Can California’s Legal Marijuana Industry Undo The Damage Of The Drug Wars?

Capital & Main is an award-winning publication that reports from California on economic, political, and social issues.

The summer mixers had not done the trick. Last year Oakland, California, which was launching the partnership component of its groundbreaking Cannabis Equity Assistance Program, found that City Hall meet-and-greets between the street-level victims of the war on drugs and those who had gotten rich by growing and supplying marijuana, weren’t going to instantly result in legal-weed dealmaking whoopie.

As part of California’s 2018 adult-use marijuana legalization, Oakland sets aside half of its marijuana business permits to grow, test, manufacture, transport, deliver and dispense pot to “equity applicants”–newly up-from-the-underground residents who make up to 80% of the city’s median income ($53,000) and either have “a cannabis conviction out of Oakland or [have] lived for 10 of the last 20 years in police beats that experienced a disproportionately higher amount of law enforcement with respect to cannabis.” The city’s cannabis equity program has a tiered qualification system, as do California’s other three existing programs in San Francisco, Sacramento and Los Angeles.

Oakland’s cannabis equity program may have gotten off to an awkward start, but that hasn’t stopped the idea of equity in adult-use marijuana economies from spreading even beyond the state. However, if this bold concept is to cohere into a concrete approach that can work both statewide and nationally, the challenges of addressing wildly mixed signals at the federal level, relations with the still-illegal cannabis market–whose economy and membership dwarfs legal weed in size—and embedded bureaucratic forces must be overcome.

“General applicants” (the mostly white entrepreneurs who have conducted business at a remove from Oakland’s worst drug war suffering) gain improved marketplace access by partnering with equity applicants–who are mostly black, but not always. Cannabis Equity bureaucracy most shared asset is physical space–which the moneyed entrepreneurs can offer the city’s disadvantaged pot businesspeople. Cannabis equity can appear to be the nearest thing, conceptually, to reparations in America.

Still, last year’s City Hall mixers had failed to create much chemistry between the cannabis haves and have-nots. Darlene Flynn, the city’s director of the office of Race and Equity, realized that between the mixers’ interactive awkwardness and municipal government’s usual bureaucracy, Oakland’s cannabis office would have to farm out the matchmaking.

“We needed some tools for helping people meet,” Flynn would later acknowledge in an email.

Rising Tensions Between Underground And Above-Board Sales

No state has a relationship dynamic remotely like the one between California and marijuana. We officially consume 2.5 million pounds of the drug each year, more than any state. California produces approximately 15 million pounds annually. This means that, even before dipping its toes into the uncharted waters of restorative justice, the legal weed market must contend with vast market and political forces. While an illegal market nearly six times the size of the legitimate marketplace comports itself in the shadows, fewer than 10 percent of the state’s adult-use market is legal. Tensions between the cannabis underground and California’s above-board pot sales haven’t been more tense than in recent memory.

Still, governments had begun to follow Oakland’s lead in assuring that the newly legal marijuana market will be open to historically discriminated-against populations. Oakland earmarked nearly $3.5 million in interest-free loans for those whose experience with pot had been demonstrably more toxic than those of white residents.

Ohio, Florida, Pennsylvania, Massachusetts and Maryland all have cannabis equity programs in development, under those states’ medical marijuana laws. Advocates from all over are studying the approach.

“I used the work on equity in cities like Oakland, as both a technical starting point and conceptually,” says Massachusetts Cannabis Control Commission Shalene Title, “to wrap my head around how to approach the question of equity in the context of the war on drugs.”

Oakland isn’t the only California city playing in the cannabis equity space. In San Francisco, all new permits, with a few nuanced exceptions, are run through that city’s Equity Program—for cultivation, manufacturing distribution, testing and retail. “Not until 50 percent of each permit category reflects permits from the Equity Program will permits become available for new business,” says Nicole Elliott, director of San Francisco’s Office of Cannabis.

