Member Blog: Creating a Diverse, Inclusive, and Sustainable Cannabis Industry

By Rebecca Lee Katz, President, Pakaloh LLC

This year, a national outcry against police violence and the impact of COVID-19 on Black and brown communities initiated a reckoning with the legacies of oppression and injustice in the U.S. Along with recognizing our institutionalized and internalized racism, we have started to come to terms with our economic inequality now that the income gap is worse than it has been in 50 years and three families alone control more wealth than 50% of Americans.

As with the rest of the country, the cannabis industry is lived differently based on the intersectionalities of race, class, gender, orientation, (dis)ability, and veteran status. For example, already wealthy, white, male individuals have amassed fortunes in cannabis with roughly 74% of U.S. cannabis businesses owned by men and 81% by whites, according to a 2017 Marijuana Business Daily survey.

After most states designated cannabis “essential” during COVID-19, private individuals, family funds, and pension funds plowed $2.6 billion into corporate cannabis, and multi-state operators posted record sales in the hundreds of millions. Earlier in September, the second cannabis exchange-traded fund (ETF) was announced which involves an investment portfolio of multi-state operators, REITs, and CBD companies. In contrast, Black and brown communities face mass incarceration for that same plant whereby African Americans are four times more likely nationally to be arrested for cannabis offenses than whites, while in states such as Kentucky and Montana, almost 10 times more likely, cited by a 2020 ACLU report.

These economic barriers to entry entrench the lack of representation in cannabis. For most entrepreneurs, the main obstacle to starting a cannabis business is the lack of access to traditional banking. It takes at least $300,000 to open a cannabis retail store, and up to millions of dollars for other cannabis enterprises, according to the 2019 Marijuana Business Factbook. Without traditional banking, most professionals finance their businesses through family wealth or personal contacts – 84% of U.S. cannabis companies are self-funded by founders, and 22% capture additional funding through a Family and Friends Round, cited by that same report. In this system, minority entrepreneurs are at a disadvantage. U.S. median household net worth ranges from $171,000 for white families to $17,600 for African Americans, $20,700 for Latinx, and $64,800 for “Other,” based on a 2016 Federal Reserve Board survey.

In addition to funding challenges, cannabis entrepreneurs must navigate onerous state and local regulations to obtain and maintain licensing. Some states have launched Social Equity Programs to help communities historically targeted by the criminalization of cannabis to now participate in the profits of legalization. However, even Illinois’s Social Equity Program, which is considered the gold standard, awarded only 21 out of its total 75 retail social equity licenses, leaving unclaimed 54 licenses that could have transformed the applicants’ economic circumstances. The 21 finalists were taken from a total pool of 1,667 applicants, which equates to only 1.3%. Low success rates stifle market entry and ensure that corporate, multi-state operators continue to saturate the cannabis space.

Beyond media proclamations, we must actualize an inclusive cannabis industry that reflects and celebrates the rich diversity of our community and provides equal opportunities to all professionals throughout the growth cycles of the market. We must operationalize sustainable businesses that produce unionized jobs and foster generational wealth. To do so, we must not only promote our own professional aspirations, but we must champion our friends’ and colleagues’ pathways into and up the cannabis industry.

While federal legalization remains the ultimate goal, local policies that would articulate a diverse, inclusive, sustainable cannabis industry must include explicitly legalized access to banking and finance, an overhaul of law enforcement and the criminal justice system, and social equity programs that encourage market activity. Until then, we must collectivize our professional resources and knowledge to build a true business community that empowers each of us to achieve our cannabis ambitions.

Rebecca Lee Katz is an attorney at an international law firm and President of Pakaloh LLC, the free business resource for an inclusive cannabis, CBD, and hemp industry. Pakaloh offers three types of membership which are all free, and members may select as many as they choose. Membership is available to 1) “Individuals”, including new and established entrepreneurs and professionals, 2) “Providers of Products”, or plant-touching businesses, and 3) “Providers of Services”, including ancillary services.

