State Officials Debate Limits on Equity Licensing for Legal Marijuana

When Connecticut legislators agreed this spring to legalize recreational marijuana, a number of lawmakers did so with the proviso that the change would also foster an equitable, diverse market, with meaningful benefits for people from communities disproportionately harmed by the criminalization of marijuana. 

“There won’t be a cannabis bill in this state until we get equity right,” said State Sen. Gary Winfield, D-New Haven, at a press conference before the passage of the law.  

Translating those goals into policy is the work of a 15-member social equity council appointed by Gov. Ned Lamont and state lawmakers to iron out the details of how social equity can be recognized in the licensing process.

But in their first meeting earlier this month, council members shared doubts that a program to prioritize business licenses for applicants from communities disproportionately impacted by the War on Drugs would actually result in a diverse industry.

“Some of us have seen this in the contracting space where contracts are secured under programs like this and not even one day of work is ever performed on it, they’re sold off, and that is definitely not the intent of what we’re doing here,” said State Treasurer Shawn Wooden. 

State Department of Economic and Community Development Commissioner David Lehman questioned whether there should be rules to prevent licenses granted on the basis of social equity from being bought up by multistate operators.  

“If some corporation buys up a bunch of businesses operating with social equity licenses on day two, or month two, that’s not going to achieve what we want in terms of social equity,” said Lehman. “We are trying to make it so social equity licensees participate in the market in a meaningful way.” 

By law, half of all licenses must be earmarked for social equity — defined as any business with at least 65 percent ownership or control by individuals who have lived in a “disproportionately impacted area” for either five of the past 10 years or nine of their first 17 years of life. 

Kebra Smith-Bolden, who founded CannaHealth, the only Black-owned legal marijuana business in Connecticut, said that she shared some of those concerns. She is hoping to apply for a social equity license herself. 

“It’s hard, because if I got a license today and someone offered me $50 million tomorrow to sell it, I’d want to be able to take it,” Smith-Bolden said. “At the same time, I think a lot of people want to engage in this market as a form of social justice, so I hope we don’t see a lot of that.” 

Smith-Bolden said she expects that the council will recommend changes to the law limiting how quickly licenses can be resold.

In an interview with CT Examiner, she recommended a five-year limit, given that it can take years to really get a business off the ground, in her experience, especially competing with multi-state operators. 

But Smith-Bolden also expressed doubts about the fairness of such rules.

“Just because someone is a social equity applicant shouldn’t mean the government should be making all of the decisions about their business and how they operate or when they should decide to sell,” Smith-Bolden said. “I feel like it’s a little insulting to imply that social equity applicants can’t make smart decisions and smart business moves.” 

Asked by CT Examiner for his preferred timeline before a sale, Lehman declined to say, but noted that the goal was “not to give someone a license and then make it really hard for that licensee to do business.” Lehman said he wanted to make sure that any new rules would not add burdensome restrictions on how people can participate in the market.

Connecticut is one of nineteen states, including neighboring Massachusetts, to legalize recreational marijuana. But after five years, according to a February 2020 report, only three percent of fully licensed marijuana businesses in Massachusetts are women-owned, veteran-owned, minority-owned, LGBT-owned, or disability-owned. 

Steve Hoffman, chairman of the Massachusetts Cannabis Control Commission, said that the state is trying to change that. Placing a restriction on how long social equity licensees can hold onto a license is “difficult,” Hoffman said, but noted that they think they may have found another way to ensure more meaningful participation in the industry. 

“In the last six months, we’ve started making licenses for cannabis delivery available, but only to businesses with at least 50 percent social equity ownership,” Hoffman said. “Anyone is allowed to sell their cannabis business at any time, but to retain a license for delivery, they have to maintain that ownership.” 

In Colorado, which has had recreational marijuana since 2014, there are no restrictions on selling businesses started with social equity licenses. 

“The ‘social equity’ designation is only about eligibility for applying,” said Shannon Gray, Marijuana Communications Specialist at the Colorado Department of Revenue. “Once they become a licensee, they’re no different than any other licensee in terms of what they can do with that license.” 

If Connecticut chooses to place restrictions on social equity licensees, it will have to do so via new legislation, according to Leslie O’Brien, legislative program director at the Connecticut Department of Consumer Protection. 

“The law requires the social equity council to report back to the legislature and make recommendations, and this may be an area where they do that, because extending parameters would require a statutory change,” O’Brien said.

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