Washington’s weed industry is owned overwhelmingly by white people, but that shouldn’t surprise anyone who has been paying attention—the industry was designed that way.
Unlike other states with legal weed, Washington’s government has never even attempted to boost diversity in cannabis with any social equity programs. People with felony convictions are blocked entirely from owning businesses and the emerging industry itself is unfriendly to anyone without independent wealth.
But there’s finally a movement from Washington’s leaders to change that. Five years after legal pot first went on sale, lawmakers and the state’s top pot regulator are mounting an effort to create the state’s first pot equity program. It's an attempt to send some of the benefits of the legal weed industry to the communities of color who were most victimized by the War on Drugs.
Only now comes the hard part.
There’s no proven method for improving diversity in the legal weed industry, which is dominated by white-owned companies across the country. The pot industry is a precarious market in which you need large amounts of cash to survive low prices, huge taxes, heavy regulations, and a hostile federal government that still considers pot illegal. On top of that, creating any kind of system that gives racial preference for benefits can face legal challenges, especially in a state like Washington where affirmative action is illegal.
On top of all that, Washington’s leaders appear to be going about this process with little or no buy-in from the minority communities they claim to want to help.
Lara Kaminsky, the executive director of the Cannabis Alliance, a Washington pot trade group, said the proposals so far appear “flawed” because they haven’t gotten enough participation and approval from the actual disadvantaged communities they claim to want to help.
“We do not think they have actually asked the people they intend to help if they like the proposals,” Kaminsky said. She also said it doesn't appear "those people are involved in the creation of [the proposals].”
That became blatantly obvious last week when The Stranger found out that the state’s most powerful pot trade group, the Washington CannaBusiness Association (WACA), was falsely claiming support from the African American community.
WACA wants lawmakers to legalize out-of-state investment in the industry, a windfall worth tens of millions of dollars for WACA’s members, in exchange for giving 1 percent of those out-of-state investments to a social equity fund.
WACA claimed in a September news release to have the support of Aaron Bossett, the executive director of the Black Cannabis Coalition, for the out-of-state investment deal. But when The Stranger asked Bossett he said—in no uncertain terms—that he actually opposes the trade group’s plan.
“That money will crush our community because we don’t have space in the industry right now, and that will be what locks us out,” Bossett said. “Nobody who is sitting at the table is from our community.”
Lawmakers are attempting to pass these deals during the quickly approaching state legislative session, which begins in mid-January and will be over before the end of March. That's an extremely fast timeline for proposals that have yet to convince many industry observers.
Washington might finally be getting serious about trying to make an equitable pot marketplace, but the state appears to still have a long way to go before our weed economy is any fairer.
What the Community Wants
All of this was underscored by a sobering scene outside Uncle Ike’s in White Center on a recent Saturday afternoon. Before customers could get inside the shop, which is famous for their “Cheap Pot!” advertising slogans, they had to pass by a line of picket signs proclaiming the stark injustice of the legal weed industry.
“BLACKS ARE 4 TIMES MORE LIKELY TO BE ARRESTED FOR CANNABIS POSSESSION” one sign’s caption read, printed below charts showing the disparity in cannabis ownership. “NO JUSTICE NO PEACE” and “WHERE’S OUR FAIR SHARE?” read two other signs, one being carried by Aaron Barfield, a member of the Black Excellence in Cannabis organization.
“I would like to see the economic opportunity that has been created in the recreational industry equate to the population of African Americans in the state,” Barfield said. “If we were so heavily involved in this industry that you had to lock us up at such a high rate, why can’t we have the economic opportunity now that it is legal?”
The racial disparity of the War on Drugs has been an aspect of Washington’s legal weed industry since before legalization. Proponents of Initiative 502, the ballot initiative that legalized pot in 2012, argued that the prohibition of pot wasn’t only an inefficient use of government spending, it was also racist against African Americans. Voters bought in and approved I-502 with 55 percent of the vote in 2012.