A WOC-owned company, Pakaloh provides its members with a comprehensive suite of services, starting with free information and discounts at financial institutions like banks, lenders, and payment processors that work in cannabis. Pakaloh also features free Business Tutorials that cover a range of cannabis topics from accounting to agriculture. These are informative, introductory online videos submitted by members that allow them to reach an audience of potential clients who may need to hire their services. Additionally, members may post and search for job opportunities.

Partner companies also offer discounts for members to use on individual and bulk orders. Members network on the site by accessing directories and sending messages directly to each other. Lastly, Pakaloh curates information on professional and activist organizations and events. Pakaloh is pledged to every community, and comes from pakalolo, an embrace of generations of the founder’s family in Hawai’i. Pakaloh holds true that no matter your roots, each of us aspires toward something greater than ourselves, be it our family, our nation, our cannabis movement.

The Push for Equity in the Cannabis Industry

by NCIA Editorial Staff

It’s no secret that the cannabis industry still has much work to do in terms of building a diverse, equitable, and inclusive workforce. But what barriers stand in the way, and how can we overcome them?

According to the ACLU, cannabis use is roughly equal among African-Americans and whites, yet African-Americans are nearly four times more likely to be arrested for possession of the substance. Higher arrest and incarceration rates for these communities are not reflective of increased prevalence of drug use, but rather of law enforcement’s disparate focus on urban areas, lower income communities, and communities of color.

People of color are unequivocally and disproportionately affected by the prohibition of cannabis — so, what happens when a state decides to end prohibition?

Many states that have chosen to tax and regulate cannabis have included provisions in those laws that prohibit individuals with any prior convictions from working in a licensed cannabis company. Not only that, according to the Minority Cannabis Business Association, “heavy regulation, the high cost of entry, and information gaps hinder minorities from entering the industry as owners, employees, and patients & consumers”.

Not all states have taken that route, however. Massachusetts state law requires the Cannabis Control Commission to promote full participation in the industry by people disproportionately harmed by marijuana prohibition and enforcement. The goals of Massachusetts’ social equity program include reducing barriers to entry to the adult-use cannabis industry and providing technical services and mentoring to individuals facing barriers.

Action is also being taken at the local level. In January, the District Attorney’s office in San Francisco announced that they would be retroactively applying Proposition 64, which legalized the possession and recreational use of cannabis for adults ages 21 years or older, to misdemeanor and felony convictions dating back to 1975.

The important message of social equity, diversity, and inclusion in the cannabis industry has also reached the halls of Congress. A year ago, Sen. Cory Booker (D-NJ) introduced S. 1689: The Marijuana Justice Act, which was the first piece of federal legislation to ever order federal courts to expunge cannabis convictions and actually punish states that have racially disproportionate arrest rates or disproportionate incarceration rates for marijuana offenses.

Just last week, Senate Minority Leader Chuck Schumer (D-NY) introduced the Marijuana Freedom and Opportunity Act, which creates a dedicated funding stream for women and minority-owned cannabis businesses that will be funded by revenue generated by the industry and directly linked to the industry’s growth. Not only that, the bill provides $100 million in grant funding to encourage state and local governments to develop, enhance or expand expungement or sealing programs for individuals convicted of marijuana possession.

In addition to these pieces of legislation, there have also been resolutions filed that address these disparities. In June, Congresswoman Barbara Lee (D-CA) introduced the Realizing Equitable & Sustainable Participation in Emerging Cannabis Trades (RESPECT) Resolution, which encourages equity in the cannabis industry. The resolution urges state and local leaders to implement a series of practices when granting licenses for legal cannabis businesses to improve access for communities of color to the nascent industry, such as minimal application and license fees, no caps on the number of licenses, increased local control of the licensing process, and removing broad felony and cannabis convictions as automatic disqualifiers for participation. NCIA was proud to endorse this resolution and looks forward to advocating for its passage.

There’s still an incredibly long way to go before we have a cannabis industry that’s as diverse and rich as the cannabis community as a whole. Here at NCIA, we know the task of representing the legal and legitimate cannabis industry is more than just advocating for the biggest or richest companies — we’re also here to advocate for diversity, inclusion, and equity in this industry that we are all building together.