Nothing is perfect. That includes plans with noble intentions. Throw in a worldwide COVID-19 pandemic, and it’s safe to say that the roll-out of Illinois’ social equity program for cannabis companies isn’t quite what was envisioned. While the state can boast some of the most progressive social equity provisions, others say that the rules don’t do enough to support or promote minority participation. In other words, advocates say that Illinois’ industry-best social equity program is flawed.
The state’s social equity program includes three key areas. However, program advocates are worried. State law only stipulates that the applicants own 51% or more of a cannabis business to qualify for these provisions. What’s to prevent a social equity applicant licensee from selling their license to someone who technically wouldn’t be eligible a few years down the road? The new license holder would only have to pay for waived fees and any outstanding state grants or loans.
Applicant originates from what’s termed an ‘under-resourced area’ or one disproportionately impacted by the war on drugs.
Critics say that one of the biggest hurdles to success in the cannabis industry is the lack of access to capital. Combine that with COVID-19 license delays, and businesses eager to get going in the first rounds of licenses are burning through precious cash while trying to beat the clock. With an application deadline of July 20, there is close to $31 million in restorative-justice grants available to businesses in ‘economically distressed areas.’ Additionally, low-interest loans are also available to help with startup and operational costs. Still, industry experts caution that’s not going to cut it in a competitive marketplace.
Applicant (or family member of the applicant) was directly impacted by police enforcing anti-marijuana laws.
Critics argue that this is a flaw in the application process that actually prevents people of color from qualifying. Per these qualifying parameters, Black individuals who haven’t been arrested or live in distressed neighborhoods (outlined below) don’t qualify for these social equity programs. Additionally, in an interview with Marijuana Business Daily, the initial intention might not even be attainable. “Because of the limitations of how we’re able to structure the program, we can’t be 100% certain that the social equity program will bring the racial diversity that we want,” said Akele Parnell, a Chicago-based attorney and board member of Chicago NORML. In the same article, Mark Peysakhovich, a Chicago-based cannabis consultant and senior policy adviser for the Illinois Cannabis Trade Association, acknowledged that the state’s new social equity law couldn’t say a certain number of licenses would go to people based on race.
Applicant hires 51% of employees from a distressed neighborhood negatively affected by the war on drugs.
Critics point out that applicants can score points on their applications for this hiring demographic, but that it’s ripe for abuse. The provision might not work as intended if the 51% is stuck in low-pay or menial positions with a company. Others note that these programs are great if the social equity program participants want to work directly with the cannabis plant but highlight gaps for people of color who want to own ancillary cannabis companies.
The coronavirus pandemic has made it difficult to gauge whether these social equity provisions in the law are — or will be — successful. While COVID has delayed the state from issuing two sets of licenses, many expect that the retail store licenses will be issued by the end of July. The rest will follow. Meanwhile, industry insiders worry. Currently, Illinois’ recreational cannabis market is dominated by the medical marijuana companies that managed to get in on the initial adult-use sales that kicked off in January 2020. This might give those companies an advantage that the social equity businesses just won’t have.