Pot went on sale in 2014 and five years later pot sales have accounted for more than a billion dollars in state tax revenue, according to 502data.com. Black people make up 4.3 percent of the state’s population, according to the 2010 census, but currently own only 1 percent of pot farms and processors and 4 percent of retailers, according to a survey from the state’s Liquor and Control Board (LCB). Barfield and his group claim the LCB’s numbers are inflated.
Barfield, who grew up in Renton, is himself a minority license holder for a pot shop, Emerald Haze in Renton, but he said a business disagreement and a lawsuit left him with little control of the shop. He said his experience is indicative of the overall market, in which black people are left with a lopsided playing field and little-to-no help from the state.
Barfield’s advocacy group is calling on the state to start to make good on its promise to use legalization as a way to rectify the wrongs of the War on Drugs by rolling out a series of programs for minorities, including:
• New retail pot shop licenses for Black people and minorities
• A share of tax revenue to be reinvested in communities harmed by the War on Drugs
• The creation of a grant program to kick start non-white-owned pot companies
• Allowing people with felony records to own pot licenses
• And creation of a new cannabis equity advisory board with at least one full-time employee at the state level to oversee pot equity programs
Joy Hollingsworth, who grew up in Seattle’s Central District and whose family owns one of the only Black-owned farms in the state, Hollingsworth Cannabis, said giving grants to Black-owned businesses would be a major benefit.
“We are going up against people who have millions of dollars,” Hollingsworth said. “We took my dad’s retirement and pulled it from his hands to start our business.”
Hollingsworth said it has been particularly difficult to be one of the only black-owned businesses in an industry with overwhelming white ownership.
“In terms of not a lot of people looking like us who were store owners, that was difficult in terms of getting on shelves,” Hollingsworth said.
Her company’s first pot sales were to Barfield’s shop in Renton and A Bud and Leaf, a pot shop owned by Jim Sultan in Olympia. Sultan, who himself is Black, said he had to close his shop after his landlord tore down the building and Sultan couldn’t find any other legally-allowed property he could rent in Olympia. Most retail pot shop owners in Washington own their properties to avoid Sultan’s situation, but Sultan didn’t have enough capital to buy his own retail property.
Sultan said his experience shows how the few Black people that got into the industry have ultimately been pushed out.
“The people who lost out were the very people who fed the initiative’s rationalization,” Sultan said. “You rationalized this on the basis of Black folks being disproportionally arrested, convicted, and locked up. So Black folks are saying, ‘You pimped us. You set this up but you haven’t corrected squat. You put this out here and the very people who were shut out before are still excluded.'”
Barfield said he chose to protest outside of Uncle Ike’s, one of over 50 pot shops in Seattle, because he thought the shop’s owner, Ian Eisenberg, is one of the “greatest beneficiaries of the unjust system that we have right now,” and because Eisenberg helped craft the LCB’s current proposal for a new social equity program, which has yet to be formally released.
“The current social equity proposal that the LCB sent to the state, which he had a lot of impact in shaping, is completely inadequate and really just protects the status quo,” Barfield said.
Eisenberg said he was not involved in LCB’s proposal and, in fact, said the LCB’s proposals were “not well thought out.” He added that he was in “total support” of having a social equity program but he questioned if it was too late for new small retailers or pot producers to survive in the cutthroat competition of the legal marketplace.
Eisenberg said creating a new license for consumption lounges, and giving those exclusively to minorities, might be a better route.
“The amount of effort that goes into this is so great that I think it would be better to go into something that makes sense, like consumption lounges,” Eisenberg said.
What the Government Wants to Give
Two social equity proposals have quickly gained traction this year: WACA’s out-of-state investment plan, which already has the support of powerful lawmakers in the state legislature, and a separate plan from the LCB. The LCB’s plan would hand out new retail pot shop licenses to people of color and set aside a small amount of money for grants for those people to run their stores.
