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Slow Progress Concerning Social Equity Still Hampering the American Cannabis Industry

Despite the substantial legal and economic gains in the recreational and medicinal market sectors over the past few years, the social equity issue is still yet to be sufficiently addressed.

As 2023 rapidly comes to a close, advocates and stakeholders in the legalized cannabis industry have accomplished a great deal regarding the expansion of both the adult-use and medical marijuana markets in America. This year alone, Minnesota and Ohio became the 23rd and 24th states, respectively, to legalize recreational cannabis for adults 21 and older. Likewise, over 80% of states have some type of medical marijuana program in place to help meet the needs of registered patients.

In addition to expanding legal markets throughout the country, the federal government contributed to the industry's potential growth this year when the Department of Health and Human Services (HHS) recommended that cannabis be moved from Schedule I to Schedule III on the Controlled Substances Act.

While the recommendation is not binding, with the U.S. Drug Enforcement Agency (DEA) having the final word, the overwhelming scientific data combined with growing political momentum for marijuana reform could significantly impact the DEA's final decision.

If agency officials do reschedule cannabis, the move will have far-reaching repercussions for scientific researchers facing prohibitive barriers because of marijuana's past Schedule I status. Along with the expanded research possibilities afforded by the rescheduling, the move would also enable cannabis companies to take advantage of tax opportunities and other financial instruments currently unavailable to businesses that sell Schedule I and II drugs.

Overall, it has been an extraordinarily positive and eventful year for cannabis and its passionate proponents. However, if there is one glaring disappointment still plaguing the young and burgeoning market, it is the tricky and sensitive issue of social equity programs.

When Colorado and Washington became the first two states to legalize adult-use marijuana in 2012, the main focus of those two campaigns was to get recreational cannabis legalized for individuals over 21. In more recent years, states have begun including social equity provisions to make sure that groups disproportionately and negatively impacted by past marijuana policing receive preferential consideration in the awarding of licenses for retail and medical dispensaries.

However, according to a new report by MjBizDaily called “Diversity, Equity & Inclusion in the Cannabis Industry,” the lofty and aspirational social equity goals legislated into some newly legalized markets are falling well short of expectations.

States like Arizona, Illinois, Michigan, and New York have ambitious and virtuous social equity language in their respective legal and regulated markets. And some genuinely wonderful success stories have emerged from the newly established industries.

For example, this past March, Nuggets Dispensary became the first Black-owned business with a marijuana social equity retail license to open in Detroit. Unfortunately, the opening comes four years after the city approved recreational cannabis sales.

Other examples include Annu Khot of Illinois and Alicia Deals of Arizona. Both women opened locations in their respective states to much success and even more challenges. "It's exceeded our expectations. (However), it was a very steep learning curve. We definitely made a lot of mistakes, but we learned from them, and I think when we open our second dispensary, we're going to be so much better." said Khot, who immigrated to the U.S. from India in 2008.

"It's exceeded our expectations. (However), it was a very steep learning curve. We definitely made a lot of mistakes, but we learned from them, and I think when we open our second dispensary, we're going to be so much better."

- Cannabis Social Equity Business Owner Annu Khot

Khot's success, while impressive and encouraging, is more of an exception than the rule in Illinois. According to an annual industry report from the Illinois Department of Financial and Professional Regulation, in Illinois, roughly 18% of retail dispensaries were majority-owned by women in 2022, and around 11% were majority-owned by nonwhite operators. Likewise, of the 185 social equity retail licenses issued in Illinois in July 2022, only 40 are open for business, with another dozen or so in the pipeline (from Ananda Strategy).

Much like Khot's experience, Deals became the first Black social equity lottery winner this past June to own and open a cannabis retail dispensary in Arizona. "It was more than (the) survival of the fittest. I was fortunate enough to partner with some big guys that didn't want to take advantage of me," said Deals, who partnered with California cannabis brand Cookies to open her store in Tempe.

"It was more than (the) survival of the fittest. I was fortunate enough to partner with some big guys that didn't want to take advantage of me."

- Cannabis Social Equity Business Owner Alicia Deals

The two women's journeys are indicative of the social equity dilemma confronting state officials and aspiring equity candidate entrepreneurs. According to internal research, cross-referenced with industry sources and databases, conducted by MjBizDaily in February, less than 20 of the nation's roughly 10,000 medical and marijuana dispensaries and adult-use stores are Black-owned, a woeful and discouraging underrepresentation from an industry that loudly and proudly touts social equity as a foundational element. While that number has increased modestly since then, the numbers are still ridiculously low.

Legalization activists point to the corporate cannabis machine dominated by massive and deep-pocketed multi-state operators (MSO) as the main impediment to the full realization of the social equity aspirations established by lawmakers, stakeholders, and government health and safety officials.

Additionally, disastrous results like the well-intentioned but ill-conceived Conditional Adult-Use Retail Dispensary (CAURD) program in New York have led to long delays in store openings, causing a powerful resurgence in the unlicensed and illicit black market. As a result, officials have effectively scrapped CAURD and are now allowing existing medical cannabis companies (MSOs) in the state to apply for recreational licenses.

There is no magical answer on how to fix the issue of social equity licensing. Much like with the Civil Rights Movement in America, there has to be a concerted and dedicated effort by political leaders, regulatory officials, and the voting and buying public to insist on the establishment and viability of social equity candidates moving forward. To paraphrase the late, great President John F. Kennedy from his famous "To the Moon" speech, "We choose to do these things not because they are easy but because they are hard."

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