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Colorado to License Social Equity Cannabis in 2020

September 20, 2019

One of the longest running legal cannabis markets, Colorado will begin to license social equity cannabis businesses in 2020. Earlier this year, Senate Bill 224 passed changing a plethora of medical and recreational marijuana regulations including the creation of a social equity program. The move is an effort to diversify the cannabis industry in Colorado and provide funding to those who have been victims of the war on drugs.

Micro Licenses for Social Equity Cannabis Businesses

Social equity applicants who qualify will receive micro licenses from the state. This new type of permit will require the applicant to research and model their business on existing cannabis manufacturers and cultivation facilities that have a history of success. 

Under the new law, applicants would have to be from or living in low-income areas for at least five of the past ten years, but could potentially open a business outside of the community once the license is issued. The licenses would cover cultivation, extraction and infused-product manufacturing opportunities, but not dispensary operations.

Accelerator and Endorser Relationship

Earlier this month, Colorado cannabis regulators met with business owners to discuss how the accelerator/endorser aspect will work and troubleshoot any potential pitfalls. Topics included how length of the agreement term between the accelerator and endorsing businesses, how the state could incentivize potential endorsers, and what factors will determine who can qualify the new licensees.

Marijuana Enforcement Division director Jim Burack pointed out that, “People from around the world look to us as an example on how to do things right. What exactly is this relationship between endorser and accelerator? How do we ensure this business relationship is mutually beneficial?” 

There are still some questions that are looming large over the framework of the social equity program. It is still unclear how the relationship will work between the new licensee and endorsing business. There are concerns about privacy and liability agreements, potential equity shares and royalties, equipment operation and that’s just a start.

Who Qualifies for Social Equity Program?

Establishing a social equity program and issuing new licenses will hopefully spur minority participation in the cannabis industry, but skin color or gender won’t necessarily define who receives a license, insists Shawn Coleman, a cannabis lobbyist who helped write the language creating the new licenses. According to Coleman, those who have been personally affected by the war on drugs will receive priority consideration. 

Coleman explained that, “If you’re white and you grew up in a trailer and your dad went to jail for ten years for selling meth, I can see why you’d think you’d be fit for this. This isn’t exclusive to any certain group.”

Will Established Cannabis Companies Participate?

One of the most challenging parts for social equity licensees will be finding an established cannabis companies to participate as an endorser. The state is considering a few options to entice existing cannabis businesses included reducing licensing fees, launching certain excise-tax credits and giving priority designation for licensing transfers and updates.

Social equity cannabis businesses will be much more likely to succeed if they are taught the best and most efficient way to model their company from the beginning. It’s expected that there will be future legislation to more clearly define the roles of the accelerator and endorser but at least Colorado is taking steps to include those who have been negatively affected by cannabis criminal enforcement.