A decade after Washington legalized recreational cannabis, people of color remain locked out of the multibillion-dollar industry, with some calling the state’s new efforts for inclusion a late start to an already finished race.
Set up against a backdrop of racial protests that gripped the United States in 2020, the Washington State Liquor and Cannabis Board’s belated social equity program is finally expected to roll out in March. Black and brown business owners, however, point out that problems of access to capital, place-making, technical know-how and licensing persist.
Washington’s struggle with social equity in the industry is not unlike the struggles of other states that have legalized marijuana, said Caislin Firth, an instructor in psychiatry and behavioral sciences at the University of Washington, whose research focuses on cannabis legalization and racial disparities across the country.
“What is distinct is that it took so long for these conversations to start and then from the time it started, it’s been a couple years now and we’re only now getting close to its rollout.”
When Washington legalized the recreational use of cannabis in 2012, social equity was not a priority in its regulation framework. LCB proposed legislation to increase diversity in the industry in the fall of 2019, which was passed by the state Legislature in early 2020. It went into effect in June 2020, a month after George Floyd’s murder and the COVID-19 pandemic laid bare disparities that sparked a global wildfire of racial reckoning.
When Washington legalized the recreational use of cannabis in 2012, social equity was not a priority in its regulation framework. It became so only in 2020, months after George Floyd’s murder and the COVID-19 pandemic laid bare disparities that sparked a global wildfire of racial reckoning.
That year, the cannabis sector contributed $1.85 billion to Washington’s gross state product and directly and indirectly supported 18,700 full-time jobs.
In 2021, pot sales hit an all-time high of over $1.5 billion, data from the LCB shows. In fact, on average the industry accrued over $1 billion in sales annually over the past five years.
Yet a yawning gap persists between who receives and who is refused a share in this windfall.
Over 82% of 484 licensed cannabis retailers statewide in 2020 identified as white, according to the LCB’s survey. Asians followed thereafter with 7%. Black retailers received 4% of state-issued licenses.
Washington set up its recreational use cannabis industry through a lottery-based system for license distribution. The more tickets purchased, the higher the chance of securing a retail license for the desired county. In other words, greater access to capital meant a greater chance of securing a license in the densely populated Puget Sound region with better profits.
This has led to no Black-owned pot shops in Seattle, where there were 53 active licensed cannabis retailers as of 2021, according to LCB data. The closest is located in the unincorporated area of Skyway. One Latino-owned store is located in Pioneer Square.
Data on employee demographics is harder to come by.
Unlike Massachusetts, where state regulations track the demographics of workers in the cannabis industry, Washington currently has no plans to collect such data, leaving an important piece of information absent from the discussion.
These statistics stand in stark contrast to who is arrested on cannabis-related charges. Even after legalization, Black people in Washington are twice as likely to be arrested for possession and consumption of cannabis compared with their white counterparts, according to a 2020 ACLU report. In northern Whatcom County, the disparity is striking: Black people are nine times more likely to be arrested than white people.
For now, the LCB says its efforts are primarily focused on redistributing over 40 retail licenses that were forfeited or unused to applicants, including formerly incarcerated individuals from areas disproportionately affected by the war on drugs. Applicants with a criminal history were previously not allowed to participate in the industry.
But even with this redistribution, over 70% of cannabis businesses will remain white-owned.
The current social equity plan focuses on retail, though disparities in the cannabis grower and producer industry are as bad, if not worse. As of June 2021, Washington has nearly three producer/processor licenses for one retail store, creating an imbalance that has caused some cannabis producers and processors to struggle with product surplus.
“The best opportunity for social equity licensees to achieve success is in the retail tier,” said Brian Smith, the board’s spokesperson.
Admitting the solution does not adequately resolve these disparities, the LCB is proposing legislation this session to allow the board to issue a modest increase in social equity licenses over the coming years, Smith said.
Currently, nearly 60% of the licenses up for grabs in March are in counties where the sale of cannabis products faces bans or moratoriums, according to the task force report. Though Washington state decriminalized the recreational use of cannabis over a decade ago, its implementation relies on local jurisdiction laws, creating an uneven landscape of where businesses can actually establish themselves and let the social equity program take root.
In 2014, Paul Brice, a Black Asian American owner of Happy Trees, a cannabis store in Cle Elum, Kittitas County, unsuccessfully entered the lottery for a license in his hometown, Tacoma.
For his shop in Cle Elum, Brice, a prominent cannabis entrepreneur who serves as an advisory member of the LCB’s social equity task force, says the local council’s back and forth on allowing the sale of cannabis led to a loss of thousands of dollars before Happy Trees could even open.
To circumvent these local restrictions, the LCB said it issues retail licenses by county though it admits the bans and moratoriums still pose a challenge to the program.
Another obstacle, especially in counties where cannabis sales are fully legalized, are limits on the number of retail stores that can be set up in a given county. Local buffer zones around parks and schools also hinder prospects for business owners of color already struggling for access to capital and space.
