Washington state cannabis bill seeks to make industry more diverse, equitable

A bill currently before the Washington state legislature aims to increase diversity on both the retail and production sides of the cannabis industry in the state.

By Sarah Kahle, The Seattle Times

Jim Buchanan is more than ready for change.

A second-generation Seattleite, cannabis retailer and entrepreneur, he is also president of the Washington State African American Cannabis Association and has spent months fighting for House Bill 2022, a bill that would make sweeping changes to Washington state’s cannabis industry.

The bill is the latest in a series of legislation intended to increase social equity and racial diversity in the cannabis trade.

In 2020, House Bill 2870 established the Marijuana Social Equity Program, an application-based process intended to provide people of colour, harmed by the war on drugs, opportunities to become more involved in the burgeoning marijuana economy. The 2020 measure also created the Social Equity in Cannabis Task Force, comprising lawmakers, government representatives and industry experts charged with making recommendations about the issuance and reissuance of retail cannabis licenses in ways that would promote business ownership among people of colour.

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The bill currently before the state legislature incorporates many of the policies recommended by the task force, and would create 38 new retail and 25 new producer and processor licenses each year through 2029. The bill also stipulates that these and any other new cannabis licenses may only be awarded to so-called social equity applicants until 2030, after which 50 per cent of licenses must be awarded to such applicants.

Social equity applicants are people who have lived in an area disproportionately impacted by marijuana possession arrests, or those who plan to open a business with majority ownership by a racial group shown to have been disproportionately affected by marijuana possession arrests.

The bill also allocates over US$22 million annually to provide grants, low-interest loans and a mentorship program for social equity applicants, though a substitute version of the bill stipulates that only those who already have a license are eligible for much of the funds.

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“This bill is key because it provides the technical assistance, the money to help you get stabilized, to help you move through that process, not just give you access to a license and then throw you to the side and say, ‘Figure it out,” said Emijah Smith, chief of staff at King County Equity Now, a nonprofit Black advocacy and policy organizing institute.

According to a July 2021 self-identified survey from the state’s Liquor and Cannabis Board, 388 retail cannabis stores, making up 81 per cent of the market, are white-owned, while 19 stores, representing 4 per cent of the market, are Black-owned. On the producer and processor side, the racial gap is even wider: 85 per cent of Washington’s cannabis is produced by 1,092 white-owned businesses, while just 1 per cent is produced by 18 Black-owned businesses.

“Why aren’t we getting an equitable amount of licenses, specifically in an industry that we were so harmed by and went to jail for consistently?” said Buchanan, who grew up in Seattle’s predominantly Black Central District during the war on drugs. For him and many other Black community leaders, the state’s now-legal cannabis industry represents a chance to heal communities from years of redlining, gentrification and systematic racism.

“It’s a crude and ironic slap in the face that the very community that … suffered at the hands of the war on drugs, were denied the opportunity to build a life, to build wealth, so that they could revitalize our community,” said Elmer Dixon, who was a co-founder of the Seattle chapter of the Black Panther Party in 1968.

Drawing parallels between the Black community’s relationship to the cannabis industry and Native Americans’ relationship to the gaming business, Buchanan hopes HB 2022 will open the doors for Black Washingtonians to build generational wealth by becoming more involved in the profitable trade. According to MJBizDaily, a marijuana business news source, Washington cannabis retail sales totalled US$1.7 billion in 2021, and the market is projected to generate an annual US$2.5 billion by 2025.

HB 2022 would give Black entrepreneurs the opportunities that many in the community say should have been made available to them nine years ago, when marijuana was first legalized in 2012. Many Black business owners say they were effectively locked out of the industry from the very beginning, held back by the lack of legal funds crucial for navigating the complex application process.

The criteria for licensing recommended by the task force, which aims to bring justice to the industry by weighting a social equity application process, are designed to benefit Black applicants and, to lesser extents, Latino and Native American applicants. The bill also calls for a third-party contractor to review and prioritize the applications, and requires the LCB to issue licenses in the order specified by the contractor.

But the criteria’s explicit delineation of race, as well as the presence of a third-party reviewer, has left some supporters calling for amendments. The LCB, which initially requested the 2020 bill establishing the task force, testified that it wants to retain the authority to prioritize applications and offered an alternate rubric. A representative of the governor’s office also testified in favour of the bill, supporting the LCB’s proposed changes. Several of the LCB’s requests were granted in the substitute version of the bill that passed a committee vote on Feb. 3. The substitute bill passed through the House Appropriations Committee with a narrow majority on Monday.

Some of the bill’s other provisions were controversial as well. A measure in the original legislation would have largely eliminated the buffer zone requirements imposed upon cannabis retailers, bringing the regulations more in line with those concerning alcohol or tobacco products. Currently, dispensaries must be at least 1,000 feet from several types of public places. The new legislation would have reduced the distance requirement to 500 feet from schools, on par with alcohol restrictions, but these buffer reductions were dropped from the current version of the bill.

“It’s very hard to find a location that is not next to a playground, a library, a transit centre. So there’s very limited spaces for anyone to even access these opportunities,” said Rep. Emily Wicks, D-Everett, the bill’s prime sponsor.

There isn’t complete consensus among those in the industry, though. The Craft Cannabis Coalition, a group of 35 retail stores in Washington, testified in opposition to the bill.

Several opponents of the bill expressed concern that the hundreds of licenses set to be released through the social equity program would saturate the market with more businesses than consumer demand requires. The bill’s supporters, however, argue that in an industry set to grow by US$1 billion in the next four years, there will be huge demand for both retailers and producers — demand that Black business owners are ready to meet.

“It is about bringing parity in the cannabis industry with Black and brown people,” said Rep. Melanie Morgan, D-Parkland, who serves on the task force, during a virtual public hearing on Jan. 28. “That’s simply what we are asking for in totality, whether it be about buffer zones or whether it be about licenses. This is what this bill is about.”

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