Scant minority ownership in Nevada’s cannabis industry, spurring calls for social equity reform

(This is the sixth 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 7 Colorado and Part 8 Massachusetts.)

Minority ownership of cannabis businesses in Nevada is rare, and there are few signs that situation is likely to change anytime soon.

Nevada’s current cannabis regulations are limited when it comes to promoting diversity among business owners, and while there has been discussion about how to improve social equity, significant barriers must be overcome to foster inclusion.

The state’s regulators, like those in other mature markets such as Colorado, failed to write social equity provisions for the program after voters legalized a recreational marijuana that launched in 2017.

Also, recreational cannabis licenses are limited and expensive in Nevada, with applicants needing to prove they possess at least $250,000 in liquid assets to score higher for a permit.

With lack of access to capital one of the most oft-cited obstacles for minorities to succeed in the industry, it’s fair to say that Nevada’s cannabis industry regulations are not conducive to social equity as they’re now written.

Industry sources say Nevada has one fully Black-owned retailer and two Black-owned cultivation licenses out of more than 330 permits.

“In my opinion, that doesn’t say diversity,” said Las Vegas-based consultant Aesha Goins, who founded the Cannabis Equity and Inclusion Community and created the Nevada Cannabis Community Reinvestment Fund to help distribute money to people most harmed by the war on drugs.

Nearly insurmountable

One of those minority business owners is Aaron McCrary, co-owner of Zion Gardens, a cannabis cultivation facility in North Las Vegas.

McCrary has been lauded as the first black cannabis “master grower” in Nevada, and Zion Gardens is 100% minority-owned.

He said the state is attempting to make “inroads” with creating social equity provisions to promote diversity, but “there’s still a lot to be done.”

Because Nevada allows vertical integration and many of the recreational cannabis companies are well-established and growing larger all the time, “it’s almost an impossible head start to overcome,” McCrary added, noting those companies are well positioned with first-mover advantage.

“You only get one true bite at the apple,” he said.

When regulators require $250,000 of liquid assets to score points on an application for new licenses, those applicants with generational wealth have a distinct leg up, McCrary said. Not to mention the capital it takes to purchase real estate, build out a facility and equip it.

“The ability to access large sums of legitimate capital is the No. 1 impediment to success of all small businesses,” McCrary said.

He’d like to see business ownership and retail access points that better reflect the demographics of where the businesses are located.

McCrary would also prefer to see new licenses awarded to minorities in the communities where the owners live.

He pointed to the social equity program in Illinois, where people who have lived in a neighborhood hit hard by the war on drugs can use that to score points on an application.

Lobbying for change

Goins, the Las Vegas consultant, characterized the conversation in Nevada around social equity and inclusion as “hectic.”

She said she spent the entire previous legislative session lobbying for minority inclusion in the state’s cannabis industry.

Goins is pitching the idea of creating a “microbusiness” license for social equity applicants to own a vertically integrated medical marijuana company with a cultivation facility of no more than 3,500 square feet.

Another option would be to allocate the licenses for public consumption venues to social equity applicants, which has been discussed in other states, including Washington.

Goins pointed out that everything she’s doing right now is “passion work” and is calling on the industry to help support organizations attempting to foster diversity in Nevada’s cannabis industry.

One key problem for states such as Nevada – which, by cannabis industry standards, is a well-established market – is trying to shoehorn in business opportunities for social equity applicants.

Joe Brezny, a Las Vegas-based cannabis consultant, worked on the original ballot measure in 2013 that led to Nevada’s adult-use market.

He said social equity, although an issue back then, wasn’t as prominent at the time as it is now.

“So we’re right there with the rest of the industry (when it comes to social equity), which is not good,” Brezny said.

Other opportunities

Brezny singled out Ohio as an example of what Nevada should do, saying that state’s medical marijuana licensing regulations could help to ensure the industry reflects the population’s demographics.

“But there’s no cohesive national strategy for any of this,” Brezny added. “And it’s a hodgepodge at the state level.”

He admitted that it could be difficult for social equity applicants if they’re awarded permits to compete in a saturated market.

“The bar (the regulators) set was high, and the only people who got licensed sailed far above the bar,” Brezny said.

But he also conceded there would be no harm in an additional licensing round for social equity applicants.

The location of a new retail facility could factor in because certain areas already have several cannabis stores. But other areas, such as Ward 5 in Las Vegas, don’t have any retail stores.

As for the idea of consumption lounges going to social equity applicants, Brezny noted that the only one such facility operational in Nevada before the coronavirus pandemic – the NuWu Cannabis Marketplace on the Paiute Tribe reservation north of Las Vegas – has been a “screaming success.”

Bart Schaneman can be reached at [email protected]

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.

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