Racial Disparity in The American Cannabis Industry: How it Happens and Why.

Racial Disparity in The American Cannabis Industry: How it Happens and Why.

It is an inarguable fact that the cannabis industry in America is booming in a way that has never been seen before. Cannabis sales have soared in the past several years with an increase in sales of over 200% between 2016 and 2020. This has in large part been due to the increasing number of states legalizing the plant for medical or recreational use. What is arguable, however, is the extent to which legalization supporters can consider the current state of the industry an undiluted victory. While the growth of the legal marijuana industry in the United States is a welcome state of affairs to many people, there is still work to be done to make said industry a welcoming and accessible field for all Americans. Herein lies the most significant problem, as the legal and business aspects are not welcoming nor accessible to some individuals. Additionally, it is the very people who have been disproportionately targeted for marijuana possession and use before legalization who are being barred from entering the weed industry. As of 2018, 81% of cannabis business owners were white. This might not initially appear to be an upsetting statistic, as the remaining 19% of cannabis businesses are owned by people of color. However, since Hispanic and Black individuals alone make up approximately 31% of the population, one might argue that the current distribution is not reflective of equity-based industry standards. Additionally, people of color have long been targeted by the legal system as regards marijuana-related convictions. One might argue that this disparity is not due to a lack of resources or support for potential business owners who are people of color, but a lack of interest among these groups. However, the available evidence suggests that this is not the case, as many people of color have attempted to obtain licenses to enter the industry and these efforts have been thwarted by exclusive laws and a lack of capital to invest in their businesses. Therefore, the problem that today’s cannabis industry faces is not one of statistical inequality, but legal and economic inequality that prevents passionate and capable individuals from reaching their full potential in the legal marijuana space. 

The central problem with racial equity in the American cannabis space is perhaps the difficulty that many people of color have with obtaining licenses to operate businesses in the industry. As stated above, 81% of cannabis businesses in the United States are white-owned. However, in certain parts of the country, the figure is significantly higher. For example, only 1.8% of Massachusetts business owners in the marijuana industry are people of color, despite the state’s social equity efforts including providing programs to expedite and support applications submitted by minority groups. This phenomenon is not isolated and similar figures may be seen throughout the country. However, in many cases, the disparity between white business owners and people of color in the industry is not due to a lack of applications, but difficulties in having one’s application approved. For example, shortly after legalizing cannabis in early 2020, Illinois created a program that allowed applicants to be scored based on social equity “points.” The applicants with the highest number of points would be eligible to take part in a lottery that would decide who should be granted a license. In concept, this strategy strikes one as a reasonable means of justly determining which potential business owners would be licensed. However, many people of color were excluded from this lottery because of changes made to the points system. In November 2019, shortly before dispensary applications were due, state cannabis regulators announced that applications would be scored using a “whole-point” system, meaning that there were no partial points given and many more applicants received perfect scores than would have otherwise. Additionally, regulators decided that bonus points would be awarded for military veterans. Therefore, as many applicants received perfect scores, past military service became a far more relevant metric for potential approval than membership of a minority group. This series of events is only one example of the types of programs that American state governments launch to augment the equity of the industry. These programs are doubtlessly well-meaning. However, as demonstrated above they are seldom as effective as necessary. One might argue that the impression of inefficacy in Illinois’ efforts to create social equity is only solidified by the fact that none of the state’s 110 dispensaries are owned by a person of color. Additionally, of the 21 applicants who were allowed to proceed to the lottery stage of the program described above, approximately two-thirds obtained social equity status not through being members of minority groups themselves, but by hiring staff from neighborhoods disproportionately affected by the war on drugs. This process has also been extensively slowed by the lottery being delayed several times. These delays create an environment in which individuals seeking licenses are left in professional purgatory while competitors continue to draw significant profits and build their brand loyalty, affecting the ability of applicants to attract consumers after licensing. 

In addition to the legal hurdles that people of color must overcome to obtain licenses, a lack of financial resources with which to start a business is a leading cause of the low rate of people of color in the cannabis industry. In some areas of the United States such as Long Beach, California, the fees involved in the application process alone regularly reach six-figure amounts, which many potential applicants cannot afford. Additionally, this lack of ability to invest such large amounts among people of color who wish to enter the industry may be attributed in large part to the war on drugs. For example, Black individuals are 3.7 times more likely to be arrested for marijuana offenses than their white counterparts, a figure that escalates to render Black individuals as much as 50 times more likely to be arrested on cannabis charges in some American counties. As one might infer, this statistical trend might have a significant financial impact on both the people in question and their families. This has the potential to leave people and families of color financially damaged and unable to invest capital in business ventures. The financial impact of disproportionate focus from law enforcement on people of color is even more poignant in attempts to build a cannabis business as banks in many states will not provide business loans for marijuana companies due to the federal status of weed as an illegal drug. As actor, activist, and writer Edward Forchion says in an April 2020 interview with insider, "They're making it legal for corporations. Guys like me, who went to prison for selling weed, are watching as rich white guys are now making millions doing the exact same thing I went to prison for." As reflected in the above quote, another significant issue for people of color who wish to start cannabis businesses related to increased marijuana-related arrest rates is the fact that many states will not grant a license to felons. The details of this issue vary considerably by state. For example, states such as Illinois, New York, New Jersey, and others have opted to automatically expunge cannabis charges from criminal records. However, other states such as Alaska and Massachusetts either will not allow expungement of cannabis charges or require a lengthy and complex petitioning process. In states such as these, individuals who have been convicted for marijuana possession or use are not allowed to own businesses that deal directly with the plant because they are technically felons although what they were convicted for is now legal. Due to the increased amount of cannabis arrests among people of color, there are also a disproportionate number of people of color who are unable to obtain licenses in the industry because they committed acts that are now fully legal according to state law. 

While the American cannabis industry is growing quickly and a wealth of progress has been made in the fight to legalize the plant, the industry in its current form lacks racial diversity. One might argue that there is a tragic irony in the fact that people of color have seen the most

 negative effects of any group from the war on drugs, but are unable to enjoy the professional opportunities offered by the cannabis industry. Many potential business owners of color have been disappointed by ineffective state-led social equity programs, while others are unable to apply for licenses because of exorbitant fees they are unable to afford, and many are excluded from the industry entirely because they have been convicted of cannabis possession that would now be considered entirely legal. 

Insider article about how the cannabis industry has become a predominantly white space (Included quote from Edward Forchion found here):


Brookings article about efforts for social equity in state cannabis reforms:

https://www.brookings.edu/blog/fixgov/2021/04/16/state-cannabis-reform-is-putting-social- justice-front-and-center/

Chicago Reporter article about why the industry lacks diversity:

https://www.chicagoreporter.com/black-and-latinx-owners-are-barely-a-blip-on-the- cannabis-revenue-radar/

CNBC article about persistent racial inequality in the industry:

https://www.cnbc.com/2021/07/01/in-billion-dollar-cannabis-market-racial-inequity-persists- despite-legalization.html

NBCNews article about the struggles black entrepreneurs face when trying to start cannabis businesses:

https://www.nbcnews.com/news/nbcblk/black-entrepreneurs-struggle-join-legal-weed- industry-n1132351

Image - https://qz.com/1482349/weed-and-reparations/