What is social equity in Colorado’s cannabis industry? Regulators look to level the playing field for marginalized communities

With about 40 states expected to allow some form of legalization by the end of December, 2020 is poised to be a breakout year for cannabis.

But as the movement toward normalization gains steam across the United States, legislators and activists are adding a moral provision to the burgeoning marijuana industry: to rectify decades of racial persecution caused by the War on Drugs.

Colorado is no exception. This year, regulators at the state level and in Denver are tackling new initiatives to improve social equity in the industry — even if they’re still figuring out exactly what that looks like.

Broadly, social equity is a concept rooted in the idea that each person is equal and has inalienable rights. When it comes to cannabis, this much-buzzed phrase refers to righting the wrongs of the War on Drugs, whether it be creating deliberate entry points into the industry for people of color or seeking justice for those whose lives were upended by marijuana-related incarceration or criminal convictions.

Officials in each state and city where cannabis is now legal have their own ideas of how social equity should play out. In Illinois, for example, applicants for the state’s new recreational dispensary licenses are, in part, evaluated on social equity elements, such as whether they live in areas with high levels of poverty, unemployment or cannabis-related arrest rates.

For John Bailey, co-founder of the Denver-based Black Cannabis Equity Initiative, social equity means two things: opportunity for, and investment in, communities of color.

“What you really want of the cannabis piece is to give people if not a better chance, a second chance,” Bailey said. “We’re not coming like we want reparations. We’re saying we want opportunity, because an investment in the black community is an investment in Colorado.”

Social equity, particularly concerning business ownership, will be the subject of a forum from 4 to 6 p.m. Thursday at the Coffee Joint cannabis lounge in Denver. The event, which is free and open to the public, aims to bring together industry veterans, government officials and prospective business owners to discuss how to bring more diversity into the industry.

Local demographics

Between 1986 and 2010, there were about 200,000 arrests for marijuana possession in Colorado, according to a 2012 study from Queens College. That study also found black and Latino people were disproportionately targeted in enforcement, accounting for 36% of all possession arrests despite making up just 23% of Colorado’s overall population.

The Colorado legislature is currently considering a bill to automatically expunge marijuana-related offenses from locals’ records, but advocates and regulators alike agree more must be done.

Because marijuana license applicants are not required to disclose race or ethnicity, there’s no comprehensive data about the demographic makeup of Colorado’s cannabis industry, said Shannon Gray, marijuana communications specialist for the Department of Revenue’s Marijuana Enforcement Division.

The city of Denver recently commissioned a study to look at this issue; the results are expected to be published later this year.

A 2017 survey by trade publication Marijuana Business Daily, however, found that 81% of respondents who held ownership stake in a cannabis company were white.

“The data nationally suggests there’s an inequity locally,” said Bailey. “… There’s a higher alert to try and get something done.”

Opportunities for business

At the state level, Colorado is developing an accelerator program to bring residents from designated economic opportunity zones into the industry. Under the Marijuana Enforcement Division’s working rules, an existing marijuana grower or manufacturer would be paired with a new licensee to offer mentorship, as well as technical and capital support. Eligibility is limited by geography and excludes dispensary licenses, according to the law.

The state will have rules solidified this summer and begin accepting applications on July 1.

Social consumption and hospitality licenses present other possible avenues into ownership. House Bill 1234, which was signed into law last May, allows for businesses where customers could consume cannabis onsite, like a coffee shop or dispensary tasting room. However, cities must individually opt in to allow these establishments.

As Denver officials weigh whether the city will opt in, considering social equity is paramount to that decision, said Ashley Kilroy, executive director of the Excise and Licensing Division, which issues marijuana business permits.

“As we’re continuing to grow and evolve in this industry, we’re looking at some of the new licensing coming down in the next year and figuring out ways to remove barriers to hopefully ensure more equitable opportunities to participate in the industry,” Kilroy said.

Rita Tsalyuk, co-owner of the Coffee Joint, remembers the difficulty she had complying with Denver’s ever-changing regulation when she first opened the dispensary in 2017 and its adjacent cannabis lounge in 2018. With social consumption on the horizon, the Ukraine native wants to help others navigate the often complicated process.

“We want to help them fill out applications. We want to help them with real estate. We want to help them to understand all the laws, and anything we know we don’t mind to share,” Tsalyuk said, adding she also plans to provide loans to aspiring business owners.

But experts say equity isn’t just about ownership; it also mandates having the tools and infrastructure for success.

Looking for longevity

Oakland native Dewayne Benjamin began his cannabis career in marketing and branding before founding the MMJ Showcase, a flea market-style event focused on cannabis products. In 2018, he opened Tetra Lounge, a private cannabis club in Denver’s RiNo district that’s welcomed patrons from 38 different countries to “learn about cannabis not just as a plant or drug, but as a culture,” he said.

Benjamin, who is black, knows it takes more than a license to run a business.

“You can’t just pick anyone who has no background in business and give them a business and hope they succeed,” he said. “The educational foundation is going to be the main part to make sure businesses have the longevity we want to see moving forward.”

And not just hospitality businesses, Benjamin is quick to note. Ancillary operations, such as technology and consulting, are poised to grow with the cannabis industry.

Regulators have offered few details on social equity initiatives beyond business ownership, but say it’s top of mind.

“We’re working on it internally and looking at ways we can support women- and minority-owned business in other ways,” said Gray, of the state’s Marijuana Enforcement Division.

Kilroy, the head of Denver’s Excise and Licensing Division, points to $9.3 million in cannabis tax revenue that’s been funneled to affordable housing projects in the city, many of which affect communities disproportionately affected by the War on Drugs. Her office is also engaging the industry to take up the cause.

“This isn’t just for the government to create or try to create,” Kilroy said. “The industry has to also make a commitment to recruitment and hiring an inclusive and diverse workforce.”