The Cannabis Social Equity Application will allow cannabis entrepreneurs to apply for retail licenses after a U.S. district judge refused to halt the lottery selection.
The City of Los Angeles Department of Cannabis Regulation announced last week that it had “successfully conducted the retail application lottery, also known as Phase 3 Retail round 2 Lottery” which involved selecting “100 verified Social Equity Individual Applicants (SEIAs) for an opportunity to apply for a retail license in the City of Los Angeles”.
The city released the following statement last Thursday regarding the Cannabis Social Equity Application.
“The SEIA verification criteria align with the mission of the Social Equity Program (SEP) to promote equitable partnership and employment opportunities in the cannabis industry. The SEP is an integral part of the Department of Cannabis Regulation and provides economic opportunities for those most affected by the War on Drugs.
Challenges to the Cannabis Social Equity Application Process
The cannabis social equity application process faced a legal challenge when Michigan man and principal of the California based corporation, Variscite, filed a lawsuit in California after filing a similar one in New York. The federal judge in the New York case ruled that state regulators would be unable to issue dozens of marijuana retail licenses until the matter was resolved.
Gay had requested social equity verification via the cannabis social equity application. He is one of the 1200 plus applicants that requested verification out of which 500 plus qualified.
The New York ruling came after a determination that Gay “didn’t meet the criteria for eligibility under L.A. law which requires an applicant to have a ‘prior cannabis arrest or conviction’ and either be low income or live in an area identified as disproportionately affected by policing”.
Gay responded asserting that “he satisfied all three requirements except that the relevant events occurred in Michigan rather than California”. He further contended that Los Angeles laws offer a preference to California residents over out of state residents in the Lottery process. This would mean the Cannabis Social Equity Application violates the dormant commerce clause of the U.S. constitution.
Is the Lottery Process Fair?
According to the Los Angeles Department of Regulation, the last lottery, which took place on December 8, used a “triple-blind selection process”.
The fact the process was “blind” means that the entity that selects the applicant does not know the applicant’s identity. The fact that the process is “triple blind” means that no one involved in the selection process, including the DCR, FBI, and various City departments, knew the identity of the person being selected until after the party was selected and their data was reconciled.
The City also stated that it used a third-party global business advisory firm called FTI Consulting, Inc. to administer the selection process further protecting the identity of the applicants.
Social Equity Provisions in California
Social equity provisions have been a focus of cannabis reform efforts, including the cannabis social equity application, taking place all over the country. Elected officials are also aware of a need to remedy previous harmful associations with cannabis formed during the War on Drugs.
California is doing its part.
Gavin Newsom, the state’s democratic governor, announced in September that he “signed several measures to strengthen California’s cannabis laws, expand the legal cannabis market, and redress the harms of cannabis prohibition.”
He also called “on legislators and other policymakers to redouble efforts to address and eliminate these barriers”
“For too many Californians, the promise of cannabis legalization remains out of reach. These measures build on the important strides our state has made toward this goal, but much work remains to build an equitable, safe, and sustainable legal cannabis industry. I look forward to partnering with the Legislature and policymakers to fully realize cannabis legislation in communities across America,” Newsome said at the time.
Why Is the Cannabis Social Equity Application Important?
The Social Equity Program was created “to promote equitable ownership and employment opportunities in the cannabis industry in order to decrease disparities in life outcomes for marginalized communities, and to address the disproportionate impacts of the War on Drugs in those communities.
Social Equity Applicants receive certain benefits including:
- Certain license types which are reserved for SEIAs only until 2025
- Business licensing compliance (BLC) and Technical Assistance
- Pro bono and low bono legal services
- Fee deferrals
- Grant funding
The Cannabis Social Equity application will give underserved cannabis entrepreneurs a better shot at making it in the industry.