OAKLAND, Calif. — On Dec. 6, 2020, the US House of Representatives passed the MORE Act, which made history by becoming the first marijuana decriminalization bill to ever get a vote on the floor of either chamber of Congress.
Besides federal decriminalization, the act includes (limited) provisions for criminal record expungement and community funding — including a 5% tax on marijuana products to fund social-reform projects, such as the foundation of an Office of Cannabis Justice.
It was hailed as a game changer. But the act was largely symbolic, and it was never debated in the Senate. Even if it is resurrected and passed, the MORE Act will not be an instant solution to the deep disparities that have scarred both criminalization and legalization. Many of the worst ills of the marijuana industry are tied to America’s long-institutionalized racism and poorly-regulated capitalism, in the face of which even well-intentioned reforms are doomed.
Just look at the precursor to and partial inspiration for the MORE Act: Oakland’s Equity Permit Program.
The MORE Act’s Roots: Oakland
In 2017, the city of Oakland launched its trailblazing permit program in an effort to increase access to the legal cannabis industry for those most impacted by prohibition. Some provisions in the MORE Act are based on Oakland’s Equity Permit Program, such as targeting loan and permit access towards mostly Black and Brown communities.
The act was co-sponsored by Rep. Barbara Lee (D-Calif.), a co-chair of the Congressional Cannabis Caucus who represents Oakland in Washington. She has pointed to her city’s focus on Black and Brown entrepreneurs as something that paved the way for the federal MORE Act — but even the permit program’s beneficiaries doubt its effectiveness.
Alphonso ‘Tucky’ Blunt (he has suggested his surname sealed his destiny) is the co-founder of Blunts + Moore, still the only equity-operated pot dispensary in Oakland. He’s unimpressed by the program’s progress.
“There’s supposed to be eight equity dispensaries open, but there’s only one. We’re the only equity dispensary open right now. That’s a problem,” Tucky told The News Station.
The logic behind the Equity Permit Program is simple but realizing its promise has proven difficult, even in a city where officials are dedicated to the cause. After recreational legalization hit California in 2016, Oakland’s City Council decided 50% of pot permits should go to people from those communities hurt most by the ‘war on drugs.’
All the heads of the big companies are corporate white cannabis. And they play hardball – they buy up all the white-label flower, leave everyone with the crumbsJessie Grundy
Applicants are deemed eligible if they meet two of three criteria. They need to have had a non-violent felony marijuana arrest in their past. Or they must prove residency for at least 10 of the previous 20 years in a police precinct with disproportionately high numbers of marijuana arrests. Alongside one of those, an applicant’s annual household income also needs to be less than 80% of the city’s median income.
Equity policies are necessary, according to a growing number of local and federal policy makers, with New Jersey Sen. Cory Booker leading the charge. The Democrat is vowing to oppose any federal marijuana reform unless it includes a robust and restorative equity program.
National surveys indicate 80-90% of legal pot businesses are white-owned. Oakland itself is 23% Black, while 82% of Oakland pot arrests have been of Black residents, even though studies indicate marijuana use is roughly equal across racial lines. Prioritizing equity applicants would appear to be a smart way of offsetting some of the racial injustices tied to the burgeoning cannabis industry.
Marijuana is Big Business — but Just For Some?
After all, California’s pot permits are wildly valuable and desperately competitive. An indication of just how valuable a foot in the door can be comes from cannabis investment company Acreage Holdings. In 2019, Acreage purchased a dispensary location and permit from a non-equity applicant with a small storefront on MacArthur Boulevard in a lower-income neighborhood in Oakland. It cost them over $10 million. Incidentally, one board member of Acreage is John Boehner — the former Republican Speaker of the United States House of Representatives, who used to use his gavel and clout to laugh off marijuana reform proposals.
That $10 million may well prove a solid investment. In 2019, California’s suppliers sold $3 billion worth of legal marijuana. In 2020, that figure grew to $4.4 billion. And with a huge amount of cash on the table, permit acquisition is one of the biggest bottlenecks keeping would-be entrepreneurs out of the industry.