Los Angeles has started its Cannabis Social Equity program, while Sacramento is preparing to launch Cannabis Opportunity, Reinvestment and Equity. These programs are primed to issue permits before 2018 is done. Among the 34 California legal adult-use cities — 12 percent of the population — is Berkeley, which has a cannabis equity program in development.

But as the newcomers amended Oakland’s program, the founding municipality was still contending with the matter of hooking up general and equity applicants. Early in the fall Darlene Flynn asked two volunteers with the innovation nonprofit Open Oakland, Richard Ng and Angela Gennino—respectively, a social impact consultant and an information architect—to build a digital tool.

Last August the pair began developing a back-end software application. Throughout the fall of 2017 there were mock-ups and beta tests.

“The concept was, really, a dating site,” Ng, told me over breakfast at Awaken, a café just around the corner from City Hall. The code beneath the weed biz interactions was about the same as Craigslist. Functionally, “CannaEquity,” as the site would be called, was brass-tacks eHarmony. Instead of the user’s “Status,” pot entrepreneurs list their Application Stage: “Not submitted yet”; “Submitted”; “Received an inspection card.” On the Partner Search page, rather than the object of consideration’s profession, their type of business is put out there: Cultivation or delivery, dispensary or distributor–you damn sure wouldn’t want to be in bed with someone who doesn’t know the difference.

“The most important qualities in an equity partner are: honest and open communication and an ability to learn and grow as a partner,” writes CannaEquity user ecooke, a cannabis manufacturer and distributor.

“I’m The Poster Child For Cannabis Equity”

Rolling up among the site’s Potential Partner Profiles was Linda Grant, 48. Mother of six, grandmother of two. Purveyor of marijuana since eighth grade. Possessor of one felony. She was looking for a partner in her non-storefront dispensary — a delivery service. The cost of renting space in the East Bay would be the difference between her working legit or returning to the black market.

“I’m the poster child for cannabis equity,” Grant said in a telephone interview.

Though educated largely in the local weed trade, Grant clandestinely moved, by her estimation, millions of dollars of the stuff that now fuels the Green Rush, as Wall Street calls it. She started at the age of 12, dealing out of the girl’s bathroom at Elmhurst Junior High School. Instead of advancing through high school, Linda Grant sold weed.

She worked for her older brother. The cops once busted her for a $5 bag of weed. Of course her brothers were arrested and did time, too. Years ago, she spent time at Alameda County’s Santa Rita Jail for dealing. She was pregnant. Thereafter, she would pull back on her participation in the marijuana marketplace.

“I didn’t want to lose my kids,” Grant said.

The people trying to connect with Grant on CannaEquity.org shared few such stories. That chasm is an open and ugly secret among Americans who’ve chosen to look. Last year, Oakland produced a report showing that 77% of cannabis-related arrests in 2015 were black people, who in that year made up around 30 percent of the city’s residents. (At the height of the government’s drug crackdown, the city’s population was about 10 percent blacker than it is today.)

People of color who’ve been anywhere near the $7 billion North American cannabis industry still share Buzzfeed’s 2016 reporting—based on 150 interviews with dispensary owners, sales people and cannabis insiders—about the unbearable whiteness of the U.S. game. About three dozen of the 3,200 to 3,600 American storefront marijuana dispensaries–among the more scaleable categories in cannabis–were black in 2016.

Three dozen. The prevalence of black celebrity brands and frontmen can make the industry seem racially diverse when it’s actually profoundly exclusive. Since the jazz age, black people have been foundational in the development of American cannabis culture, and that fact makes the low stat especially egregious.

A Cannabis Industry That Is Overwhelmingly White

Although she was looking through CannaEquity for a partner to provide her space for an office and inventory storage, Grant already had a partnership with the Hood Incubator, a local nonprofit with Ivy League credentials that at its outset sought only to improve the presence of brown and black people in a cannabis industry that, according to Marijuana Business Daily, is 81% white.

