Grow, Gift, Repair

Cannabis regulators gave mixed messages on who qualifies for equity program

The Cannabis Control Commission has long struggled with its economic empowerment program, a first-in-the-nation plan to give special benefits to marijuana applicants harmed by the war on drugs.

But this week it confronted a new wrinkle when it acknowledged mixed messaging regarding who even qualifies for the program.

The program bestows “economic empowerment” status to those who met three of several criteria, including having majority equity from people who lived in an area disproportionately impacted by the war on drugs, served in previous positions helping those harmed by the war on drugs, or who were minorities.

The state gave the status to 122 applicants in April 2018, allowing them the ability to skip to the front of the line for licensing review. The benefits were later expanded, with the state abolishing initial application fees, cutting annual licensing fees in half, and eliminating software fees. Economic empowerment applicants were also given exclusive two-year access to delivery-only and social consumption licenses.

But lack of capital and hurdles gaining municipal approval hamstrung the applicants, and few were able to even apply for a license, let alone benefit from a priority review. Just nine applicants from the program have so far made it to a provisional license, and many within the program have criticized the slow pace.

During a virtual commission hearing on Thursday, commissioners said the CCC staff has told some applicants that they only need 10% equity from harmed groups — rather than 51% — for economic empowerment status. That information, which the commission now says was incorrect, was told to some applicants over the phone, and then further sent out through an April 17 memo to all program participants.

Commissioners on Thursday clarified that applicants still need to be majority-owned by disenfranchised groups to maintain economic empowerment status. Commissioners stopped short of calling the action a “mistake,” saying staff had interpreted the regulations differently than the commissioners. Chairman Steven Hoffman speculated that staff may have conflated language from another part of the regulation.

“It has caused distress,” Hoffman said in an interview after the meeting.

As a result of the clarification, three of the nine economic empowerment applicants that have so far been granted provisional approval no longer qualify for the EE program. Hoffman said the commission would not penalize those applicants for any benefits they had received up to this point for which they may not have qualified. However, they wouldn’t receive those benefits moving forward.

It’s unclear how many economic empowerment applicants who don’t have pending licenses before the commission reduced their equity to the 10% guidance. Hoffman said the staff would review if any other applicants had been affected.

“We’ll hold them harmless,” Hoffman said. “I don’t think there’s any lingering damage.”

Executive Director Shawn Collins was ultimately tasked with sending out a new memo to applicants clarifying the requirement to maintain 51% or more equity in a business to maintain economic empowerment status.

“This has been a growing pain moment,” said Commissioner Britte McBride. ”Getting the emails I’ve gotten over the last couple weeks raised a lot of concerns in my mind… but this was an evolving policy we walked into, and at some point maybe there were breakdowns of getting information to the people who need to use it. This is a learning moment.”

Staff will look at the policy for potential changes over the long term as part of its most recent round of regulatory discussions, set to begin in the coming weeks.

Hoffman said there’s an argument for reducing the equity component to give applicants more flexibility on getting desperately needed capital. But reducing the equity thresholds could also reduce the leverage small economic empowerment operators have in negotiating.

“I still believe flexibility at the end of the day is a good thing,” Hoffman said. “It’s going to help all of us accomplish our objectives and so I want to explore if there’s a way to do that.”