Despite this, the Equity Permit Program has done little to solve the racial imbalances of the legal marijuana market.
According to statistics from the city council, at least 897 equity applications have been submitted since the program’s launch. They’ve granted around 180 of them. This does not mean 155 equity applicants are in business.
Four years down the line, Tucky co-runs the only equity-owned dispensary operating in Oakland. The retail and cultivation markets are dominated by non-equity (or ‘general’) applicants. There are other equity owners running other pot businesses (chiefly in the distribution and delivery sectors), but they are unable to access the most profitable links in the supply chain.
There’s a frustrating array of reasons for the giant mismatch between equity applicants and equity business owners.
We’re trying to address disparities and access to capital that have developed for decades, if not centuries, in an extremely challenging context of a newly-regulated market in which a large portion of businesses will failGreg Minor of Oakland’s Cannabis Regulatory Commission
The first is simply bureaucracy. Jessie Grundy is a young and almost impossibly lively equity entrepreneur (he’s now making forays into music representation, and prefers ‘magnate’) and the owner of pot distribution company Green Peakz. He had been in the black market since his teens and went legal three years ago.
Grundy explained the learning curve is close to vertical.
“The failing is that it’s a very steep curve. Most people that fail are failing because of the learning curve,” Grundy told The News Station.
Getting one of these coveted permits requires 20 years of paperwork proving residency, income, and criminal record. A Berkley report noted “city staff had never administered a program with so many documentation requirements before.” Compared to the 155 equity permits granted, 163 applications have been withdrawn by applicants who lacked funding, struggled to prove their eligibility, or changed their minds.
Those who presented a successful application found the license was just the beginning. After receiving a permit, applicants receive paperwork. Then more paperwork; then even more.
There are compliance forms to get through, business licenses, tax procedures. Applicants need to be up to opaque, industry-specific codes — meaning inspections from the police, fire department, the planning, and building department and the city’s cannabis office. Dispensary hopefuls quickly find themselves in need of lawyers, accountants, and investors. Many will also need structural engineers, architects, and compliance consultants. Costly upgrades often come next.
These are business costs most equity applicants can’t afford — a problem not shared by non-equity applicants.
Greg Minor, assistant to the city administrator and a member of Oakland’s Cannabis Regulatory Commission, recognizes the difficulties.
“If you’re coming from an environment where there’s no regulation, and you move into this hyper-regulated context, it can be a challenge for cannabis entrepreneurs,” Minor told The News Station.
These obstacles have sidelined equity applicants into less lucrative roles. Cultivation and storefront retail both require far more capital – and far more training – than most equity applicants have ever been allowed to access. The vast majority of equity applicants who have successfully opened their businesses are compelled, by necessity, into intermediary operations with a lower cost of entry, which most often resigns them to distribution and delivery.
These intermediary operations net nickels and dimes compared to the big bucks available at the two far ends of the supply chain — cultivation and retail.
Applicants Need Training
Tucky Blunt feels strongly — and stated repeatedly — that the city needs a training or education program to allow access to more profitable ventures and to prevent applicants from sinking beneath the sea of paperwork involved.
“Funding and education,” Tucky told The News Station. “What we need is real funding, and real education.”
In the program’s defense, some small training programs do exist: technical and legal assistance for applicants, shared-use facilities where business operators can learn from one another and a workforce grant program that recently began taking applications. Critics say these are insufficient. A more robust training program is (hopefully) in the pipeline, but it could be a while yet: Minor described it as a “a long-term project that we’re hoping to set up in the next year or two.”
We’re the only equity dispensary open right now. That’s a problemTucky Blunt
Meanwhile, applicants grapple with the threat of competition. While half of all permits are earmarked for equity applicants, there are two other categories of applicants: general and incubator. General applicants can come from any demographic, pay more for their permits, and wait in a long queue. Incubator applicants are also non-equity but are offered priority in exchange for ‘incubation’ of an equity applicant. To qualify, an incubator must provide an equity applicant with a rent-free space for three years. In exchange, the applicant gets a shortcut to one of those in-demand permits.
