Social Equity in Cannabis: The Promise and Pitfalls Across the U.S.

In 2019, Illinois simultaneously legalized recreational cannabis and launched a statewide social equity program aimed at equalizing access for justice-impacted individuals and marginalized groups. The rollout quickly became tangled in lawsuits — a now-typical occurrence — delaying issuance of the first license until 2022. Similar scenarios have played out across the country as more states look to repair the harm done by the war on drugs.

Even before Illinois ramped up, social equity efforts had taken root across the nation, some more successfully than others. Massachusetts implemented what is generally acknowledged as the first statewide social equity program in January 2018, more than a year after voters legalized an adult-use ballot measure that specifically mentioned policies to encourage participation by those harmed by prohibition. Before that, beginning in 2017, Los Angeles, Oakland, and other California cities launched local initiatives to boost equity.

Today, the majority of states that have legalized recreational cannabis either included social equity provisions in their enabling legislation or retroactively implemented programs years later. Each program is unique, with no universal definition or provisions. Common features include preferential licensing, financial assistance, criminal record expungement, and operational support.

Qualifications for applicants vary across programs, too. Typical requirements include residence in areas of disproportionate impact, previous cannabis-related convictions, membership in a racial or ethnic minority, and military veteran status, to name a few.

The lack of a cohesive definition of “social equity” or global set of program objectives has spawned its own set of issues. Who qualifies and what support should exist? Who really gets a slice of the pie? Scan the internet and you’ll see disdain for programs that fall short while oversight agencies give lip service to vague goals alongside success stories about businesses that couldn’t have succeeded without a program’s support. This paints a confusing picture.

Here’s what we discovered by speaking with people on the front lines across the United States. What’s working? What’s not? What’s next?

Where the journey begins — and stalls

Beatrice Carranza, founder and chief executive officer at Colorado-based edibles brand BACHAZ, heard about the state’s then-two-year-old social equity program through word of mouth in 2022. “I was like, ‘Wait a minute. All of those qualifications are talking about my story,’” she said. “The struggles we faced as a family for possession. It affected us and followed us through many years.”

Carranza recalls a smooth application process. She submitted all the requested documents and waited weeks to months between rounds of correspondence with the state. When eventually she was approved, she felt both vindication and validation. “When [cannabis] was first legalized, we got pushed away,” she said. “Everything in my past had affected me and not given me that opportunity. Getting this license was a gold ticket. Now things were real.”

Michael Marinaro, too, was approved with ease. “I was accepted almost instantly when I wrote my story,” said the founder and CEO of Massachusetts-based brand BadaBloom.

The application and licensing process has not been as smooth for everyone, though. Kennis Littleton, founder of Canna Gemz, is among the 776 social equity license applicants in Minnesota. Since November 2024, he has awaited lottery results from the state’s Office of Cannabis Management (OCM). Twice delayed by court action including lawsuits alleging some applicants were improperly disqualified and others represented “straw men” designed to game the system, the lottery to fill 249 social equity slots was expected to take place in June. 

For Belicia Royster, the process was even more frustrating. Hers were among the applications for Illinois’s first points-based lottery. Although she partnered with multiple existing companies and entrepreneurs from California, “none of these opportunities turned into a license,” she said. The experience inspired her to found the Social Equity Empowerment Network (S.E.E.N.) and become a plaintiff in a lawsuit about the process.

Legislative wrangling skewed the Illinois lottery’s results by awarding extra points to military veterans, Royster believes. “It basically turned into a veterans program because of the points game,” she said, leaving many prohibition-impacted applicants without a high enough score to qualify. “If you weren’t a veteran and social equity, you weren’t going to get [a license] because you were missing out on those points.”

Learning from experience, she enlisted a veteran friend’s partnership for the next round. However, since the state didn’t put a cap on the number of applications, the pool became flooded with more than 4,000 applications from wealthy, well-connected entrepreneurs, including many out-of-state players, she said. “You get all these rich people partnering up with social equity applicants who can afford to put in fifty applications, whereas regular people like me could only put in a couple,” said Royster. “They were essentially giving out seventy-five dispensary licenses to twenty-one connected people with perfect scores.”

Eventually, Royster received two craft cultivation licenses. But “two years later we’re still not operational, because the money has dried up,” she said.

