Black People Face Big Barriers Entering the Legal Weed Industry

The marijuana business is booming in the US, but the high costs of setting up legal weed operations are shutting out many black and brown entrepreneurs.

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Sep 20 2018, 8:39pm

Amber Senter, a weed activist and founder of Supernova Women, is fighting to get more women of color into the legal marijuana industry in California. Photo courtesy of Amber Senter

Amber Senter, cofounder of Supernova Women, an organization meant to empower women of color entering the marijuana industry, thought she had finally hit the marijuana jackpot—and she kind of had.

In January, the City of Oakland handed out permits for brick-and-mortar marijuana businesses through its new equity program, which aims to give those most affected by the war on drugs a shot at entering the lucrative business of legal pot. Senter’s business partner, Cesar Angobaldo, had a preliminary agreement to open a dispensary with one of the four lucky equity winners—a black East Oakland native and personal trainer named Marshall Crosby who has been trying to break into the industry for nearly 15 years.

That partnership represented a solution to the exact problem that Oakland's equity program is trying to address. While the legal weed business in the US is currently an $11 billion industry, less than a fifth of marijuana business owners identify as racial minorities, including the 4.3 percent who are black. With this deal, the new business would be one hundred percent minority owned. Senter and Angobaldo could provide business guidance and access to capital, while Crosby could finally become a marijuana business owner.

But what started as a potential form of micro-reparations—black people are 3.73 times more likely to be arrested for marijuana offenses in America than white people—quickly grew murky. Months after the lottery, Crosby decided to partner instead with a white-owned chain from Seattle, Have a Heart, and pull out of the non-binding contract. “The relationship ended as soon as Marshall pulled out,” said Angobaldo, “two weeks after the lottery.”

Senter and Angobaldo believe that change of heart comes down to money. “They have more money than me. It’s big interests leveraging this program that was designed to bring equity,” said Senter. Crosby acknowledges that the decision was partly financial, saying “I assume they'll offer access to more resources.” He also says that Have a Heart has been easier to work with. “Have a Heart allowed me to make decisions and they weren't trying to control everything.”

How the racial wealth gap hurts entrepreneurs of color

The problem of financing is a big hurdle for anyone trying to get into the legal weed business. Before legalization, anyone with some marijuana seeds, pots, lights, and a fan could grow pot plants indoors for as little as $100 and start selling it, with professional operations starting around $70,000. Now, if you want to sell pot legally, you need to get a license, which can cost up to $120,000 depending on the size of your business. Throw in legal fees, insurance, space rental, marketing, and taxes and your costs can balloon into the millions of dollars.

As the racial wealth gap increases, with white families having 10 times the net worth of black ones in the US, and black business owners far less likely to get loans, that financial barrier can be especially hard to overcome. While equity programs like Oakland’s aim to level the playing field, often the people of color who get the licenses wind up partnering with white-owned firms for financing.

"The only way for black and brown small business people to enter is if you can partner with a large funded white business—and that’s fucked up," said Senter. “It will be near impossible to keep the big corporates from manipulating these programs. They can raise capital much easier and can afford more clever attorneys,” Angobaldo added.

Crosby says that he’s happy with the deal, which gives him 51 percent ownership, a salary, and a percentage of the profits. “They’re providing capital and making sure everything goes to plan. We get together with them so they teach us,” Crosby explained. “I’m going to allow them to run the business, but I’m going to learn.”

“I wanted to get into this industry because I used to be involved in the black market, but we don’t have to do that anymore,” Crosby added. “It’s giving us an opportunity to show our city that black people are somebody.”

When equity programs are less than equitable

The new partnerships raise the question: If a white-owned company from outside Oakland is profiting from the equity program, is the program truly serving its purpose? And how can the black community secure a stronger foothold in the legal iteration of the very industry that they built long before pot stocks were being traded on Wall Street?

Have a Heart COO Ed Mitchell, who identifies as black, said that his company’s Oakland ventures are not taking from the local community. He adds that money will make its way back into Oakland’s black community in the form of tax revenue and the jobs created for people of color (half of Have a Heart’s staff are minorities, according to Mitchell).