The LCB says its hands are tied on local caps as the law authorizing these limits, and how it might be increased, is under the state Legislature’s authority. The board cannot increase the number of licenses specifically for social equity applicants without legislative action.
In addition to inadvertently supporting the illicit market, a low number of retail stores leads to an unhealthy market dynamic, the task force observed in its report. Citing the work of economists, the panel said Washington’s current policies restricting retail licenses give retailers undue power, creating a market that operates like a monopoly.
“Although the Legislature took care to prevent monopolies through the ban of vertical integration, the lack of retail stores is creating a similar dynamic,” the task force said. “Small businesses are being consumed and wealth is being collected by fewer and fewer companies. In this current system, small businesses created by social equity applicants are unlikely to thrive without a pointed effort to correct for these unintended consequences.”
Black businesses are also wary of moving to Eastern Washington, despite these areas reporting an average per capita purchase of cannabis products nearly 10% higher than west of the Cascades. Most of Washington’s Black residents live in the Puget Sound region, and going east would entail leaving their support networks for insular rural communities, where many say they do not feel welcome or safe.
“You want to have your own kind, a more secure environment,” Brice said. “And when you’re not selling weed, if you want to see anyone that looks like you or hang out with stuff that’s close to your culture — good luck if you’re in Yakima or good luck if you’re in Kennewick.”
Setting up these businesses outside densely populated regions also means less access to a diverse pool of employees, said Darlene Conley, a criminal justice professor at Saint Martin’s University. She and her husband own one of less than a handful of Black cannabis production companies in Washington.
“We’re committed to helping ‘spread’ the wealth in our community and provide jobs and if we moved east, no money would be flowing into our community,” she wrote in a letter to the task force.
The market size for these businesses also plays a key role in determining the benefits versus the cost. “Right now in Cle Elum, I’m selling to a population of around 2,000,” Brice said. “If I was in Tacoma, I would be selling to a population of over 200,000 — there is no comparison.”
From the get-go, policy makers knew a license in Seattle would be intrinsically more valuable than a license in, say, Moses Lake, said Aaron Barfield, president of the Black Excellence in Cannabis association.
“At this point, they’ve locked us out of all of the licenses that are in areas where we’re from and where we already had our businesses and lives,” he said. “They want to play this game like they’re trying to do something to help us win when they were the ones who created the situation that locked us out in the first place.”
For many businesses of color, surviving in the industry, as it is currently set up by the Liquor and Cannabis Board, is not easy without the support of generational wealth.
While Brice’s previous work in the real estate industry helped him navigate the bureaucracy of setting up a pot shop, his experience was still fraught with challenges of discrimination and the absence of generational wealth.
After finding a suitable property to lease, the application process takes months, sometimes even a year to process, he explained. “In the meantime we’re just paying rent on an empty property and it’s no small amount. We don’t have spare family property lying around to list on our application as some of our counterparts do.”
Too often, the lack of capital has kept business owners of color scrambling to keep up with the evolving regulation of cannabis sale and consumption.
“When there isn’t precedent or a guidebook from other states, you’re really chartering into the unknown,” said Firth, the UW instructor. “And every time you implement fixes or changes to the system, it has huge ramifications and downstream effects on small businesses.”
To address some of these challenges, the new social equity plan offers technical assistance to business owners of color to keep up with changes.
Many say, however, that these are piecemeal solutions for disadvantaged entrepreneurs looking to enter and stay in the industry. With a federal ban on cannabis still in place, these businesses cannot access regular bank loans and financial support from formal institutions. Even after the ban is lifted, social equity applicants with a criminal background may still struggle to get loans.
The task force also says technical assistance is “inadequate,” pointing out that of the $500 million the state collected in taxes from pot sales in 2021, less than 1% was allotted to the Technical Assistance Mentorship Program. The panel drew comparisons to other states, like Illinois, California and New York, where low-interest social equity loans and business grants are offered as solutions to sidestep concerns about the use of public funds for private businesses.
For Washington, the task force has recommended financial assistance for social equity applicants from designated, disproportionately impacted areas. But the LCB reiterates this would require legislative action.
Several times in her letter to the task force, Conley emphasized that social equity is good for the industry. “Having a few more BIPOC owners does not disadvantage or take anything away from the majority population,” she wrote, referring to Black, Indigenous and people of color. “[It] will benefit white cannabis businesses and not present serious competition.”
The heavy surveillance and hardship that business owners of color can encounter, in an industry rife with painful memories of overpolicing and incarceration, has left a bitter taste of distrust and frustration. Their experiences convince them the system intends to subvert any opportunity for reparations.
“They’ve worked actively to basically sabotage any efforts that we, the Black pioneers who actually built the foundation for the multibillion-dollar cannabis industry, make to go forward and own any stores,” Barfield said.
The race was rigged from the start, he said.
Editor’s note: An initial version of this story has been updated to include more information about the timeline for when legislation was proposed by the LCB and when it was approved by lawmakers.