The funding gap

Acquiring a license through a social equity program is just the first step. Once applicants have completed that leg of the journey, becoming — and staying — operational presents another complicated array of challenges. Social equity license holders are no different from other licensees when it comes to one basic business necessity: funds.

“While the licensing barrier is lower for social equity entrepreneurs, none of the [other barriers] are lower,” said Shannon Donnelly, executive director for the Center for Social Equity Support in Colorado. “We’re always going to run into the barriers of running a small business.”

Donnelly has been consulting with social equity entrepreneurs since 2018. Justice-impacted herself, she previously worked as a cannabis process navigator, a position in which she created programs to assist social equity entrepreneurs. After leaving her regulatory role, she started the Center for Social Equity Support to provide mutual aid and incubators for social equity businesses. She believes the social equity programs with funding built in from the beginning are headed in the right direction.

“Colorado had ten years of legalization with established businesses before we looked at social equity,” she said. “But states on the east coast, like New York or Massachusetts, have actually built money in to support these businesses from the ground up. Programs with funding built into them do better overall for entrepreneurs.”

But funding is not always easy to come by in these programs, even in states that appear to have prioritized financial aid for license winners. In Massachusetts, social equity entrepreneurs can access an “immediate needs grant” to jumpstart operations. Marinaro used the resource to pay rent and other BadaBloom startup costs. But the grants don’t cover attorney fees or construction costs, which also come with hefty price tags.

The state separated the grants program into four tiers: the first for entry into the industry, the second for imminent or outstanding expenses for essential business operations, the third for acquisition of final licensure and start of operations, and the fourth for funds to improve and expand the existing business.

BadaBloom was approved for a $50,000 immediate needs grant and received the money right before Christmas 2024. “It was the best gift I’ve ever gotten in my life,” Marinaro said.

After the depleted fund was replenished in early 2025, Marinaro received an additional $250,000. Alongside his gratitude for support, he emphasized that BadaBloom and other businesses still need much to achieve success. “I could have spent my $250,000 in about three minutes,” he said.

BadaBloom, like many others in Massachusetts, had been brand-building for a long time before any funds became available. “We were ready to go the whole time, just trying to make rent and mortgage, stay alive, and not go under,” Marinaro said. “A lot of small companies went under. I believe some of those companies would still be alive if that fund had come [back online] earlier.”

As Littleton awaited the lottery results in Minnesota, he remained hopeful about access to capital. In March, the state’s Department of Employment and Economic Development announced two new grant programs to fund social equity businesses. “As they roll out these programs and they become more readily available, it’s going to be good,” he said. “Minnesota is usually very good about these types of programs.”

For Carranza in Colorado, recent access to capital has had a positive impact, though she echoed others in saying her business could use more financial help. The first grant she received totaled $25,000 to help with operational costs of starting the business. Then she received a second grant to assist with packaging and expansion, followed by a recent $20,000 grant. “I wouldn’t be here if it wasn’t for that,” she said. “It’s not a lot of money compared to other states, but I have been able to work and stretch [the grant funds] out as much as I can. Can you just imagine if we had more money and resources?”

In May, Carranza was gearing up for a pitch-deck competition that will grant three existing businesses $50,000, $75,000, or $100,000. Hosted by the Colorado Office of Economic Development and International Trade, the Cannabis Business Pitch Competition was open to Colorado licensees with at least 51 percent social equity ownership.

As for Royster, who is based in Illinois but has worked with social equity programs across the nation, she believes there needs to be more reinvestment of cannabis tax revenue into social equity businesses. More than a dozen state agencies — from the Department of Agriculture to the Department of Financial and Professional Regulation — are involved in the Illinois industry in some way, and they all have their hands in the same pot. “That needs to be streamlined in order for some of these funds to trickle down to the program that they designed and is failing,” she said.

She recently spoke at the state capital during a Department of Agriculture celebration of Black cannabis farmers and the billions of dollars the industry has contributed to state coffers. “It’s all smoke and mirrors,” she said. “Those billions didn’t make it to social equity businesses. So how can we fix that? I want to challenge every state to make sure that when creating this lane for small businesses in a big pond, we make sure everybody eats.”

