An Unprecedented Opportunity for Cannabis: What’s Happening with Washington’s Social Equity Program

Purchasing Cannabis from a dispensary

Mistakes were made.

That was the assessment the state’s Liquor and Cannabis Board (LCB) made in 2020, eight years after Washington voters approved Initiative 502, which legalized recreational marijuana in the state; six years after the first marijuana retailers were licensed; four years after the state stopped issuing new retail licenses; and three years before the state would try to correct its mistakes.

For many, especially people of color, marijuana had for years meant incarceration, destroyed families, and uprooted lives. Today, the substance is mostly a great way to get rich without the same risk, and especially if you’re white.

Black Americans were 3.73 times more likely than whites to be arrested for marijuana, according to an ACLU analysis of 8.2 million marijuana arrests between 2001 and 2010. Yet today the opposite is true of people whose lives benefited from the plant—a survey of Washington cannabis retailers revealed that 82 percent of the owners who control Washington’s $1.3 billion legal marijuana industry identified as white.

In 2020, the attempt to diversify the state cannabis industry and make amends for the racially disproportionate impacts from the war on drugs began in earnest with the passage of a new state law, HB 2870, “which created pathways for those disproportionately harmed by the war on drugs to potentially gain a license for retailing cannabis,” according to the state LCB.

In practice, those pathways meant creating a Social Equity Task Force, which earlier this year announced it would make 44 retail licenses available “to individuals disproportionately impacted by the enforcement of cannabis prohibition laws.” Since 2020, the LCB has held in reserve licenses that were forfeited, cancelled, revoked, or never issued.

Though Washington was late to the game in creating its Social Equity Program for cannabis businesses, it’s among the minority of states that have done so at all. Out of 37 states that have legalized cannabis, the Minority Cannabis Business Association National Cannabis Equity Report found that just 15 states also have a social equity program.

Washington’s program creates an unprecedented opportunity simply by making new retail licenses available at all. The LCB has not accepted new applications for retail licenses in almost a decade, having reached the caps established by state law (first in 2014 and then again when the cap was raised in March 2016).

Legislation currently working its way through Olympia could further expand the program and the unique opportunity. But as of this writing, once the available social equity licenses are gone, they’re gone. Which can make any hiccups in the application process all the more difficult.

“In 2016, you had to prove that you didn’t have a criminal history” said Heidi Urness, chair of the cannabis practice group at McGlinchey Stafford. “Now you gotta prove that you did.”

To qualify for a license, an applicant must have resided in the state for the previous six months, hold at least a 51 percent controlling interest in the business, and meet two of the three additional criteria that they lived in a Disproportionately Impacted Area (DIA) for a minimum of five years between 1980 and 2010, they or a family member were arrested and convicted of a cannabis offense, and/or they have a household income less than state median of $82,400.

One problem, according to Urness, is that the Social Equity Program targets folks who may qualify but can have a hell of a time proving it. For instance, an individual who has had unstable housing (which can be the result of a conviction) will find it difficult to establish a documented residence in a DIA.

“I’m having people go and get declarations saying that they were taught by someone 30 years ago,” Urness said of clients who want to open a cannabis retail business, but don’t have documentation proving they lived in a qualifying area anywhere from 13 to 43 years ago. “We’re really struggling to find people who can vouch for these elements.” And she worries that similar complications could result in some of the coveted licenses going unclaimed.

The LCB doesn’t seem to share that worry but acknowledges that bureaucratic hurdles could necessitate providing more time to applicants. LCB Communications Director Brian Smith told NWSidebar that each of the license applications will receive a ranking score. While there may be some applications that don’t meet the qualifications or get scored high enough to win a license, Smith said it’s unlikely the LCB won’t award the full batch of social equity licenses. He noted that a recent LCB training drew hundreds of attendees.

The LCB is working alongside the state Department of Revenue, which is tasked with approving the business licenses (separate from the license to sell cannabis products) under which applicants need to open a cannabis retailer. However, that department’s backlogs have created a bottleneck for the Social Equity Program. LCB staff have requested that the board extend the application deadline to April 27 “out of an abundance of caution and fairness to those applicants seeking to form a business entity, staff will propose the extension.” The extension request is scheduled to go before the board at its March 29 meeting.

On another front, Washington’s SB 5080 would, among other tweaks, extend the Social Equity Program through 2032. The bill had passed the Senate and was working through House committees as of this writing.

For now, Urness is urging anyone who thinks they can apply for a license to do so, and for other legal professionals to inform their clients and make sure they at least make a bid for this unprecedented—and potentially one-time only—opportunity.

“If you’ve got clients who are eligible and you’ve got $250, this is an unprecedented possibility, especially if you’ve suffered any of these wrongs,” Urness said.