Republicans Stripping Out Social Equity In Cannabis Legislation

Even as cannabis companies are making lots of noise about their social equity actions, Republicans are quickly moving to strip out any efforts to level the playing field. The latest move is by Virginia’s legislation. The state’s SB107 was filed on January 6 and is scheduled to be offered on January 12, 2022. What is notable about the legislation is that 30% of the tax revenue was originally carved out to go to the Cannabis Equity Reinvestment Fund established pursuant to § 2.2-2499.8 and instead is being directed to the general fund. Sources told Green Market Report that legislators were calling the program, “give a felon a license.”

Paul McLean of the Virginia Minority Cannabis Coalition one of the most respected new voices within the Virginian cannabis industry said, “The SB107 appears to be the first move in dismantling social equity in Virginia. Having funding is essential to the success of an equity program, and eliminating that funding is a slap in the face to those who have worked so hard to ensure Virginia has a healthy and equitable cannabis market. Part of what VMCC is doing with our boot camps is providing funding connections to graduates because of the systemic lack of funding opportunities overall and primarily Black and Brown entrepreneurs, especially those impacted by the war on drugs. We know that our elected officials can do better, and Virginians must demand they do what is fair for their constituents.”

The fund was created in the state treasury as a special nonreverting fund that was to be used to help those affected by the drug wars and that any leftover money was specifically not to go to the general fund. The language initially the money for the purposes of:

1. Supporting persons, families, and communities historically and disproportionately targeted and affected by drug enforcement;

2. Providing scholarship opportunities and educational and vocational resources for historically marginalized persons, including persons in foster care, who have been adversely impacted by substance use individually, in their families, or in their communities;

3. Awarding grants to support workforce development, mentoring programs, job training and placement services, apprenticeships, and reentry services that serve persons and communities historically and disproportionately targeted by drug enforcement.

4. Contributing to the Virginia Indigent Defense Commission established pursuant to § 19.2-163.01; and

5. Contributing to the Virginia Cannabis Equity Business Loan Fund established pursuant to § 4.1- 1501.

Democrats had passed the original legislation, but Republican Glenn Youngkin won a hard-fought race to become the new Governor. Activists had become concerned that Youngkin might slow roll the efforts to begin legal adult-use sales that were slated for 2024, although there have also been some efforts to speed the timeline. Republicans in the state did not vote for legalization, while the Democrats did. Youngkin said in April that he’s “never met anybody who habitually used marijuana and was successful.” In May he described legalization as “another problem that’s going to be dumped at my feet” if he were elected. Yet, cannabis companies were hopeful that legalization would proceed.

Jim Cacioppo, Chief Executive Officer, Chairman and Founder of Jushi (OTC: JUSHF) said in November, “With Governor-elect Youngkin previously stating that he would uphold the will of the people, and focus on creating a ‘rip-roaring economy,’ we are fully confident that he and the people of Virginia will continue to make progress as we look to bring thousands of new well-paying jobs, drive hundreds of millions in taxable infrastructure development and generate hundreds of millions in new tax dollars through a safe, regulated program at a time when the Commonwealth is ready to prosper.”

Virginia Medical Marijuana Companies

While Virginia has only legalized medical marijuana, some large MSO’s have targeted the state for growth. Jushi and Columbia Care (OTC: CCHWF) are both located in the state. Dalitso LLC dba Beyond / Hello (retail brand for Jushi) operates in the state, along with Green Leaf Medical and Dharma Pharmaceuticals. MedMen’s approval was rescinded in June of 2021. In September, Columbia Care said that it teamed up with three organizations – BIPOCANN, Virginia Minority Cannabis Coalition, and Nolef Turns to offer social equity-driven resources for the developing cannabis community in Virginia.

“Undoing the harms of prohibition requires more than laws–it takes community, outreach and resources,” said Ngiste Abebe, Vice President of Public Policy at Columbia Care in September. “As the market leader in Virginia, we want to see a thriving cannabis economy in which everyone can take part, especially those who have been disproportionately affected by cannabis prohibition. While Virginians wait for adult use laws to be finalized, partnerships like this can help prepare impacted communities to benefit from economic opportunities that have been explicitly created for them. We look forward to working with these partners and local officials to support an expanded, more diverse, more impactful cannabis community in Virginia.”