Marijuana plants sit on the shelf of a dispensary in Oakland, California. Photo courtesy of Getty Images.

“Oakland has a great equity program, but there’s a missing component—cash,” Mitchell said. “We have lots of partners. Marshall Crosby, he has the best deal of any, bar none, hands down, he’s going to really well for himself… he bent us over and the city helped him.”

Oakland city administrator Greg Minor detailed how Crosby has benefited from the partnership with Have a Heart: “Through the equity program, Mr. Crosby, a resident of one of the areas most impacted by the war on drugs, has been given an opportunity to operate one of the limited number of dispensary permits in the City of Oakland and by virtue of that opportunity he has attracted capital, free real estate, and free branding from entities like Have a Heart.” The city did not approve the new partnership until it was revised to give Crosby 51 percent ownership of the joint venture.

Missing out on a green opportunity

Many have spoken on the potential of the legal marijuana industry to economically lift up the black community. “The opportunity is huge at the end of the day,” says former NBA star Al Harrington, who mobilized his own celebrity to start the multi-state marijuana operation Viola Extracts . “It’s been a billion-dollar industry for a long time. It’s actually a drug that mostly black people were distributing, so from that perspective, I feel like black people have a leg up because they have experience.”

Former NBA player Al Harrington now runs his own legal marijuana business, Viola Extracts. Photo courtesy of Al Harrington

Jacob Plowden, co-founder of the non-profit Cannabis Cultural Association says that the cannabis industry could revolutionize the conception of blackness: “It has the potential to give someone their life back, to give them a step back from a place of punishment of weed and into a place of celebration and success. It’s a massive shift in societal thought in what could make one successful.”

So why have black people had trouble cashing in on the industry they helped to create? In some cases, past criminal records for weed possession have made them ineligible to participate in the legal weed business, as BuzzFeed reported in 2016. But for the most part, the problem is money.

“Getting funded is a bitch,” says Wanda James, the first black dispensary owner in Colorado who is now attempting to venture into New Jersey’s new medical industry points out the immense amount of capital that’s required to succeed as a potrepreneur. Even in 2009, when pot was just legalized in Breckenridge, Colorado, James says “you’d have to spend $200,000 to $250,000 to get a lease, renovate, make a space look nice, and get your grows together,” on top of the risks of raids and arrests since the federal government was still enforcing the national ban.

Wanda James was licensed in 2009 to open the first black-owned dispensary in Colorado. Photo courtesy of Wanda James

Today, the costs can run into the millions, with costs including “building the dispensary, creating the products, building the grow facility and processing plant, and hiring the correct talent,” James said. Licensing alone costs $20,000 in New Jersey, she added. Many of the operating costs of the legal industry are new for growers who may have participated in the illegal industry, and potentially price out those who could have found success on the street.

What’s more, most states that have a legal marijuana business forbid industry entrants from having previous felonies. This puts black people, who are disproportionately targeted for drug arrests despite similar usage rates to white people, at a disadvantage. Legalization doesn’t appear to be stopping unfair policing, which could impact chances of legal participation in the future. In Washington DC, arrests for distribution and public consumption quadrupled after legalization, with over 75 percent of arrestees being black.

James and Harrington, two of the largest black success stories in the industry, recognize that they’re exceptions in what is becoming a largely white industry. “We struggle because of limited resources, and the people that do have experience with the industry have blemishes on their record because of childhood and arrests,” Harrington says. “Obviously, I don’t have any of that and I’m capitalized. Oftentimes people want to work with me because of the celebrity.”

But for potreprenurs of color with fewer resources, the struggle to set up shop continues. Senter and Angobaldo are now turning to San Francisco’s equity program for another chance at starting a dispensary. Unlike Oakland’s program, applicants for San Francisco’s program are required to secure space and funding before getting city approval, which Senter is working to get. As in Oakland, once again they’re up against Have a Heart.

Follow Benjamin Goggin on Twitter.