of Financial and Professional Regulation (IDFPR), emphasized that Illinois took deliberate steps to develop a successful social equity program aimed at rectifying the damage caused by the war on drugs.
The state not only invests a quarter of its marijuana tax revenue into the Restore, Reinvest, Renew (R3) program, which provides support for civil legal aid, economic development, reentry, violence prevention, and youth development, but it also takes steps to expunge over 800,000 arrest and conviction records. Moreover, Illinois requires all new licensees in the industry to meet specific social equity criteria.
“We have only granted licenses to individuals residing in disproportionately impacted areas or those who have been affected by arrest or conviction, either personally or through a family member,” Johnson stated. “We take pride in the efforts we have made.”
Accessing capital continues to be the primary challenge for equity applicants, according to her. To tackle this issue, the state has allocated over $18 million in forgivable loans directly to licensees. Additionally, they have set aside another $40 million for the current fiscal year to support this fund. Moreover, efforts are being made to offer technical assistance to eligible individuals who are seeking licenses.
Johnson emphasized the importance of assistance both at the beginning and end stages of the process. He highlighted the state’s commitment to monitoring the effects of equity initiatives and mentioned an ongoing study aimed at identifying further opportunities for industry improvement. He expects the results of the study to be available early this year.
Hillsman mentioned during the Q&A session that California is taking measures to enhance tracking systems and conducting academic research on economic business conditions. This research focuses on small businesses and equity businesses, with the aim of providing policymakers with more accurate information to make informed decisions.
According to Fagan, New York was lucky to have had the opportunity to gain insights from the experiences of other equity programs before developing its own.
According to an official from New York, the state has learned from the experiences of other states when it comes to social equity. By observing how social equity licensees were exploited, the regulations in New York were designed to prevent such predatory practices. For instance, one requirement is that designated social equity owners must have full control over their businesses.
Fagan highlighted instances of predatory business practices in cities like Los Angeles and Detroit. However, state-level equity programs have also encountered obstacles, including issues with transferring business licenses to non-equity operators and allegations of “egregious exploitation” of equity applicants. Some of these applicants claim that their business partners have completely excluded them from receiving any profits.
During the previous meeting of the National Academies Committee on Public Health Consequences of Changes in the Cannabis Policy Landscape, which took place in November, various regulatory issues were discussed. These included topics such as local control, the ongoing presence of the illicit market, the existence of unregulated businesses, market trends in countries where cannabis is legal, and the involvement of corporate entities and celebrities in the legal marijuana industry.
Representatives from multiple federal agencies participated in the committee’s initial meeting in September. They provided valuable insights on the ongoing development of cannabis policies.
According to a description by NASEM, the ad hoc cannabis committee is anticipated to offer recommendations for enhancing a harm reduction approach. This approach aims to minimize the negative impacts of various regulatory models, such as those related to social, employment, education, and health. Additionally, the committee will provide recommendations on policy research for the next five years.
