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Social fairness in the marijuana industry is still largely a pipe dream

DENVER (AP) – Terrence Hewing was working for a parcel delivery company in 2007 when police approached his van in suburban Denver. It was early for a pickup, and someone out for a ride called the authorities after seeing him taking a nap in the driver’s seat.

Officers found approximately a pound of marijuana inside the vehicle. This led to a few days in jail, thousands of dollars in legal fees and a conviction for drug possession. Hewing lost his job and, due to his criminal record, struggled for years to find housing and a stable, well-paying career.

“I felt like I was in a certain box in society,” he said. “There are people who don’t have crimes and people who do. It almost makes you feel a little left out.”

Hewing, 39, recently became one of the few black entrepreneurs to receive a business license in Colorado’s recreational marijuana industry. His goal is to run a business that delivers the very substance that has stained its balance sheet.

His opportunity is the result of personal ambition coupled with Colorado’s effort to right the wrongs of the war on drugs past.

Hewing will enter the market as a so-called Social Equity Operator, licensed under a program that offers reduced fees and mentoring to encourage the growth of new businesses, especially for blacks arrested or jailed for marijuana offenses.

Social equity has been a selling point for the legalization of marijuana in many states. New York, which last month largely legalized cannabis use, has set itself a goal of securing 50 percent of licenses for minorities and other contenders for social equity.

But so far the goals have far exceeded the realities, in part due to legal tangles as states seek to expand diversity in boardrooms, retail stores, production plants and greenhouses. of cannabis.

The disappointment at the slow pace of deployment of equity programs has taken on a deeper resonance at a time when the country suffers a racial toll, sparked by cases of police brutality and punctuated last year by the death of George Floyd in Minneapolis.

The limited statistics available indicate that business owners and investors at the top of the booming industry remain predominantly white.

In Nevada, about 30% of the state’s residents are Latino and 10% are black. But the state’s first demographic survey of the cannabis industry released earlier this year showed only about 2% of board members identified as black and just over 7% Latinos.

States are moving towards a more diverse marijuana industry, but so far the push for social fairness has been marred by many delays and litigation, said Karen O’Keefe, director of state policy in the United States. Marijuana Policy Project.

In some cases, aspiring social equity licensees have been locked again, this time in predatory contracts, with profits and control largely in the hands of investors. In others, they have been outclassed in a fierce market dominated by international companies valued at millions and sometimes billions of dollars.

And sometimes the states themselves have been slow to set up and develop programs.

Voters in Washington and Colorado in 2012 made their states the first to legalize recreational marijuana. But it is only now that they are moving towards greater social equity.

Colorado’s program, which went into effect earlier this year, is open to all breeds, but the state’s Marijuana Enforcement Division says on its website that the goal is to increase diversity, especially among owners. It also recognizes “the effects of decades of criminal enforcement of marijuana laws on communities of color.”

According to a 2020 study by the American Civil Liberties Union, blacks in the United States are nearly four times more likely than whites to be arrested for possession of marijuana, despite comparable use. The study analyzed arrests for possession of marijuana from 2010 to 2018.

The Colorado program is open to those who lived in the state for at least 15 years between 1980 and 2010 in an area of ​​opportunity or an area disproportionately affected by drug laws, which is determined by levels. education and poverty, unemployment rates and the number of people. who receive public assistance. The program is also open to those with household income below 50% of the state median and those who have been or have an immediate family member arrested or convicted of a marijuana-related offense.

One provision allows new licensees to partner with an existing marijuana business to learn from experienced professionals.

Seven years after recreational marijuana sales were legalized, it has been a long wait, said Sarah Woodson, wife of Hewing and chief executive of advocacy group The Color of Cannabis.

“Once it’s regulated, (they) should literally be the first people who have the opportunity to legitimize and profit from this business,” Woodson said, referring to those convicted of marijuana.

As many seek answers to increase minority participation in the business, a recurring question has arisen: Are private equity programs doing enough to help licensees who may have little or no business experience? or access the capital needed to start a successful business?

Los Angeles, the nation’s largest legal pot store, opened for business in 2018. But more than three years later, its social equity agenda remains a work in progress after becoming entangled in a legal battle and beyond. have undergone a major makeover, intended in part to protect inexperienced social equity licensees from shark investors.

The delays have left many potential operators and their backers in limbo, awaiting approval to open as start-up costs mount.

“I’m paying rent on an empty building,” lamented Kika Keith, a leading activist in Los Angeles and co-founder of the Social Equity Owners and Workers Association. She is seeking a social equity license to open a retail store in the historically black neighborhood of Crenshaw.

After two years of planning, a previous partnership fell apart due to delays and regulatory changes that prompted its original investors to pull out. By that time, the company had spent $ 350,000 on lease payments, lawyers and other fees. Keith, who is black and raised in South Los Angeles, has secured new funders but is still awaiting a license.

Keith compares his long struggle to struggles of the past, such as breaking Jim Crow laws that imposed racial segregation in the South. “They keep pushing us deeper into the hole,” she said.

Cannabis lawyer Hilary Bricken said the California market is treacherous even for seasoned traders with dense layers of ever-changing regulations, heavy taxes and competition from the illicit industry still in full swing. boom. Pot remains illegal at the federal level, which can make loans and other banking services difficult to find.

Businesses are generally focused on making profits and building brands, not focusing on a humanitarian mission, she said. Investors might be worried about entering into a partnership in which they would have to cede significant control to the equity operator, such as under Los Angeles rules.

In capitalism, “the dollar rules,” she said.

Hoping to address these concerns, Woodson’s group, anchored in the historically black neighborhood of Five Points near downtown Denver, is running a 10-week business course to help students navigate the process. demand for social equity and put them in touch with industry leaders.

Michael Diaz-Rivera, 35, who identifies as white, black and Puerto Rican, recently completed the program, which teaches business and marketing, tax reporting, licensing and management, among other topics.

An elementary school teacher convicted of possession of marijuana, Diaz-Rivera sees his future in a jar delivery business, although he admits he has struggled to find an investment and, with little experience in business, worries about falling into an unfair contract.

With social equity, “I’ve noticed that a lot of established businesses aren’t as interested in this because they’re not getting anything out of it,” he said.

As for Hewing, he is optimistic about his prospects, despite the obstacles.

“We’re trying to get it to where we’re actually creating businesses, owners, and generational wealth,” he said. “People can help their communities and restore the negative damage caused by the war on drugs.”


Blood brought from Los Angeles. He is a member of the AP Marijuana Enforcement Team. Follow him on Twitter at Follow AP’s full marijuana coverage:

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