SRA

In  November, Congresswoman Nancy Mace (R-SC) sponsored The States Reform Act (SRA), filed in the U.S. House saying, “This bill supports veterans, law enforcement, farmers, businesses, those with serious illnesses, and it is good for criminal justice reform. Furthermore, a super-majority of Americans support an end to cannabis prohibition, which is why only 3 states in the country have no cannabis reform at all.” Her bill did offer expungement for those convicted of cannabis crimes, but it did not include any social equity language. Mace is a freshman Congressional member with less power than others. She is also a proponent of the “Big Lie,” which didn’t seem to deter cannabis industry leaders who sang her praises in November.

Many in the cannabis industry have become frustrated with Democratic leadership that has not been able to pass any legislation. Senator Chuck Schumer has insisted on holding out for legislation that includes some sort of social equity component, but that issue seems to be the line in the sand for Republicans. Expungement looks to be palatable, as does banking language, but offering to level the playing field is apparently a bridge too far.

New York Dems Create $200M Fund

While Virginia is stripping out the social equity fund, New York’s Democratic governor Kathy Hochul is taking a different approach. In the “State of the State” book released last week, it said “In support of that goal, Governor Hochul will create a $200 million public-private fund to support social equity applicants as they plan for and build out their businesses. Licensing fees and tax revenue will seed the fund and leverage significant private investment.”

It went on to say, “While New York has committed to making its cannabis industry more equitable, this action will put that commitment into practice. New York will lead where many other states have fallen short,” it continues. “The governor is focused on providing more than basic business supports and training for our future cannabis entrepreneurs, and this fund will provide direct capital and startup financing to social equity applicants as the State takes meaningful steps to ensuring that New York’s cannabis industry is the most diverse and inclusive in the nation.”

Social Equity Programs

While states have had hopes of creating programs to level the playing field, the results haven’t been as promising. The Diversion, Inclusion, and Social Equity (DISE) Committee of the California Cannabis Industry Association (CCIA) released a detailed accountability report in November. The report carefully examined California’s social equity program, specifically, the state’s initial seven districts that received grant funds from the California Cannabis Equity Act passed in 2018. The California Cannabis Equity Act of 2018 was designed to empower minority business owners who have been most impacted by the War on Drugs. Children of those incarcerated for non-violent crimes were among the applicants who applied to benefit from the program, which is about as close to “impacted by the War on Drugs” as it gets. 

Many people believe California’s social equity program isn’t living up to what was promised when the bill was passed. The accountability report released by the CCIA proved that to be true. 

Here are some key findings: 

  • In Oakland, 90% of respondents said lack of capital is a major problem plaguing their business 
  • In Los Angeles, as of October 1, 2021, only 28 of the 200 identified social equity applicants have received temporary approval
  • In Mendocino, the County has not yet approved any Equity Eligible Applications

In Closing

It’s tremendously difficult to engineer social progress. Some states are very focused on the effort, while others are less so. Some have implemented programs to varying levels of success. Most have faced great criticism as no one strategy has proven to be the most effective. Cannabis companies often seem caught between trying to address the issues on their own versus wanting to support legislation that financially benefits the companies, but has no interest in social equity.

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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2 comments

  • John Thomas

    January 11, 2022 at 6:32 pm

    The huge leap from compensating drug war victims to compensating “communities” is at best misguided and, at worst, a scam.

    If it were only Blacks that got arrested for marijuana and made second-class citizens for life, maybe it would be a good idea to just look at Black communities. – But, of course, that is not the case.

    FBI statistics show that 40 percent of all arrests for marijuana are of white people, while 60 percent are of Blacks. How can this injustice for millions of white victims be ignored? Isn’t discrimination against smaller groups a bad thing?

    Further, these “social equity” programs don’t even help a significant number of Black victims of the war on marijuana consumers. Just a very few, lucky (well connected?) Blacks will benefit.

    What we should do instead is simply compensate ALL the victims of this insane witch-hunt. Younger victims should get paid job training and placement. Older victims should just get a pension. Funds could come out of the marijuana taxes, and, clearly would be the best use of those funds.

    Further, the corrupt move to push ‘social equity’ is a huge obstacle to legalization, since it is massive, counter-productive baggage that naturally draws resistance.

    Reply

  • Keath Lackey

    January 18, 2022 at 11:06 am

    All taxes collected on marijuana sales should be used on infrastructure projects in the state they are generated. This way every individual reaps the benefit. Taxes collected should not go to specific groups or minorities. You also continue to create jobs when the money goes to projects that benefit everyone.

    Reply

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