006: Cannabis Legalization and Social Equity in Massachusetts
Image Credit: Rolling Releaf
3 Updates and Lessons for an Early Adopter of Legalization
On November 8th, 2016, Massachusetts residents voted to approve recreational cannabis sales and usage in the state, becoming the 7th state to do so. As one of the first states to enact this legalization, it also serves as an object lesson for mistakes and successes that it has had along the way.
As more states legalize the sale and consumption of cannabis, Massachusetts is a case study for what entrepreneurs should look for as they begin licensing and operations. In this blog, we examine three trends that have come to define not only how cannabis is distributed statewide, but how it might affect cannabis sales nationally.
Slow Rollouts Due to Delays in Sales, COVID-19
While cannabis has been legal in Massachusetts for over four years, licensing for the first recreational marijuana store didn’t begun until nearly two years later on July 1st, 2018. This was largely in part due to a controversial six-month delay passed by Gov. Baker.
The delay on licensing rollouts, coupled with the COVID-19 pandemic, has led to significantly less taxable income funneled back to the state, with only $122 million collected in 2020. While not an insignificant sum, this number is far below projections. For nearly half of the period that cannabis has been legal to purchase, the United States has been under pandemic restrictions.
Massachusetts state officials passed legislation to regulate cannabis sales much in the same way that liquor stores control the sale of their goods. However, unlike liquor stores, cannabis dispensaries were not considered to be an essential business. Similarly, retail cannabis stores were not eligible for the Paycheck Protection Program loans.
Despite these setbacks, a recent report by the New York Times suggests that cannabis sales actually saw a surge over the past year. Quarantine restrictions have necessitated efficiency of distribution over in-store experience.
As we now see an end to pandemic restrictions in the United States, cannabis stores find themselves in a middle ground between two disparate customer groups. Dispensaries often center their business model around customer experience. Now, these stores may need to consider the value that on-demand cannabis sales offer to their business.
Seeking Equity: The Rise of the Marijuana Delivery Operator?
Devin Alexander was a high school senior with aspirations of joining the military. His plans were derailed when he was arrested for the possession of 2 grams of marijuana, making him ineligible for service. Due in part to the efforts of a movement to end unfair possession laws, his story doesn’t end here.
The Massachusetts Social Equity Program is a branch of the Cannabis Control Commission, the primary state regulatory agency. The SEP provides training and other resources for social equity applicants to get their business started, enter the workforce, or work in the cannabis field in an ancillary capacity. In 2019, Devin joined the SEP to learn more about business entrepreneurship.
Given the loopholes in current regulations, social equity has not yet gained traction in Massachusetts. Of the licensed applicants, only ~20% identify as being part of a disadvantaged business group. This leaves the majority of licenses owned by white and male operators.
For cannabis legalization activists, equitable distribution of licenses has remained a priority on the national level. New York, which legalized recreational cannabis in March, have pledged half of their licenses to members of marginalized communities. Massachusetts struggles to meet the same commitment to social equity, but efforts continue to be made in reversing this outcome.
In August of 2020, the CCC created a new category of marijuana delivery services, although the rules around this were complex and restrictive, all but ensuring that dispensaries would be the only group qualifying for delivery service licensure. With most of the licenses distributed to non-social equity applicants, the intent of the SEP was nullified.
Thankfully, the story doesn’t end here. Devin Alexander, along with several others, helped found the Massachusetts Cannabis Association for Delivery in an effort to make regulations conform with social equity. The efforts of MCAD have led to a true third-party operator category: marijuana delivery operator certification. Announced on May 28th, 2021, these licenses are available exclusively to participants in the CCC’s social equity program and economic empowerment applicants for the first three years, granting license holders the ability to buy from wholesale growers and distribute directly to customers.
If successful, marijuana delivery operators will provide minority business owners the ability to run operators without the hurdles inherent to brick-and-mortar operations. As of now, 122 certified economic empowerment applicants and nearly 400 social equity program participants are eligible to obtain this license.
While home delivery isn’t new for those who receive medical marijuana, marijuana delivery operators offer a solution that allows for an easier path to business ownership. Activist groups are committed to making license distribution equitable. Devin Alexander, now CEO of the company Rolling Releaf, has founded his company on the mission of making premium cannabis more accessible and equitable through responsible sourcing and ease of delivery.
Social Consumption Lounges May Be Coming Soon
As Massachusetts approaches its fifth year of cannabis legalization, it has become far easier for residents to purchase marijuana. Finding a place to consume it, however, remains a challenge.
It is currently illegal to smoke, vape, or eat cannabis-related products in public anywhere in the state of Massachusetts. This can result in fines up to $100. This presents a problem not only to residents, but to visitors who are becoming part of the emerging cannabis tourism sector.
Lawmakers sought to compare the legalization, sale, and control of cannabis as similar to that of liquor sales. For this reason, a bill legalizing social consumption lounges in the state has gained increasing traction.
Massachusetts is currently home to the only social consumption lounge on the East Coast. Use of this space is currently limited to a membership-only model. If this bill is passed, that number could change dramatically.
While this possibility shows promise, the bill is unlikely to move through the Massachusetts legislature until 2022 at the earliest.
Cannabis Trends in Massachusetts Show Promises and Problems
What lessons can we learn about cannabis legalization in Massachusetts? Successes face setbacks. Even as cannabis sales ramp up nationally, restrictions limit the distribution of licenses, sales, and consumption of these products.
Massachusetts also illustrates avenues entrepreneurs can take to build successful businesses in their own state. As the pandemic has shown, there are many paths to reaching customers, both in brick-and-mortar locations and outside of them.
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