Cannabis Social Equity Programs in the New York Tri-State Area

As Adult-Use cannabis continues its state legalization and adoption across the Northeast, it’s extremely hard to not recognize the apparent inequalities that trouble the history of cannabis arrests and the racially charged past of cannabis legality, per the ACLU Black individuals are four times as likely to be incarcerated for marijuana-related charges with arrest rates being significantly higher for black individuals over white individuals in all U.S. states. 

The inequalities within cannabis continue after the legalization of cannabis within a state, Leafly’s Job Report published in 2021 reported less than 2% of cannabis businesses have black ownership in today’s licensed cannabis markets.  In an industry that prides itself on social rights, social justice and starts from grassroots activism aiming to address wrongful incarceration, the current diversity of cannabis ownership does not reflect the values in which the cannabis industry uses to identify itself. 

The implementation and support for Social Equity Programs within the legal cannabis industry aim to properly assist individuals directly impacted by the inequalities associated with the history of cannabis prohibition as well as the legalized cannabis market. Over 13 states with legal adult-use cannabis have also addressed social equity through the implementation of some form of assistance, below focusing specifically on the New York Tri-State area which has a long history associated with disproportionate cannabis arrest.

New York

New York legalized adult-use cannabis in 2021 with the passage of the Marijuana Regulation & Taxation Act (MRTA). Part of the MRTA is a robust social and economic equity program with an aim to create priority and resources for members of communities that have been disproportionately impacted by cannabis prohibition and has established a goal that 50% of all adult-use licenses be awarded to social and economic equity applicants. Additionally, the State Dormitory Authority is seeking proposals from investors and design firms who seek to assist eligible social and economic equity participants in their business development. The Dormitory Authority plans to have a $200 million fund to develop and implement this program as well as properly assist licensee’s with start-up and operational expenditures. Below outlines some of the parameters for qualifying as a social and economic equity applicant. 

1. Individuals from communities disproportionately impacted by the enforcement of cannabis prohibition. 
1. The Cannabis Control Board will issue guidelines to determine eligibility of this requirement.
2. Communities disproportionately impacted include a history of arrests, convictions, or other law enforcement practices within a specific geographic area reflecting a disparate enforcement of cannabis prohibition when compared to the rest of the state. 
2. Minority-Owned Businesses
1. At least 51% ownership by one or more minority group members. 
1. Minority group member is a U.S. citizen or permanent resident alien who is and can demonstrate membership in one of the following groups. 
1. Black persons having origins in any of the Black African racial groups.
2. Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South American of either Indian or Hispanic origin, regardless of race.
3. Native American or Alaskan native persons having origins in any of the original peoples of North America.
4. Asian and Pacific Islander persons having origins in any of the far east countries, south east Asia, the Indian subcontinent or the Pacific Islands. 
2. Minority ownership must be real, substantial, and continuing.
3. Minority ownership must have and exercise control of the business. 
4. Must be a small business
3. Women-Owned Businesses
4. Minority and Women-Owned businesses
1. A firm owned by a minority group member who is also a woman.
5. Distressed Farmers
6. Service-Disabled Veterans

New Jersey 

New Jersey started accepting license applications for their adult-use cannabis program in late 2021. As part of the legalization process, the Cannabis Regulatory Commission (CRC) created the Office of Diversity and Inclusion to establish practices and procedures for promoting the inclusion of diverse populations in the legal cannabis industry. Currently, the program has a specific path for “Priority Applicants”, this priority application process was created with the goal of creating opportunities for people from designated targeted communities, people with prior cannabis convictions, minorities, women, and disabled veterans and is broken into three different business types. 

1. Diversely Owned Businesses: minority-owned, woman-owned, or disabled veteran-owned, and certified as such. 
2. Social Equity Businesses: owned by individuals who have lived in an economically Disadvantaged Area of the state, or who have cannabis related convictions.
3. Impact Zone Businesses: the business is either located in an Impact Zone, owned by residents of an Impact Zone, or employing residents of an Impact Zone. 

Connecticut 

Connecticut has structured their licensing system a bit differently than both of the previously mentioned states. The state has designated multiple pathways to licensure for most license types which include: social equity lottery, general lottery and non-lottery applications. The social equity lottery process offers reduced licensing fees to qualified applicants to assist with the pathway to licensure. Additionally, the social equity lottery process will take place before the general lottery which will allow for unsuccessful lottery applicants to reapply during the general lottery. 

Non-Lottery Applications (with a social equity component)

• Cultivators located in a Disproportionately Impacted Area (DIA) as defined by Section 149 of Public Acti 21-1.
• Social Equity Partners 
• Is a business entity at least 65% owned and controlled by individual(s) who: 
• Had an average income of less than 300 percent of the state median household income over the last 3 years. 
• Was a resident of a DIA for at least 5 of the past 10 years
• Was a resident of a DIA for at least 9 years before the age of 18
• Equity Joint Ventures
• A business entity partnering with a licensed medical marijuana producer or dispensary that is at least 50% owned and controlled by an individual or individuals that:
• Had an average income of less than 300 percent of the state median household income over the last 3 years. 
• Was a resident of a DIA for at least 5 of the past 10 years

• Was a resident of a DIA for at least 9 years before the age of 18

While efforts made by states to prioritize licenses being awarded to social equity based businesses can create a more equitable cannabis industry. The ability for these applicants to obtain funding for their businesses is heavily lacking. Due to the federal illegality of cannabis receiving loans for cannabis businesses from financial or federal institutions isn’t possible, in mature markets like California this has led social equity applicants and minority owned businesses to turn to private investors. The lack of financial resources for these programs allow for predatory lending practices towards minority owned cannabis businesses. New York’s efforts to create a state backed fund to assist with business start-up costs shows a positive trend towards creating an equitable industry. 

For more information on U.S social equity programs contact Cannabis License Experts.

Sources

• https://cannabis.ny.gov/system/files/documents/2022/02/cannabis-management-fact-sheet-social-equity_0_0.pdf

• https://www.timesunion.com/news/article/State-seeking-proposals-for-investors-builders-17179362.php

• https://portal.ct.gov/socialequitycouncil?language=en_US

• https://www.nj.gov/cannabis/businesses/priority-applications/index.shtml

• https://cannabisindustryjournal.com/feature_article/the-great-social-experiment-social-equity-in-new-york/

• https://www.latimes.com/california/story/2022-01-27/california-pot-industry-social-equity-broken-promises

• https://www.forbes.com/sites/roberthoban/2020/08/31/the-critical-importance-of-social-equity-in-the-cannabis-industry/?sh=5d51b1e1a6db

• https://cannabisindustryjournal.com/feature_article/where-are-we-now-social-equity-in-the-us-cannabis-industry/

• https://www.theguardian.com/us-news/2021/nov/04/cannabis-california-black-businesses

• https://www.nacb.com/social-equity#:~:text=The%20goal%20of%20social%20equity,the%20new%20legal%20marijuana%20industry.

• https://www.aclu.org/gallery/marijuana-arrests-numbers