Functionally, what this often means is general applicants with enough cash to flash can purchase a spot at the head of the line. Many incubator applicants are not individuals, but instead major companies or groups of stakeholders with seemingly bottomless pockets. In one study, Berkley researchers noted “allowing general applicants to gain priority through providing incubation space…tilted the playing field in favor of bigger businesses.”
When asked by The News Station if Oakland’s pot market had less of a problem with white, corporate ownership than other cities, Tucky laughed.
“No! no, no, no, no, no. They’re there now. Corporate weed is why so many places haven’t opened yet, I believe,” Tucky said.
Minor recounted a story of one businessman, Dorian Gray — presumably named by parents unfamiliar with the book – who seemingly tried to bribe his way to a permit. Gray offered to fly Minor to Spain to meet some cannabis business partners; when Minor asked why that would be helpful, the only explanation Gray offered was that Spain had pot consumption lounges that could provide policy examples. Minor never took that trip — and not just because San Francisco and Oakland already had consumption lounges of their own. Minor believes it was a bribe. Gray has been reported to the district attorney both for this ‘gift’ attempt and another alleged $10,000 bribe.
An early presence in the recreational pot market is an opportunity — the market’s continuing to grow, and staking a claim now will pay dividends down the line. As equity applicants struggle to open, investment groups with access to compliance teams and attorneys can open shop far more quickly. In doing so, they consolidate corporate (and typically white) control over California’s nascent legal market.
It’s been happening for longer than people realize. As Minor described, discrimination has shaped Oakland’s pot retail market since medical marijuana was legalized statewide back in 1996. When the first weed businesses began to open, the ambiguity of the new laws created opportunities for discrimination. As Minor put it, across two full decades of discretionary enforcement, “there’s a lot of grey area for law enforcement to decide who’s legal and who’s not. That can lead to disparate outcomes.” There are no prizes for guessing who suffered more.
Oakland’s marginalized communities have historically been denied access to the training necessary to run a profitable business. They have also long been unable to access the necessary capital. Up against hedge funds and (rejected) flights to Spain, equity applicants simply cannot compete without funding.
Grundy explained there are so many start-up costs that, without financial backing, “it just becomes a burden, not a business.”
“You can get the license,” Grundy told The News Station, “but it’s another thing to be able to thrive, survive, compete…you wanna thrive, you need about a hundred thousand. You want to compete, you need about a quarter million to a million dollars. Without that, you’re just gonna get pushed out by general applicants.”
Grundy estimated nine out of 10 people he has dealt with in cannabis were white, male, and had a corporate pedigree.
In an effort to offset this disparity, the City of Oakland earmarks funds for low-interest loans to equity applicants – a vital policy for a program aimed at helping disadvantaged communities. Many suggest it’s still not enough to compete.
“All the heads of the big companies are corporate white cannabis,” Grundy claimed. “And they play hardball – they buy up all the white-label flower, leave everyone with the crumbs.”
He gave an example pegged to the typical loan sum: “They’re gonna be coming with like a million dollars to shop, compared to your $50,000 or $100,000.”
For those who can’t secure a city loan, the obvious solution is outside help. Many equity applicants seek out – or are sought out by – investors ineligible for the program who are willing to pony up the substantial start-up capital needed.
Tucky and Grundy never gave up any ownership of their ventures. Many others weren’t so savvy.
“A lot of these people, they go into a room and they’re offered ten grand, and that’s a lot for them,” Tucky explained. “They don’t know the value of what they have.”
In a lot of cases, investors provide insufficient support. When the equity applicant (either eventually or inevitably) grows frustrated, their investors buy larger and larger stakes: while equity applicants cannot sell their permits, they can be reduced to a bit player in their own organization.
Oakland was the first city to attempt an equity program, but other California cities followed suit since, including San Francisco and Los Angeles. Both programs are struggling too.
San Francisco has a backlog of 18-24 months for equity applicants. Applicants are required to operate their business location while completing the application, which is a financial burden few can shoulder.