The LCB’s proposal has yet to be formally introduced as a bill, but LCB Director Rick Garza told the AP earlier this year that a social equity program would be part of a larger overhaul of the industry. An LCB spokesperson told The Stranger that they are waiting for approval from the governor’s office. Tara Lee, a spokesperson for Gov. Jay Inslee, said their office is currently conducting a “comprehensive review and evaluation” and plans on releasing the proposal in mid-December.
“Generally speaking, the governor is concerned about the disproportionate impacts the War on Drugs had, and continues to have, on people of color," Lee said in an e-mail statement. "That’s, in part, the motivation for his Marijuana Justice Initiative."
Preliminary drafts of the LCB’s proposal, which were obtained by the Cannabis Observer, an industry watchdog, showed that the LCB was willing to allocate an unspecified number of retail licenses to what they called “social equity” applicants. At least 51 percent of the retail licenses would need to be owned by people of color. The applicants for these licenses would need to include a “social equity plan” that would demonstrate how the license would help meet the state’s social equity goals.
The LCB’s draft language did not include a specific number of new retail licenses they would issue, but the draft bill did allow local cities and counties to request new retail licenses if those localities wanted to increase the amount of diversity within their local pot industry. The LCB plan would also allocate $100,000 a year to fund grant programs, which would help those license holders with technical assistance meeting the state’s onerous pot regulations.
The draft bill also includes language that would put the legislature on the record saying the economic profit of the industry needs to not only go to white-owned businesses and the state government’s coffers, it also needs to go to communities of color.
“The legislature finds that social equity with respect to marijuana requires not merely the elimination of legal prohibitions, but also economic opportunities particularly for residents who come from communities disproportionately impacted by historical marijuana prohibition,” the draft law reads.
There’s support for the general idea behind LCB’s proposal in the black community. Pot shop licenses are especially valuable in Washington, thanks to state laws that make it illegal for pot farms and processors to sell their own weed. There are far fewer pot shops in the state, just over 400, than there are pot farms and processors, which number over 1,000.
But few people are buying into the specifics of the LCB’s proposal.
Bossett, of the executive director of the Black Cannabis Coalition, said the state needs to do more to make sure these new businesses are successful than just handing out a license.
“Social equity can’t just be a retail license, it has to be encompassing of the whole industry,” Bossett said. “If black people want to get involved you have to understand the trauma of criminalization and why they didn’t get involved in the first place.”
Bossett said the state needs to also help with business development, training programs, and lowering the state fees involved in running the businesses.
Hollingsworth said the $100,000 the state plans on giving out in grants is far too small to make a meaningful impact. “That needs to be in the millions,” Hollingsworth said.
Eisenberg, who owns Uncle Ike’s, said the LCB’s proposal is poorly conceived because there are very few locations left in the state’s urban areas where pot shops can legally be placed and the cost of running these business is too high for low-volume stores to survive.
“You’re going to put somebody in a crappy location, underfunded, and it doesn’t make any sense," Eisenberg said. "The costs of opening a store is hundreds of thousands of dollars. Most licenses in Seattle are failing… With the amount of regulatory compliance we have, a store that is selling $100,000 a month worth of pot is going to lose money. It’s setting people up for failure which doesn’t seem like a great idea.”
What WACA Wants
Washington’s pot companies are currently blocked from taking cash from anyone who lives outside of Washington. Venture capitalists in California and investors in New York might like a Washington pot company enough to invest in them, but unless that investor moves to Washington they are legally barred from giving the company their cash. Dropping this prohibition would bring tens of millions of dollars into the state, according to WACA, and the powerful trade group has been calling for this change for nearly as long as pot has been legal.
Now they’ve found a way that could make it happen.
WACA has asked lawmakers to lift the ban on out of state investment in exchange for putting a one percent fee on any investments over $500,000 that would go into a “social equity fund.” That fund would then pay for low-interest loans that would go to people of color who are running pot businesses.
