Grow, Gift, Repair

What’s really going on with equity?

The man on the receiving end of these queries, Chauncy Spencer , described another offer in which a group of investors would dispatch their lawyers to help him and his partners get through the red tape of permitting in exchange for carrying their brand of cannabis products. But Spencer, who has a background in biochemistry, has developed an aeroponic cultivation system, and he hopes to produce, sell, and distribute his own cannabis products — not just be a “vape shop” selling others’ goods.

A cornerstone of Massachusetts’s marijuana legalization law is its commitment to righting the wrongs of the war on drugs, specifically the prohibition on marijuana, which fell heavily on communities of color in the form of arrests, incarceration, and lifelong criminal records. Under the social equity provisions of the law, economic empowerment applicants are to get priority license review and technical assistance aimed at giving them a leg up in the legal cannabis industry. So far, however, social equity looks a lot more impressive on paper than it does in reality. Two figures starkly tell the story: More than 120 people qualified for economic empowerment status last May; as of the beginning of this year, not a single one of them was among the scores of cannabis businesses to make it through the state licensing process.

Instead of ushering in a diverse and inclusive industry, legalization has so far underscored entrenched economic patterns. The net worth of African-Americans in the Boston area is just $8, compared to nearly $250,000 for whites, according to a 2015 Federal Reserve Bank of Boston study. Starting any business is a capital-intensive endeavor, let alone one in a heavily regulated market largely shut off from traditional bank financing and government funding due to the continuing federal prohibition on pot.

Despite its language on equity, Massachusetts’s marijuana law otherwise creates structural challenges for those with limited resources. Would-be marijuana business owners must secure a physical site and local approvals before the commission even considers them for a license. This poses a formidable barrier, especially in Boston with its costly and cut-throat real estate market. And it means aspiring entrepreneurs must negotiate the thicket of city hall politics and hammer out host community agreements, a potentially costly endeavor that favors those with deep pockets.
These constraints stand in stark contrast to the wealth surging through the wider marijuana industry. It’s not just “green rush” investors, but global conglomerates such as Constellation, the maker of Corona beer, which last year bought a $4 billion stake in a Canada-based marijuana growing company. In the US, the industry has a well-formed foundation in medical marijuana, which is legal in more than half the states. Medical dispensaries were one of the key forces behind the legalization campaign in Massachusetts, and they also receive priority review for recreational licenses. Not surprisingly, they figure prominently among the early crop of licensees.

These early rough-and-tumble days of legal cannabis in Massachusetts have exposed the tensions between growing a thriving industry, one that will boost the economy and state and municipal coffers, while also ensuring that people of color are able to share in the wealth, not just as employees but owners. The fact that there’s so much money sloshing around the nascent industry may create opportunities for minority entrepreneurs, but it also raises the prospect of exploitation; investors may regard them less as partners and more as a means to gain an advantage in a fiercely competitive market.

“There’s an imbalance in power when it comes investors in this state and entrepreneurs in this state, especially entrepreneurs of color, and especially in this industry because there are a lot of unknowns,” says Shanel Lindsay, a lawyer and entrepreneur who was a leading advocate for equity during and since the state’s legalization campaign. “All of those factors lead to a situation where people can get taken advantage of.”