The aspiring entrepreneur had made the connection with Hood Incubator cofounder Lanese Martin before there was a website or even the City Hall mixers. In 2017 Grant posted on Facebook about a scarcity of grass for purchase on Oakland’s streets. Instead of a mere comment on how to score quickly, she found herself talked into attending an open house for Hood Incubator. It was here that she began seriously entertaining the idea of wading into legit waters.

“We want you to own a business,” Grant said Martin told her.

Grant was unsure whether the neighborhoods she’d lived in, going all the way back to Elmhurst, had been city-designated as unfairly policed. Perhaps equity wasn’t for her. She thought longer on the matter, figured she was indeed an eligible resident, and then tracked down records to prove it. More paper chasing followed. For six months Grant attended pro bono legal workshops put on by lawyers affiliated with Hood Incubator. (Beyond the development of marijuana enterprises, Hood Incubator was beginning to expand its scope to include criminal-records expungement clinics and business workshops, as well as policy development for local municipalities. The tech company Haze entered into a million-dollar partnership with the incubator earlier this year.)

Grant was incubated–given commerce-minded nurturing–twice, by Martin and her crew. The office space and legal access took the street dealer’s concept for a delivery business, Herbin Collective, from sketchy idea to business reality. A journey that began with one “Where the weed at” shoutout had evolved into a credible business plan, one that looked to be finalized in time for California’s adult-use legalization date, January 1.

CannaEquity had been up and running by December, 2017. A crush of participation followed. Gennino and Ng knew they had a hit matchmaking site on their hands when ancillary businesses—CPAs, attorneys, security companies—began popping up on the site. In the first quarter of the year, 300 equity applicants were currently on cannaequity.org, with about 600 suitors.

Would-be bride Linda Grant linked up with Americann, a B-Corp company that bills itself as “a national leader of sustainable cultivation and processing infrastructure for the medical marijuana industry.” Its flagship brand is Gummi Cares. The edibles company wanted to hook up with Herbin Collective.
It was something like a love connection. Gummi Cares offered Grant 1,000-square feet near the city’s airport to help get Herbin Collective off the ground. As business rentals in Oakland go for more than $50 per square foot, she was instantaneously with that plan.

“I wouldn’t mess with anyone else,” Grant told me over the phone. She focused on getting her delivery service in compliant, above-ground business for her March 1 launch. Meanwhile, Americann would get to move its cultivation and processing operations ahead of those outfits that lack newly-privileged partners such as theirs.

“The incentive was very high for the general applicants,” Gennino said, “because they want to get pushed to the top of the list.”

“I’m In A Fish Tank Full Of Shit”

Speed bumps on this road to utopia began popping up in February. While San Francisco was sparking a national trend by expunging felony convictions, Oakland’s earmarked $3.4 million in no-interest loans was failing to materialize. And Linda Grant was scrambling. Yes, she had the physical space provided by Americann and Gummi Cares. Her product would be purchased on consignment, so that wasn’t a primary concern. But there were branding and peripheral startup costs to going legit that were making the March 1 dispensary opening date seem less realistic. On CannaEquity.org there had been numerous come-ons from general applicants. Yet Grant felt they sought her partnership for her oppressed face, not to fully embrace all that Herbin Collective might become.

It’s innocent in a way that only those completely outside the cannabis industry can be innocent, the notion that one’s partners have to like you for you.

Transitioning street dealers, “have the business sense of cannabis, but maybe not of the environment,” Hood Collective’s Martin told me by phone. “You have to understand what the weather patterns will be.

“You engage white people you don’t like all of the time,” she continued. The trick is figuring how to engage those at least complicit in your social marginalization. Ten thousand dollars short and less than two weeks out from Herbin Collective’s launch date, Grant’s outlook had taken a turn for the fatalistic.

“I’m in a fish tank full of shit,” she said in a February 18 phone interview.

No Money To Give Out At First

When I passed on word last month that the program was, in the words of one critic, “in a slump,” Darlene Flynn’s assistant administrator, Greg Minor, claimed not to know the meaning of that assessment. This month Flynn acknowledged that the $3.4 million in loans that was to sustain the program had not materialized.

