There has been a lot of discussion in recent years about the role of social equity licenses in the nascent cannabis marketplace. In a market dominated by affluent white entrepreneurs, these licenses can be a godsend for members of marginalized and underrepresented demographics looking to claim their piece of the pie.
What Is a Social Equity License?
In the regulated cannabis market, a social equity license is a business license that’s set aside for members of communities that have been harmed, targeted, or otherwise adversely affected by marijuana prohibition over the years.
In some cases, these licenses may be awarded in zip codes or neighborhoods with high poverty rates or a history of high marijuana-related incarceration. In other cases, they may be reserved specifically for members of marginalized communities like the African-American and Latinx communities. Some programs also offer priority to individuals who themselves have been incarcerated for marijuana-related crimes. Other common recipients of these licenses include women, veterans, and disabled entrepreneurs.
The term “social equity license” should be distinguished from “social equity program,” as not all programs offer licensure to qualifying applicants. In some cases, the support may come in the form of a grant to help pay for licensing, or it may come in the form of other monetary and/or technical assistance related to starting a cannabis business.
Each program has its own requirements and process, but the primary goal is the same: to address a century of drug enforcement inequity and to help strengthen communities that have been harmed because of this inequity. It’s about providing opportunity. It’s also about supporting a more diverse marketplace that includes people from all walks of life.
States With Notable Social Equity Licenses
Not all medicinal and recreational states have strong social equity programs in place. In Missouri, for example, advocates have been pushing for greater diversity in marijuana licensing, but so far, the state has only offered a few extra points to applications in low-income zip codes (and even that has been challenged in court).
We’ve also seen instances where cities and counties have acted in the absence of a state-wide program. Oregon, for example, has no formal equity program in place, so Portland has established its own. When inquiring about social equity opportunities, it’s important to look not only at the state level but also at the local level.
The following are among the more prominent states that have established — or are in the process of establishing — social equity licensing opportunities for qualifying entrepreneurs.
Arizona is still finalizing its social equity program. The program was written into proposition 207, the 2020 ballot measure that legalized recreational cannabis in the state. The program sets aside 26 cannabis licenses for “people from communities disproportionately impacted by the enforcement of previous marijuana laws.”
This social equity program has come under fire from critics in the state for two primary reasons: First, the provision does not specify which communities would benefit from the license. Second, cannabis licenses in Arizona are transferable and can sell for millions of dollars (states like New York have taken steps to prevent this sort of thing). This means that the licenses may ultimately end up in the hands of privileged buyers, pushing out the recipients who were supposed to benefit from social equity.
The issue is still being debated, and it’s possible that changes to the provision will be made before the program is finalized.
Social equity programs in California are handled at the local level. There are programs in place in cities like Long Beach, Oakland, Los Angeles, and San Francisco. Each of these programs has its own requirements, and some are more successful than others.
If it seems a little disjointed, it may be because of the state’s uniquely localized approach to cannabis regulation. Although cannabis has been legal throughout California since 2016 (with the passage of Prop 64), individual communities are still free to prohibit marijuana businesses within their city limits. Currently, only 89 of the state’s 482 cities allow cannabis retailers. That’s less than 20% of cities in the state.
If you’re looking to apply for a social equity license in California, you’ll want to search your options at the city level and not the state level. For example, in Los Angeles, you would go through the Department of Cannabis Regulation; in San Francisco, it’s the Office of Cannabis.
Colorado’s equity program is overseen by the state Department of Revenue. Eligible individuals can apply for independent licensure or apply for the state’s Accelerator Program. The Accelerator Program allows marginalized individuals to enter into partnerships with existing cannabis businesses as a gateway to entry into the industry.
The Accelerator-Endorsed Licensee (the existing business providing the support) serves as a sort of host to the program participant, providing capital, technical support, and/or other assistance as needed.
To qualify for a social equity license in Colorado, you must meet the following four criteria:
- You must be a Colorado resident
- You must not have previously owned a cannabis business that was subject to revocation
- You must own at least a 51% stake in the business
- You must meet one of the following criteria:
- Have resided in a disproportionately impacted area in Colorado for at least 15 years
- Have been arrested or convicted of a marijuana offense (or suffered civil asset forfeiture due to a marijuana investigation)
- Be the parent, guardian, sibling, spouse, or child of someone who was arrested or convicted of a marijuana offense (or who suffered civil asset forfeiture due to a marijuana investigation)
- Have had a household income of no more than 50% of the state median income in the year prior to applying
If you’re considering starting a cannabis business in the Denver area, now is the time to apply. The City of Denver is reserving almost all new licenses for equity candidates between now and 2027 to offset the lack of licensing equity over the past six years (since adult-use cannabis was legalized in the state).
