Connecticut's Social Equity Program - What is it?
“It’s a head-scratcher and a huge barrier to entry.”- Michelle Bodian
Equitable: fair and impartial; but in the Connecticut cannabis industry, this doesn’t seem so. In the state of CT, there is a $3M fee for social equity cannabis cultivator permits. Connecticut is now considered to be: “by far the highest fee social equity applicants face in the U.S. marijuana industry”, says Legal and Regulatory Reporter, Jeff Smith.
Amber Littlejohn, Executive Director of the Minority Cannabis Association told MJBiz Daily that: “Existing operators getting early access to the market and unlimited access to the market, is yet another example of policies supporting and creating oligopolies.”
Here’s why, in CT, those in the medical cannabis market have a headstart in applying for adult-use licenses- they already have facilities. Additionally, “the equity applicant must own 65% of the business and that makes financing a little more challenging”, says Michelle Bodian (a senior associate attorney- lead on CT licensing with Vicente Sederburg’s Boston and NY offices).
MPP.org said in their breakdown of application, licensing, and renewal fee’s in the adult-use U.S industry:
“It is important that fees and other financial requirements for small cannabis businesses be reasonable. With the possible exception of large businesses, fees should be no higher than what is necessary to cover regulatory costs.”
A few things about Connecticut’s social equity program stand out:
The first is that an individual is eligible to be a social equity applicant if they own at least 65% of their cannabis establishment and had an average household income of less than 300% of the state median household income over the 3 tax years immediately preceding the application;
The state median income for Connecticut is around $80,000. For someone making less than 200K per year, the “head scratching” begins because, how would they come up with $3,000,000 dollars without finding a wealthier investor, therefore giving up a percentage of their business (up to 35%)?
Additionally, someone who was previously incarcerated would have their lifetime earnings reduced by their inability to earn a real wage while incarcerated. Money made from the sale of weed without a proper license could have also been confiscated by authorities thereby reducing any money that could be used for a license.
The other barrier to equity is Connecticut’s adult use framework disqualifying applicants for cannabis licensure and potential employment on the basis of certain convictions. Money laundering and willful violation of taxes are two convictions that would disqualify an applicant from the program. Both of these convictions can be associated with distribution of an illegal substance. It’s difficult to know if either of those qualify for Connecticut’s expungement of cannabis conviction:
- Connecticut offers automatic record cleaning for certain qualified cannabis convictions
- Those convicted of possession from 1/1/ 2000 - 9/30/2015 will have their records automatically cleared by 2023.
- People with certain other convictions outside of this time period can apply to have their records expunged starting 7/2022.
Photo Credit: MJBiz Daily
The Minority Cannabis Business Association says: “Having a licensing program doesn't mean the state's policies are congruent with the purpose of social equity.” Executive Director Amber Littlejohn, says:
“Connecticut's lottery system instead exemplifies the gross inequity in opportunities for large medical operators and opportunities for minority operators. Medical operators can gain early and unlimited access to the market while everyone else fights for the remaining limited licenses. Despite the promise of equity, the state will leave those who have been disproportionately harmed by prohibition fighting for crumbs.”
Not only in Connecticut’s cannabis industry is social equity looking shaky, it looks shaky across the country. In all programs, it seems that the only way a social equity qualified business can in fact get into the cannabis business, is by way of partnering with a rich white person who gets even richer through owning a portion of the black person’s company. Under Connecticut’s social equity program, that white person will own 35% of the cannabis company.
