Los Angeles Cannabis Equity Program Under Scrutiny

As frequently happens with many selection processes that aren’t conducted blind, the integrity of Los Angeles’s Social Equity Program for cannabis companies has recently been called into question. The equity program is intended to give entrepreneurs hit the hardest by the War on Drugs a head-start in the world’s most lucrative cannabis industry. However, at a recent Los Angeles Cannabis Regulation Commission meeting, many of those equity applicants packed the city council chamber to allege that they haven’t been granted fair consideration.

At the meeting, a group of applicants suggested that non-qualifying cannabis entrepreneurs who wanted to get their hands on the perks of the equity program could be using the application process to get someone from an impacted community as a figurehead for their business. And since Los Angeles’s equity program is open to people from across California who have cannabis conviction, there are plenty of folks that entrepreneurs looking for a way in could use.

“The integrity of the Los Angeles Social Equity Program has been compromised since its inception,” said Jazmin Aguiar, a board member of the Minority Cannabis Business Association and an LA-based activist and entrepreneur, in an email to Cannabis Now. “The program was created to provide equitable opportunities and begin repairing the communities and its members who have disproportionately impacted by the War on Drugs.”

Aguiar noted that Los Angeles is the largest legal cannabis market in the world, “and without a doubt, the most attractive market for any emerging investor, entrepreneurs, and anyone who is eager to bank on the wealth promised by legalization.” 

Aguiar alleges those interests have aided the city council, the cannabis commission, and the city’s Department of Cannabis Regulation (DCR) to turn a blind eye on the social equity program’s mission.

In the commission meeting on Oct. 24, the executive director of the DCR, Cat Packer, submitted a report about how the city was trying to deal with the equity applicants’ complaints and how the city would make sure equity permit holders would get a share of the profits comparable to their equity in the business.

The first concern Packer addressed was that the application system opened early for a few select applicants, which give them an unfair advantage. Her report noted that those applications were then given a standardized timestamp so as not to give an unfair advantage.

Another concern is that applicants used automated programs — such as bots — to fill out the application for “Phase 3” of the application process, which opened on Sept. 3. Phase 3 retail licenses were going to be awarded on a first-come, first-serve basis to the first 75 equity applicants who met the requirements. The city said there is no evidence to support the claim anyone used bots, but the report also noted that the first 100 applications were submitted in an average time of 1 minute and 11 seconds.

Aguiar also said that she was concerned that Phase 3 applicants were required on short notice to have secured a retail space.

At its inception, Phase 3 licensing for social equity applicants in Los Angeles would not require applicants to hold a property. “However, that was not the case once applications opened,” Aguiar said. “Instead, the city council approved a motion prioritizing, and requiring applicants to have a property lease or purchase agreement.”

This quickly became a barrier of entry for social equity applicants, forcing them to make deals in under a month’s notice, Aguiar said.

“Once applications opened on Sept. 3, so did many more issues,” Aguiar said. “Those with deep pockets are being accused of using ‘bots’ to secure their place in the line, while underfunded social equity applicants stayed in the dust scrambling for undelivered resources promised by City Council.”

Aguiar is now calling on the city to completely relaunch the cannabis equity program, saying: “It is imperative that the City of Los Angeles retract, analyze and relaunch the social equity program.”

At the meeting, Packer reminded everyone that the city was open to hearing any concerns about ethical violations of the cannabis equity program.

“There have been a number of allegations and concerns as part of public comment, and anyone who is engaged in this process is welcome to share any information regarding any ethics violations,” Packer said, according to the Los Angeles Daily News.

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