Minor explained that the first loans will come from future cannabis tax revenue, “so there was no money to give out at first.”

“We wanted a sufficient baseline amount, $3.4 million, which was how much our non-cannabis small business commercial loan program requires to serve 30-35 businesses, for the loans to be meaningful,” he explained in an email. “Now that the cannabis tax revenue has been collected we are working on selecting a consultant to administer the program and begin implementing the revolving loan program later this year.”

“We are just beginning to put that part of the program together,” Flynn wrote in an email. “It is phase two because it has to be funded by new cannabis revenue and we are getting close.”

“Close” is the difference between lightning and a lightning bug when one’s trying to ride the 2018 cannabis wave from blueprint into an actual business. In the Trump era, close is a risky thing to be. Some have taken this month’s news that the White House promised to pull back on interference with state marijuana laws as a sign that threat is diminished and improved relations with banking are ahead. Others remain wary.
“The President has made numerous promises to the the public and then failed to deliver on those promises over and over again,” said Elliott of San Francisco’s Office of Cannabis, “either by walking back his promise or not succeeding in getting Congress to deliver.”

But there are other considerations, too. One municipal cannabis administrator told me that a strict reading of federal policy could make it difficult for jurisdictions to provide funding through loans to new operators in some circumstances, “because at the end of the day, everything associated with cannabis has a tinge of risk based on the federal government’s stance.”

“If that funding,” the official continued, “is focused towards meeting the rigorous regulatory standards established by the state, then it could present less of a conflict with federal policy, but loans spent on other things could potentially prove to be a bit more complicated.”

So, the feds are a hindrance to the empowerment of cannabis entrepreneurs. But what about that overwhelming California weed wealth: The illegal marijuana market. Multiple seasoned—although presently unpermitted— California marijuana figures told me throughout the reporting of this story that the four cities with equity programs are hamstrung by their lack of relationships with black market marijuana. Old illegal pot people know people who know people who can barter goods and services, and Hood Incubator, for all its unique set of skills and great above-ground network, cannot access this tantalizingly low-hanging, multimillion-dollar fruit.

Struggling Amid The Green Rush

With too many California legal dispensaries closed or slowed by paperwork, early 2018 was a fine time for unsanctioned pot. That any up-and-comer might be struggling in the midst of the Green Rush would be laughable were it not so sad.

That’s the take of 20-year cannabis vendor-space vet Chip Moore, owner of the 4&20 lifestyle brand and delivery service. He applied for a dispensary application last year, but didn’t qualify for equity status. Veteran business people like Moore are shouting that California’s storied tradition of pot independence and innovation is being ignored in this process of creating equity. These critics say that a dramatically-improved road to compliance must be established, so that, beyond the loans that entrepreneurs like Linda Grant spent the winter waiting on, pot’s illegal mainstream can contribute ideas and—most importantly—meaningful amounts of space in which to develop their businesses.

“It can’t just be a thousand square feet. That does not equal equity within cannabis,” Moore told me at his Westside warehouse, his baritone gravelly from years of cannabis enthusiasm. “It creates a sharecropper system for young black people, where I’m giving you a thousand square feet to compete in one of the most competitive cannabis markets in the world.”

Beyond the malleability of land value in cannabis industry terms, there’s the inherent punishment that comes with rewarding only those who dwelled in demonstrably over-policed Oakland or who managed to elude arrest there. If cannabis equity programs are to ever be more than a fig leaf, this built-in bias will need to be addressed on a statewide basis.

“This system they created is punishing the cannabis industry, not the police,” he said. “I’m a black man, underfunded, undervalued in the market, but I live in Berkeley [Oakland’s northern neighbor]. I don’t get the point allotments to become an equity applicant and participate in the program. I have to go up against the big-money guys.”

Open Oakland’s Angela Gennino described the purpose of cannabis equity as being “to right a wrong and change the balance.” The notion is lofty, the means to achievement simultaneously complicated and mundane. By press time, Linda Grant’s Herbin Collective was not yet more than a name on the internet.