Equity, exploited

While many of the big issues plaguing social equity programs across the nation could be alleviated to some extent by more access to capital, several other factors also are at play. Predatory practices and alleged gaming of the system are continuing sources of controversy.

For years, social equity programs have been plagued by predatory investors offering to form partnerships with social equity applicants. The investors often provide financial assistance or fully fund an operation, ostensibly helping social equity applicants get the foundation they need for success. But these partnerships often end with the investors taking control of the business by either buying out or casting out the original social equity applicant. The scheme can provide multiple benefits for the non-equity partner, including reduced licensing fees and priority in the application queue.

Predatory licensing arrangements have been around since the inception of cannabis social equity programs, with media mentions going back to at least 2018. As more states create programs, these types of agreements will continue to try to gain an unfair advantage.

Arizona’s industry garnered a lot of negative attention because of predatory practices impeding the success of the social equity program. In June 2024, the Arizona Center for Investigative Reporting revealed Alicia Deals, the first Black woman to run a social equity dispensary in the state, remains one of the few equity license holders to retain 100-percent ownership of her business. Attorney Jimmy Cool told digital newsroom Arizona Mirror the state’s program sets up licensees to fail, so many equity license holders either enter predatory partnerships or sell their multimillion dollar asset to corporate dispensaries for “a few hundred-thousand dollars.”

Missouri was also hit hard by such practices. Last year, regulators rescinded more than thirty microbusiness licenses because of their connections to groups or individuals who had flooded the lottery with predatory partnerships.

Arizona and Missouri are not alone. Delaware’s Office of the Marijuana Commissioner posted a warning last year: “The Office of the Marijuana Commissioner (OMC) has received reports of out-of-state entities contacting potential social equity applicants in Delaware. These entities may be trying to trick you into paying for help securing a social equity license.” The notice warns against paying upfront fees for obtaining a license and cautions potential applicants to beware of “unsolicited calls, postcards, or emails promising to guarantee a license.”

Marinaro said he’s been approached by investors with dishonest motives. “Being a social equity applicant, you just have predatory people always trying to attack you,” he said.

Finding support, particularly on dispensary shelves, is also a struggle for some social equity brands. Carranza said she sees dispensaries claim to support social equity brands, but the product on their shelves tells a different story. “It’s more of the big guys. Who is paying more to have their product in the dispensary?” she said. “I’ve heard some of the big brands are paying up to a dollar for each sale. You’re obviously going to sell the products that make you commission.”

Donnelly created a Cannabis Cares program at the Center for Social Equity Support to address this issue. The organization provides badges to businesses that give back to their communities, including a social equity supporter badge. “If I can get a dispensary to care about having a shelf for social equity entrepreneurs, then that’s a win for me because those entrepreneurs have a pipeline to revenue,” she said.

Rewriting the rules

If one thing is clear about social equity, it’s that nothing is truly clear. Each state’s regulators run their own programs and seemingly are learning as they go. As Littleton noted, “It’s very much a ‘building the plane as they fly it’ type of situation.” He credits other social equity entrepreneurs for keeping his spirits up through networking mixers and events. He also gives kudos to the Minnesota Office of Cannabis Management for its support. “They’ve done a wonderful job of creating tools, videos, webinars, and other communications,” he said.

Carranza said both funding and regulations need to change for a better future. She pointed to securing real estate as a particularly challenging aspect of getting a business off the ground. “You need to have the establishment before you can get the business license,” she explained. “It took me over a year and a half to get approval. I’d get a yes, and then once they heard ‘cannabis’ it was a no.”

Royster believes changes on a federal level must happen for more meaningful change to happen downstream. “I’m sure it’s far from happening, but I’d like to see the federal government support smaller businesses that are in this space so harm doesn’t continue to happen,” she said.

For Donnelly, regulatory modifications are key, too. But she also said it’s important to look at the larger picture. “We have to change the way we look at success in these programs,” she said. “A lot of people ask me about social equity and I turn the question around and say, ‘Is small business working in America?’ If we don’t think small business is working, how do we expect that a small business that is disadvantaged in multiple different areas is now going to get over barriers that a [traditional] small business can’t even get over?

“It’s the same with regulations,” she added. “If we just loosened regulations on small businesses as a whole, social equity would rise.”

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What’s fair in cannabis? It’s complicated.