Minority cannabis ownership negligible in Colorado, but new social equity law aims to spur progress

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(This is the seventh in a series of stories from Marijuana Business Daily examining social equity regulations and business opportunities in key U.S. markets. Part 1 covered Illinois, Part 2 Michigan, Part 3 California, Part 4 Oregon, Part 5 Washington state, Part 6 Nevada and Part 8 Massachusetts.)

As is true in other mature cannabis programs, Colorado falls short in minority representation among business owners.

But advocates and industry leaders are trying to correct that – a difficult task in a highly competitive and well-established market – and hope social equity legislation Colorado Gov. Jared Polis signed into law at the end of June will help the cause.

“Black and brown business owners were left out,” said Wanda James, president of Denver cannabis company Simply Pure. “This is an opportunity for America to recover, rebuild and repair a lot of the injustices it has done.”

Bill creates progress

In early June, a study commissioned by Denver officials found that 75% of the city’s cannabis business owners were white and only 6% of both marijuana business owners and employees were Black.

On the heels of that study, Polis signed the bill that issues pardons for prior marijuana convictions, lays out how social equity license holders will qualify for mentorship programs and offers financial incentives to help get their businesses off the ground.

House Bill 20-1424 established that an individual would be eligible to participate in the social equity program if:

  • The applicant or an immediate family member was arrested or convicted for a marijuana offense.
  • The applicant lived in a designated economically distressed community for a minimum of 15 years between 1980 and 2010.
  • Their income is at or below an amount to be determined.

Sarah Woodson, executive director of The Color of Cannabis, a Denver advocacy group working on social equity in the industry, said that, even with the established definitions, much work remains to be done.

“The implementation is getting a little tricky – things can be interpreted in different ways,” she said. “But we know the industry really does have a desire to have social equity.”

Under the new rules, according to Woodson, the tentative timeline is for regulators to accept social equity applications in January.

The new regulations will allow applicants to participate in an “accelerator program” in which existing cannabis companies in several sectors, including retail, cultivation and manufacturing, will mentor new social equity business owners.

Woodson doesn’t anticipate the state will receive more than 100 applications, and those who win licenses will face an uphill battle in Colorado’s hotly competitive cannabis industry.

“We know the market is saturated,” she said.

Woodson’s organization is pushing to have fees for social equity applicants waived at the state level.

‘Working for crumbs’

Kelly Perez, a Denver-based cannabis social equity advocate and co-founder of KindColorado and Cannabis Doing Good, is focused on three core areas:

  1. Undoing the harm of the war on drugs.
  2. Creating pathways for those hurt by the war on drugs to participate in Colorado’s adult-use cannabis market.
  3. Making economic justice a centerpiece of the industry.

Perez is not convinced the changes in the program will create sufficient minority participation and ownership.

“I want economic generational wealth-building in the Black and brown community,” Perez said. “And I want cannabis to do that.”

The new legislation is “a drop in the bucket when the big companies have millions and millions of dollars,” she added. “The opportunity is quite limited.”

Taking into account the competitive market, part of the conversation has focused on adding new license types for social equity applicants to own delivery or hospitality businesses so they won’t have to compete with major, established companies.

But that opportunity is “quite limited,” Perez said.

Woodson agreed on the delivery issue, noting “there are some things that have to change” to make such licenses equitable.

With third-party delivery, the driver is limited to charging a flat rate for each delivery, so volume is the only way to make money, she said.

Woodson envisions a model where social equity businesses would be able to sell via direct delivery straight from a warehouse.

But it’s easy to see that the established industry, particularly the retailers, would chafe against that idea because it would add more competition.

“If it’s social equity only, I don’t feel like there should be too much opposition,” Woodson said. “Anything else is really inequitable – you’re working for crumbs.”

Making the grade

John Bailey, organizer of the Black Cannabis Equity Initiative (BCEI), a Denver nonprofit advocacy group, is focused on joint ventures.

The professional mentorships offered under the new accelerator program are an example.

He’d also like to see a moratorium on new licenses so the market doesn’t become even more competitive. He pointed to Oregon, where revoked cannabis licenses have been made into social equity licenses.

“You have to take into consideration that (minorities) weren’t participants in the saturation in the first place,” Bailey said.

And while he recognizes that the existing businesses shouldn’t be penalized because they were ready to go when the market began, there was no social equity at that point, so how do you correct a wrong, Bailey asked.

“Let’s recognize there are systemic barriers,” he said.

With BCEI, Bailey has created a community report card that analyzes a cannabis company’s commitment to diversity and inclusion.

BCEI will grade a company’s efforts as they relate to Black community outreach, relationships and opportunities.

The areas of grading will be:

  • Employment opportunities.
  • Relationships with Black vendors.
  • Businesses and media.
  • Partnership opportunities with Black community organizations related to investments, sponsorship and contributions.

James at Simply Pure said she’s seen an increase in Colorado residents seeking out Black-owned businesses to support them.

“I believe America is at a paradigm shift,” she said. “It’s time to level the playing field.”

Bart Schaneman can be reached at barts@mjbizdaily.com

For a sampling of organizations and efforts that support, foster and enhance social equity in the cannabis industry as well as opportunities for minorities, overall diversity and racial justice, click here.