Cannabis Social Equity Licensing – Everything You Need To Know

Since cannabis has become legal for the masses, advocates have called upon states for social equity licensing and industry reparations. In fact, most states now  have social equity language written into the legislation that’s being approved. So, what exactly is cannabis social equity and how are cannabis equity programs designed to help those negatively impacted by the War on Drugs? We’ll answer those questions and more, as we dive into cannabis social equity programs and what business owners need to know when it comes to compliance. 

What is Cannabis Social Equity?

As legalization grows, so do criticisms of a movement that has criminally affected so many and still does. The nation as a whole has a real-time view of billions being made from legal cannabis, while friends or family members still sit incarcerated for cannabis crimes, in addition to having records that negatively affect their future of growth and success. This is why many states are now using cannabis social equity programs in an effort to make up for decades of cannabis criminalization.

By definition, as outlined by the National Association of Cannabis Businesses, social equity programs are designed –

‘to ensure that people from communities disproportionately harmed by marijuana prohibition and discriminatory law enforcement are included in the new legal marijuana industry.’

Keeping in mind that those disproportionately affected, have been predominantly low income communities and people of color.

Now, with 19 states that have adult-use recreational markets, legislators and advocates are fighting for reform and reparations through cannabis equity programs.  So, next let’s take a deeper look into how these programs are structured and what it means for licensing and compliance. 

Licensing & Compliance for Social Equity

Obviously, not everyone qualifies for social equity programs. Right off the bat, the qualifications add to licensing confusion, as does the fact that social equity programs vary from state to state. For cannabis business owners, the unique licensing requirements can make it difficult to operate multi-state operations.

In general, most states have a mix of qualifications for cannabis social equity programs that include – 

• Applicants must often live in, or have previously lived in, an area where a high rate of arrests and convictions for marijuana-related crimes has occurred, but where marijuana is no longer illegal. 
• The cities or regions often must meet requirements of higher than average poverty or unemployment rates. 
• Applicants themselves may have a record from cannabis-related crimes and/or plans to hire those with marijuana-related offenses or convictions. 

The benefits of social equity licensing includes discounted or waived fees, priority in approval, assistance with applications, and low-interest loans in some states. Many states also have an ‘incubator’ program, where social equity applicants are able to operate their business like an apprenticeship, learning from established cannabis firms. 

On the profit side, many states are ensuring that money made from legal markets are going back to the communities negatively affected. That means tax dollars, up to 20% in some markets, are being re-invested in these communities to elevate education, provide legal aid, develop youth programs and violence prevention.  

Once states have approved social equity licenses, those businesses are still subject to the same regulations and requirements outlined by regulatory agencies. These regulations and requirements can pose a problem for regions where glaring system flaws are making it hard for minority business operators to succeed. For instance, in Los Angeles, social equity applicants have been slow to receive approval versus other non-social equity applicants due to certain requirements. In fact, their lottery approval process is now under scrutiny and facing a lawsuit by one social equity applicant. 

Taking these factors into consideration, those who do become approved for a social equity license should ensure they operate their business to the highest degree. By doing so, social equity licensees can  ensure they keep their license and avoid hefty fines or violations that can come from non-compliance.

Measuring State’s Social Equity Success

Recently, Leafly set out to evaluate and measure the success of cannabis social equity programs across the country thus far. Their Seeds of Change report is the first of its kind, and provides a unique perspective on social equity progress and failures to see where additional reform would be beneficial. To summarize, below are the most influential items to come from the study: 

• 1 in 20 Black Americans (5%) hold business equity in any industry, but in cannabis only 1 in 50 (2%) Black Americans hold equity in cannabis companies.
• Black Americans are 4x more likely to be arrested for cannabis nationwide, regardless of equal usage rates. 
• Only 53% of adult-use legal states are implementing equity licensing initiatives effectively.
• 63% of adult-use legal states are not effectively reinvesting cannabis revenue and taxes into disproportionately-harmed communities.
• White Americans still hold 4x more equity in the cannabis industry than Black Americans. 

While social equity programs are designed to do good, this 2021 report and early implementation shows there’s much more work to be done to be effective. 

Staying Ahead to Get Ahead

Keeping a close eye on the ever-evolving cannabis industry allows cannabis business owners to stay ahead of the trends. In turn, businesses can stay ahead of the competition, no matter the sector in which they’re operating. To do so compliance-wise, many emerging and established brands are implementing the use of innovative and comprehensive software that automates systems and processes. Like, ProCanna. 

To streamline the process for your specific state’s cannabis equity program, or standard licensing too, check out the features with which ProCanna can equip your business. From easy document uploading and importing to employee training, audits, and reporting, ProCanna’s got your back, and is fully customizable for cultivators, extractors, retail storefronts, and more. See what you’re missing and schedule a demo today.