Social Equity in Cannabis Program

Local governments in Washington State have control over whether to allow marijuana retail stores to operate within their jurisdictions. Many jurisdictions prohibit marijuana businesses while many others allow them. Thanks to a 2020 law, social equity considerations are now part of the state’s licensing process, which may impact local jurisdictions’ decision-making process in deciding to allow retail marijuana sales.  

The Washington State Legislature passed E2SHB 2870, creating a social equity in cannabis program. The program includes the Social Equity in Cannabis Task Force, which will develop policies and recommendations to enhance social equity in the cannabis industry licensing process. This law adds a new status of “social equity applicant” for issuance of marijuana retailer licenses. Social equity applicants with “social equity plans” are given priority by the Liquor and Cannabis Board (LCB) for available marijuana retailer licenses, including up to 34 licenses available because they are subject to forfeiture, revocation, or cancellation or were available but not previously issued by the LCB. In addition, the Marijuana Social Equity Technical Assistance Competitive Grant Program is established and funded.

Legislative Intent

The legislative findings in Section 1 of E2SHB 2870 include the following statements that provide insight into the legislators focus on equitable opportunity in the marijuana industry.

• Additional efforts are necessary to reduce barriers to entry to the cannabis industry for individuals and communities most adversely impacted by the enforcement of cannabis-related laws,
• Individuals who have been arrested or incarcerated due to drug laws, and those who have resided in areas of high poverty, suffer long-lasting adverse consequences, including impacts to employment, business ownership, housing, health, and long-term financial well-being,
• Family members, especially children, and communities of those who have been arrested or incarcerated due to drug laws, suffer from emotional, psychological, and financial harms as a result of such arrests and incarceration, and 
• Individuals in disproportionately impacted areas suffered the harms of enforcement of cannabis-related laws.

Social Equity Program - Definitions

According to the new law’s definitions in RCW 69.50.335(6):

“Social equity goals” mean (i) increasing the number of marijuana retailer licenses held by social equity applicants from disproportionately impacted areas; and (ii) reducing accumulated harm suffered by individuals, families, and local areas subject to severe impacts from the historical application and enforcement of marijuana prohibition laws.

“Social equity applicant” means:

(i) An applicant who has at least fifty-one percent ownership and control by one or more individuals who have resided for at least five of the preceding ten years in a disproportionately impacted area; or
(ii) An applicant who has at least fifty-one percent ownership and control by at least one individual who has been convicted of a marijuana offense or is a family member of such an individual.

“Disproportionately impacted area” means a census tract or comparable geographic area that satisfies the following criteria, which may be further defined in rule by the board after consultation with the commission on African American affairs and other agencies and stakeholders as determined by the board:

(i) The area has a high poverty rate;
(ii) The area has a high rate of participation in income-based federal or state programs;
(iii) The area has a high rate of unemployment; and
(iv) The area has a high rate of arrest, conviction, or incarceration related to the sale, possession, use, cultivation, manufacture, or transport of marijuana.

Social Equity Task Force

The Social Equity in Cannabis Task Force is composed of members from public and private sectors, including the Washington State Legislature, the LCB, the Association of Washington Cities (AWC), the Department of Commerce, the Attorney General’s Office (AGO), the Governor’s Office of Indian Affairs, minority commissions and organizations, a labor organization involved in the industry, and persons holding licenses in the cannabis industry. This task force is charged with making recommendations to the board (LCB), including establishing a social equity program for the issuance and reissuance of existing retail marijuana licenses and advising the governor and the legislature on policies that will facilitate development of a marijuana social equity program. See, RCW 69.50.336.

The task force meetings are open to the public. The first meeting was held virtually via Zoom on October 26. The next meeting is December 14. Information and meeting materials are available online. The task force was to complete a report by December 1, but COVID-19-related delays mean this report is now expected to be completed in 2021.

Social Equity Applicants

To be considered for a retail license under this new law, a social equity applicant submits a social equity plan along with other marijuana retailer license application requirements to the LCB. If the application proposes ownership by more than one person, then at least 51% percent of the proposed ownership structure must reflect the qualifications of a social equity applicant. Persons holding an existing marijuana retailer license or title certificate for a marijuana retailer business in a local jurisdiction subject to a ban or moratorium on marijuana retail businesses may also apply for a license under this section.

The social equity plans required from applicants address at least some of the elements outlined in subsection RCW 69.50.335(6)(d), along with any additional plan components or requirements approved by the LCB. Elements of these plans include how the applicant qualifies as a social equity applicant, the ownership structure of the proposed retail business, how issuance of the license will meet social equity goals, the applicant's personal or family history with the criminal justice system — including any offenses involving marijuana — the anticipated workforce composition, neighborhood characteristics of the proposed business location (with a focus on “disproportionately impacted areas”), and “business plans involving partnerships or assistance to organizations or residents with connection to populations with a history of high rates of enforcement of marijuana prohibition.”

Technical Assistance Competitive Grant Program

The Marijuana Social Equity Technical Assistance Competitive Grant Program is established in RCW 43.330.540. Grants will be awarded on a competitive basis to marijuana retailer license applicants who are social equity applicants under RCW 69.50.335 and based primarily on the strength of an applicant’s social equity plan. The funds may be used for technical assistance, including navigation of the marijuana retailer licensure process, marijuana-business-specific education and business plan development, financial management training, assistance in seeking financing, and connecting applicants with established industry members and tribal marijuana enterprises for mentoring. RCW 69.50.540(1)(j) appropriates $1.1 million dollars for this grant program from the state’s Dedicated Marijuana Account. 

Conclusion

This program is expected to enhance equity and inclusion in the cannabis industry. Marijuana retailer licenses available to social equity applicants are of particular interest to local governments, especially those considering whether to change current policies. We will continue to follow these new social equity developments.

Resources

• Governor’s Interagency Council on Health Disparities: Social Equity in Cannabis Task Force
• Social Equity in Cannabis Task Force kick-off meeting — recorded October 26, 2020
• MRSC topic page Cannabis (Marijuana) Regulation