Connecticut recently established a Social Equity Council to oversee the formation of social equity policies and to process approvals. So far, the council has approved a list of 215 communities that will be prioritized for marijuana sales licenses.
In addition to residing in a disproportionately impacted area, qualifying business owners must have at least a 65% ownership stake in the business and an average household income of less than 300% of the state’s median household income over the last three years.
The Massachusetts social equity program is overseen by the state’s Cannabis Control Commission and provides training, assistance, reduced licensing fees, and application fee waivers in addition to special licensing consideration.
To qualify, prospective business owners must reside in Massachusetts and have an income that does not exceed 400% of the average household income for the area. They must also meet one or more additional criteria, such as living in a disproportionately affected area or being of African-American or Hispanic descent.
Michigan’s program emphasizes fee reductions for qualifying individuals and businesses. For example, business owners who have lived in a disproportionately affected area for 5 consecutive years receive a fee reduction of 25%. Individuals who have had a past marijuana conviction also qualify for fee reductions (25% for a misdemeanor conviction; 40% for a felony conviction).
Qualifying business owners can apply through the Michigan Marijuana Regulatory Agency. The application can be mailed or submitted online.
Though the program is still in its preliminary stages, New York is already being heralded as having one of the best social equity programs in the country. The goal of the program is to issue 50% of all recreational cannabis licenses to social equity candidates. The program includes low- and zero-interest loans, reduced fees, and assistance with the application preparation process.
The details of the program are still being worked out, but it appears that minority members, women, distressed farmers, and service-disabled veterans will be among those who benefit from the program as it gets underway.
The Ohio Department of Administrative Services operates the EDGE program. Edge stands for “Encouraging Diversity, Growth, and Equity.” The eligibility requirements are a bit looser than in many states. The applicant just needs to be an Ohio resident who is socially and economically disadvantaged and who operates their business in an economically disadvantaged area. A candidate is considered “socially disadvantaged” based on race, gender, or disability.
The one downside to Ohio’s state program is that it’s only open to existing businesses. To qualify, you must have a business that’s operational for at least a year. Benefits of the program include financial assistance, technical assistance, and priority consideration for state and local contracts.
Lawmakers in Pennsylvania recently drafted a bill to legalize recreational cannabis use, and the bill is noteworthy for its emphasis on social equity. Under the terms of the bill, priority licenses would be granted to veterans and individuals from communities most impacted by the criminalization of cannabis.
It’s important to note that the bill, HB 2050, has yet to be formally introduced, so we don’t know yet if it will be made into law or if the social equity components will be amended in any way. It does appear to have some degree of bipartisan support, however. In addition, one poll found that 62% of Pennsylvanians support recreational cannabis legalization for adults over 21 years of age.
How to Obtain a Social Equity License
If you’d like to obtain a social equity license, the first step is to determine the qualifying criteria in the state, county, or city where you’ll be conducting business. Most often, you’ll need to demonstrate that you have — or your community has — been harmed by marijuana criminalization.
You might meet the necessary criteria if:
- You are a legal resident of the state or city where you’re applying for licensure
- You reside or conduct business in a census-designated community with a low median income (the specific income requirement varies by program, as do the residency requirements).
- You have been convicted of a marijuana-related offense in the past
- One of your immediate relatives (usually a parent, child, or sibling) has been convicted of a marijuana-related offense
- You are of African-American, Native American, or Latinx descent (or you belong to one or more other communities of color that have been harmed by the War on Drugs)
- You belong to another underrepresented group or disproportionate subset of cannabis business owners (for instance, if you’re a woman, a veteran, or a disabled business owner)
- You meet certain maximum income requirements. Affluent business owners are generally disqualified from social equity licensing.
If you are eligible or believe that you may be eligible, the next step is to apply for a social equity license. Some states have a separate licensing application for social equity applicants, and other states use a single application to determine who does and doesn’t qualify for social equity benefits.
The application process itself can be daunting, which is why it always pays to have help. You’ll need to provide detailed business plans, exhaustive financial records, and much more. Some states offer application assistance to social equity candidates, but this assistance is usually minimal and does not guarantee that your application will be accepted.
To give yourself the best chance of acceptance, you can work with a skilled industry consultant to develop your business plan and strengthen your application. Our cannabis extraction consultants specialize in assisting professionals in the extracts and concentrates market, but you can find knowledgeable consultants for any type of cannabis business.
If you qualify for a social equity license, you should absolutely take advantage of it. The cannabis market is extremely difficult to break into, and a social equity distinction can give you a valuable edge. Start by finding out if you qualify, and then take that next step. It might just change your life forever.