Written by Bianka Anguiano | Published in partnership with Weed Queens.
This article was originally published on April 26, 2020
Edited by: Kimberly Morris and Melissa Hutsell
Let’s be real, the cannabis industry is not as friendly and diverse as it claims to be to people of color.
As an $11 billion industry monopolized by men and huge corporations, it’s not surprising that less than a fifth of cannabis business owners identify as racial minorities, according to data from MJ Biz Daily and BDS Analytics. Why aren’t there more Black, Indigenous, people of color (BIPOC) opening dispensaries or starting cannabis businesses?
A number of factors add to the lack of funding opportunities available for BIPOC, including the fact that cannabis remains a Schedule I drug and is federally illegal; a growing racial wealth gap; criminal records; and a lack of formal skills or expertise in the industry.
But the biggest issue BIPOC face when trying to break into the cannabis industry is money. BIPOC don’t have enough of it and don’t have generational wealth on their side as a source of financial support, according to the Economic Policy Institute. These factors make it especially difficult for BIPOC to get a cannabis business off the ground, considering the mountain of costs associated with starting a new business.
According to data from MJ Biz Daily‘s 2017 reader survey, 81% of canna-companies are white-owned.
In order to grow and sell cannabis legally, an application must be filed to attain a license. In California, that can cost up to $120,000, reports the Bureau of Cannabis Control (BCC).
After adding business insurance, security, legal fees, taxes, marketing and rent; opening and running a cannabis business can cost millions of dollars, which is why BIPOC more often seek investors or banks for financial support.
However, banks and investors are hesitant to jump into this market, as cannabis remains a Schedule I drug under the Controlled Substances Act. Both banks and investors that choose to do business with a cannabis company run the risk of being criminally prosecuted for, “aiding and abetting,” a federal crime as well as money laundering.
According to Cova, staffing alone can cost upwards of $250,000 per year.
A growing wealth gap between Black and white Americans is an added factor that contributes to the challenges of funding for minority business owners, primarily in the cannabis space. The wealth gap measures the difference between the median wealth of Blacks versus the median wealth of whites. Wealth can be calculated by adding up total assets such as cash, retirement accounts, home, etc., then subtracting liabilities, which can include credit card debt, student loans, and a mortgage among others.
The total is going to yield net worth—arguably one of the best indicators of financial health. As of 2016, the average net worth of white families was almost 10 times more than of black and Latino families, finds Pew Research.
According to the Economic Policy Institute, “more than one-in-four Black households have zero or negative net worth, compared to less than one-in-ten white families without wealth.”
Without money to fund a costly cannabis business, BIPOC are falling behind in the cannabis industry and opportunities to make a profit as the wealth gap continues to widen.
According to data compiled by The Washington Post, white Americans have higher median incomes than Black and Hispanic Americans.
The legalization of cannabis has not stopped unjust and disparate policing of cannabis users, which has impacted the chances of the legal participation for BIPOC in this market.
According to the American Civil Liberties Union (ACLU), “marijuana use is roughly equal among Blacks and whites, yet Blacks are 3.73 times as likely to be arrested for marijuana possession.”
This distressing statistic puts BIPOC at a disadvantage for participation in the industry. In many states where cannabis is now legal, past convictions from a participant and/or the participant’s spouse may disqualify them from applying for a cannabis business license, making participation in this market extremely difficult for communities who were targeted and affected most by the war on drugs.
Despite these many barriers, we’re starting to see an increase in opportunities aimed at leveling the cannabis playing field. There are a number of organizations, like the Minority Cannabis Business Association (MCBA), dedicated to providing equity programs and resources for alternative funding, holding workshops to help BIPOC develop and strengthen their business skills, and leading movements to expunge cannabis records and decriminalize cannabis and organizing.
There is still a lot of work to do in order to make this industry an inclusive and diverse one, but together we can build a market that welcomes diversity instead of pushing it out.
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