Two lawmakers have already signed onto WACA’s idea—Rep. Kristine Reeves (D-Federal Way) and Sen. Derek Stanford (D-Bothell). The legislation has yet to be pre-filed but both lawmakers confirmed to The Stranger that they are planning on introducing the legislation before this coming session.
Reeves told The Stranger that communities of color are continuing to be negatively impacted by the state’s pot laws.
“The reality is the entire cannabis market has been built on the backs of folks of color in the War on Drugs and... once legalized this is a community that has continued to be disproportionately impacted,” Reeves said. “This is a unique time and a great opportunity for us to try to… fix that.”
But there remains the big question of whether WACA’s proposal will actually accomplish this goal.
Bossett said he supported WACA’s general concept originally—out of state investment could help black-owned businesses get more capital—which is how his quote ended up on WACA’s press release claiming support from the Black Cannabis Coalition. But he said WACA didn’t involve him in actually crafting the specifics of the proposal.
“I think the idea of out of state funding is a great idea," Bossett said. "But the way that it is worded and the way they structured it benefits everybody but the group of people I am trying to help, which is the people harmed most by the War on Drugs—black men specifically."
Aaron Pickus, a spokesperson for WACA, said the trade group was “caught off guard” that Bossett no longer supports the proposal.
“We reached out to him and would love to continue to get his input on the legislation as it moves forward," Pickus said. "The conversation that we had with him earlier this year directly informed parts of the proposal already. We really want to emphasize that we want to get everybody’s input on this proposal.”
Bossett said WACA’s proposal needs more ancillary programs—like grants and mentoring programs—and a far larger percentage fee than just one percent for it to actually help Black people.
“That’s a joke,” Bossett said. “I say 10% and then go from there. If 10% of that money went to a fund, that might help.”
Both Rep. Reeves and Sen. Stanford said they are open to modifying the size of the fee. Pickus also said WACA is open to changing the fee. He declined to share a draft of the legislation, but he said the legislation is currently written to trigger a lower investment threshold, drawing the fee on investments over $200,000 instead of only investments over $500,000, if the fund fails to raise $2 million in its first two years.
Pickus said WACA is aware of large business deals that would occur if the investment law was changed.
“It’s a fact that there is a significant amount of capital that is sitting on the sidelines, and that we think that a one percent fee will raise a lot of money,” Pickus said. “We have heard of transactions of the $3 to $5 million range not happening. So while one percent can seem like a small number, it’s a percentage of what can seem like significant large exchange of capital.”
Lowering the investment barrier could also end up hurting the chances of smaller, minority-owned businesses. WACA’s proposal could send tens of millions of dollars into Washington’s largest pot companies, which could make the state’s pot industry only more difficult for smaller, minority-owned businesses to survive in.
Bossett said that is likely to happen with WACA’s current proposal.
“The biggest companies, Phat Panda and Northwest Cannabis Solutions, will take over the industry,” Bossett said. “They’ll squash the industry. It’ll just be a fight over who the largest company is.”
Sen. Stanford said in an e-mailed statement that he doesn’t expect the new capital to go exclusively to large businesses.
“Large profitable companies have much less need for outside investment, because they can build up reserves to get through a downturn or to finance an expansion,” Sen. Stanford said. “Smaller businesses often lack the scale or financial resilience for this, so outside investment can sometimes be very helpful for them.”
Bossett said he is still optimistic about the legislature getting a social equity program right. He thinks the legislature should legalize new types of pot licenses, like social consumption lounges and delivery services, and give those to black people. The legislature should also set aside more pot tax revenue for communities harmed by the War on Drugs—more like millions instead of the $100,000 the LCB is currently proposing. And he still thinks, if the legislature does the right thing, black people can still own a piece of Washington’s legal weed industry.
“I don’t think we missed anything in the beginning at all,” Bossett said. “It’s time for the black community to get involved. I think now is the opportune moment to get in.”