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Lifestyle, Research

Exploring the Lack of Racial Diversity in the Cannabis Industry

Lemetria Whitehurst

by Lemetria Whitehurst

February 7, 2024 08:00 am ET Estimated Read Time: 5 Minutes
Fact checked by Kymberly Drapcho
Exploring the Lack of Racial Diversity in the Cannabis Industry

In recent years, the cannabis industry has blossomed into a booming market, with significant economic growth and innovation expected. With increasing legalization and societal acceptance, this sector stands at the forefront of a modern gold rush, ripe with opportunities. However, beneath the surface of its rapid expansion lies a critical issue that cannot be overlooked: the noticeable lack of racial diversity in cannabis, particularly among cannabis business owners. 

A study by Marijuana Business Daily in 2017 revealed that a significant majority (81%) of cannabis business owners and founders in the U.S. were white, with only 10% being Hispanic/Latino or Black.

More recent data from Leafly’s Jobs Report 2021 indicates that Black Americans, who make up about 13% of the U.S. population, represent just 1.2% to 1.7% of cannabis business owners.

In this article, we will dissect the elephant in the room – why is the cannabis industry so white?

The Reality of Black Entrepreneurship in the Cannabis Industry

When examining ownership rates across different states, it becomes apparent that representation for Black entrepreneurs is relatively low. For example, in states like Colorado, Michigan, and Nevada, Black-owned cannabis businesses account for only 2.7%, 3.8%, and 5.1% respectively, according to the 2021 Women and Minorities in the Cannabis Industry Report by Marijuana Business Daily.

In Denver, Colorado’s capital, a survey conducted by the Denver Department of Excise and Licenses in 2020 revealed that just 5.6% of cannabis business owners are Black, while a significant majority (75%) are white.

Massachusetts took the lead as the first state to truly prioritize equity and inclusion in its legal cannabis framework. The state launched initiatives specifically designed to support entrepreneurs from underrepresented communities. However, despite these commendable efforts, Massachusetts’ progress in diversifying cannabis entrepreneurship still falls short of its overall goals. 

According to a report by WGBH News in 2020, out of 143 participants in Massachusetts’ social equity program and 122 applicants who were certified as economic empowerment participants, only 11 licenses were issued. 

Furthermore, data from the Massachusetts Cannabis Control Commission in 2021 indicates that 73% of active participants in the cannabis sector, including owners, employees, and executives, are white, with males making up 64% of this demographic.

The Historical Context: Modern-Day Redlining In the Cannabis Industry

Redlining is a discriminatory practice where certain communities, often based on race or ethnicity, are denied access to financial and other services. The modern cannabis industry, with its potential for tremendous growth, reflects the historical redlining practices of America.

Historically, the criminalization of cannabis was often used as a tool to target and marginalize communities of color, particularly during the War on Drugs era. This period saw a staggeringly dramatic increase in incarceration rates for cannabis-related offenses, with Black and Hispanic communities disproportionately affected.

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As a result, these communities bore the brunt of the legal, social, and familial consequences of cannabis prohibition. Many broken homes were created due to the war on cannabis. 

Now, the very communities that experienced the harshest impacts of violent crimes and cannabis-related arrests have found themselves relegated to the fringes of the rapidly expanding legal cannabis market. 

This new industry, ripe for pioneering entrepreneurs, is mainly accessible to a privileged elite. Therefore, business-savvy entrepreneurs are side-lined, especially well-qualified and educated minorities. These policies make it nearly impossible for them to get a stake in an industry on the cusp of significant expansion. 

As a result, it restricts their opportunity to establish and grow businesses. It’s harder for them to generate and pass down generational wealth. This results in economic imbalances that echo the systematically designed disparities of the past.

Barriers to Entry for Minority Entrepreneurs

The hurdles faced by minority entrepreneurs in the cannabis industry are no joke. 

Financially, the costs of starting a cannabis business are sky-high, with licensing fees, compliance investments, and other regulatory requirements making it tough to get off the ground. On average, opening a cannabis dispensary can set you back anywhere from $150,000 to a cool $2 million. And that’s not all – staffing costs, rental expenses, and renovation fees make the bill even steeper.

But wait, there’s more! Access to traditional banking and lending services is a nightmare due to the federal classification of cannabis as illegal. And let’s not forget about the unfair consequences of past cannabis convictions. These can prevent aspiring entrepreneurs, especially minorities, from even applying for a license. It’s like the War on Drugs never really ended, looming over the dreams of potential business owners.

As if that wasn’t enough, the regulations governing the cannabis industry vary from state to state. This variance creates a shaky foundation for those without the right connections or resources. Some policies claim to prioritize licenses for those from affected communities. However, the reality is often a bureaucratic nightmare, with red tape preventing progress at every turn.

Future Outlook of Diversity in Cannabis

Looking ahead, diversity is a huge challenge to be addressed in the flourishing cannabis industry. Against the backdrop of disproportionate cannabis-related jail terms, minority entrepreneurs face daunting barriers in entering the cannabis market. These include sky-high entry fees, refusal of bank accounts and loans, enormous legal obstacles, and limited access to essential resources.

Collectively, these challenges draw an extremely stark line between minority entrepreneurs and the more privileged elite class of investors.

The only way to combat this lack of diversity in cannabis is to openly address these challenges head-on and provide minority businesses with equal opportunity.

The entry fees don’t have to be that high. After all, the rules governing this new industry are still developing. As this industry continues to mature, it carries the potential to set a precedent in corporate responsibility and social equity. This new era could turn the lessons of its troubled past into the foundations for a more inclusive and prosperous future.

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