Cannabis Musings - June 11, 2025
On the overall failure of social equity in cannabis.
Friends – we don’t talk a lot about social equity around here. In part because I’ve never felt to be in a position to properly address it, and in part because it’s not so much the focus of Cannabis Musings. To me, the social equity idea in cannabis is a kind of reparations for the failed War on Drugs in the US. I recognize that “reparations” is something of a loaded, politically charged term these days, but I use it here in its purest sense, to compensate for a wrong. This is not socio-political advice, but it seems to be somewhat universally recognized that the decades-long approach to addressing illegal drugs in our country hasn’t worked.
As state-level legalization began to take hold in the US, grassroots activists and policymakers persuaded states to include policies in cannabis laws that would attempt to compensate for all the harms that were caused by the War on Drugs. The timing was right, with growing excitement (which turned out to be slightly delusional) building around this new direction for cannabis nationwide, and a political environment in which equity programs found broad support. These policies fell under the broad, mostly undefined rubric of “social equity.” Everyone wanted it, everyone supported it, but few could really articulate its goals or execution with specificity.
Social equity rules in cannabis took a number of different forms, the most typical being some sort of preference in licensing. For example, individuals applying for a license (whether it’s a lottery or otherwise) might be scored higher, or might have lower application fees, if they lived in certain geographic locations and held a prior conviction for certain drug-related crimes, or identified with certain racial groups. Unfortunately, like the problem it’s trying to compensate for, social equity is generally also considered to have failed to achieve its goals (a generalization, for sure). Industry studies back up the consensus that the attempts to bring equity to the cannabis business haven’t resulted in the racial and socio-economic diversity that’s championed by the industry, as well-meaning as these programs are.
There are some excellent, recent white papers out there about the problem. Both the Drug Enforcement and Policy Center’s 2021 study written by Shaleen Title, and the Reason Foundation’s 2023 analysis written by Geoffrey Lawrence draw somewhat similar conclusions and make somewhat similar recommendations regarding the licensing process, capital access, and eligibility. To me, it mostly comes down to money, which shouldn’t come as much of a surprise. The capital requirements for starting a state-licensed cannabis business are enormous in most states – not just for the buildout of the business and the increased costs of everything, but the licensing fees and legally-imposed capital requirements in many states are downright prohibitive. If you’re trying to support a historically disadvantaged group, giving them easier access to something they can’t afford isn’t solving the problem. This is why we frequently saw social equity applicants partnering with deep pockets that held, say, 49% of the license interest (just below the statutory maximum in most places), often with the social equity applicant acting as something of a placeholder to then flip the license to the deep pocket in due time (like what happened in Florida). Loan programs have been similarly ineffective at achieving their goals.
Adding to the challenge is the current political environment that is pushing back on equity initiatives. Hard. And recent Supreme Court precedent puts into question the future of social equity programs that use race as a factor for preference. Social equity is also one of the major differences among the competing cannabis bills that were offered up in Congress over the past few years.
So, where do we go from here? Darned if I know, but it seems like it’s going to be very hard at this point to fix what’s broken. State-licensed cannabis operators can’t seem to get their lawmakers and regulators to fix other major problems with cannabis laws (the best we seem to be able to do is to delay things from getting worse), so why would we expect state legislators to expend their political capital to also fix equity programs in today’s political environment. Now, to be clear, I’m distinguishing between should and would here. There’s a fair and healthy debate to be had over what social equity programs work, what don’t work, and what constituents (and the industry) want for each state. But I don’t think we can expect that material change is going to come any time soon without significant grassroots pressure (from an industry that doesn’t have much discretionary capital to throw towards the effort).
Your perspective on some/all of this likely correlates with your political bent, and these Cannabis Musings try hard to stay apolitical, but I believe that the conclusion that the War on Drugs has failed crosses the aisle. I also believe that everyone can generally agree that the attempt to provide some sort of reparations for the deleterious effects of those efforts has fallen quite short (though without ignoring some successes). To me, it’s another symptom of the deeper failure of the entire state-legalized cannabis system, which isn’t even working well for the few who are succeeding. Tinken haist nit trinken (“Dipping isn’t drinking”).
Be seeing you.
© 2025 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín or anyone else who hires me.