Los Angeles received numerous complaints about the computer system it uses for applications, and its program is facing six separate lawsuits – five of which concern the obstacles preventing access for equity applicants. The LA Times has reported on predatory investment practices targeting equity license holders; meanwhile, compliance requirements are so steep that simply meeting security camera codes for a dispensary can cost up to $8,000.
You can get the license, but it’s another thing to be able to thrive, survive, compete…Jessie Grundy
Neither program offers loans for its participants, making these obstacles almost insurmountable.
“If you’re not earmarking money for them, you’re kind of just wasting your time,” Grundy said.
“If I could give every [equity] applicant a million dollars and an attorney, I would,” the city administrator said. “We’re trying to address disparities and access to capital that have developed for decades, if not centuries, in an extremely challenging context of a newly-regulated market in which a large portion of businesses will fail.”
“It’s extremely challenging, but it’s the right thing to do,” Minor added.
The longevity of inequity in America is deeply relevant. Equity programs reveal a fundamental truth about America’s fondness for public-private partnerships and market-based solutions to inequality: you cannot truly solve injustices created by a system while still living within that system.
Program a Failure? Or is the Problem Broader?
It’s hard to say if the Equity Permit Program is failing (it certainly has its beneficiaries), but it’s certainly struggling. Grundy and Blunt were both firm on the need for funding and education, and for good reason. A systematically disenfranchised population cannot be lifted out of poverty by 180 business permits (an unknown number of which are actually in operation). The program has lofty intentions, but it’s beset by limitations stemming from divisive politics, economic forces, and a long, painful national history of racism. Without a significant structural overhaul, America’s familiar pattern of racial discrimination and corporate profiteering will simply evolve and thrive within a new legal framework.
Oakland Congresswoman Barbara Lee and the city of Oakland have been pushing the pot envelope for years, but neither Oakland’s Equity Permit Program nor the MORE Act will heal the wounds of prohibition. Equity activists have criticized the MORE Act, pointing out many of its most radical elements relating to tax appropriations and expungement eligibility were watered down in late-stage revisions.
The News Station attempted to reach Oakland’s Rep. Lee — co-sponsor of the MORE Act and Cannabis Caucus co-chair — for comment for a number of weeks, to ask why she has touted a flawed local policy as a potential basis for national reform. Her press secretary eventually offered a statement.
“As the Congresswoman sustains her efforts to ensure racial equity, she will continue to work with her colleagues in Congress to learn lessons from equity programs all across the country, because we need to have the most robust federal programs possible to repair the lasting damages of the war on drugs,” it read.
One can but hope Congress is, indeed, learning lessons from local equity programs. However, it seems one of the primary lessons to be learned is the fundamental insufficiency of market-based solutions. Effective change may be impossible without a major legislative overhaul. Without any reform of the system that created the problem in the first place, city officials here in Oakland (and across the nation) are left placing band-aids where entire limbs have been amputated.
Legalization in California is undoubtedly an improvement over criminalization, but it’s still failing to curb inequality. Those who were locked up during criminalization are now being locked out of legalization. The material inequality that deepened during cannabis prohibition has become a factor that now is limiting the opportunities available to victims on the other side.
Meanwhile, a few of those who inflicted the most suffering are now cashing in. John Boehner is an extreme example of this, but an appropriate one nonetheless: the good standing of anti-pot Republican politicians — some of which, like Boehner, are now in powerful positions within the industry — corrects none of the historic injustices at play. The playing field is far too tilted. In Oakland, it has become clear that even the equity system still disproportionately benefits those with capital and connections behind them.
The program is, fundamentally, a good thing. It has done more good than harm, even if the margins are slim — and it shows a willingness to engage with the deeper issues around legalization.
If little else, it’s a rejection of the criminalization of a community. For his part, Jessie Grundy is “glad to be an example that felons deserve a second chance.”
That said, it does not offer truly equitable opportunities for Oakland’s forgotten and criminalized communities. The opportunity to deliver white-grown weed to white-owned dispensaries does not constitute drug war reparations — or even basic equity.
Just ask Tucky Blunt, who has said it time and again: “what we need is real funding, and real education.”