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Who’s Funding Your Favorite Cannabis Company?

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Who’s Funding Your Favorite Cannabis Company?

Lost in the controversy over equity and minority participation in cannabis are questions over where Big Weed gets its money—and who benefits.

“Money has no nationality” (and variations thereof) is one of those clever-sounding aphorisms that, upon close examination, fall apart quickly. Just look at the cannabis investors in the industry. Who funds the company that sells you weed and therefore profits off of every transaction? The answer may surprise you.

A flood of money from newly legalized Canada created the first (legitimate) unicorns in the industry, before that country’s bubble burst and capital markets dried up. Now, with US investor confidence currently hurt and confused by President Joe Biden’s unwillingness to create a constitutional crisis on behalf of their stonks, money is coming into cannabis from all over the world—wherever it can be secured, really.

This is true for any publicly traded company in any industry, but not every industry was made possible because of legalized adult-use marijuana. Legalization came packaged to voters and the public with social justice promises. And cannabis companies market themselves today as socially conscious and responsible companies.

Fighting the War on Drugs, Again

This all begs a question: Can capitalists right the wrongs of the War on Drugs—and can they do so if their venture capital was earned in, say, Russia—where Brittney Griner was just sentenced to nine years in prison for scraps of cannabis oil?

One state lawmaker doesn’t think so.

In May, Pennsylvania State Rep. Danilo Burgos, a Philadelphia Democrat, introduced a bill urging the state Department of Health to “investigate each entity… with a permit to open and operate a medical cannabis business” and to “take steps to revoke the permit” if there’s a connection to Russia.

“It’s crucial that we work as a body to ensure no Pennsylvania government programs are utilized to benefit those who are complicit in the Russian war effort,” Burgos said in a statement when his bill was introduced May 2. “We must take every effort to support Ukraine in their struggle against this unprovoked Russian invasion.”

In a later phone interview, Burgos said he introduced the bill to use the Ukraine war and increasing scrutiny on Russian oligarchs and US firms doing business in Vladimir Putin’s country to highlight an ongoing problem with cannabis legalization: The economic benefits are going to outside investors rather than Black and brown locals harmed by the War on Drugs, whom legalization backers promised would be uplifted.

“This will help bring more attention to the overall problem in the entire commonwealth,” he said. “That’s what I’m trying to do: Trying to use current events that are catching peoples’ attention to shed light on the larger problem.”

There are 165 permitted medical-cannabis dispensaries currently in Pennsylvania, according to the state health department. These include some of the biggest companies selling cannabis in the US. However, Burgos insists his legislation has nothing to do with any particular company.

“I did this to bring to light the lack of willingness, by government in general over the years but particularly here in Pennsylvania, where we seem to miss the target when it comes to helping communities of color,” he said.

“There’s very little push for communities of color to have access in the cannabis world,” he added. “It’s extremely prohibitive for people of color to invest in cannabis.”

In addition to a lack of access to cannabis investors, capital, onerous permit fees and limited licensing have been blamed for depressing BIPOC participating in legal marijuana. 

The Non-Response Response

In an e-mailed statement, a state Department of Health spokesperson said the agency “does not have a formal position” on Burgos’ bill. The spokesperson noted that under Pennsylvania law, applicants for medical marijuana permits must provide a criminal background check that the health department uses to “determine the… character, fitness and suitability” of the applicant. They must also provide documents identifying “each financial backer and principal.” However, there are no restrictions on sources of capital. Nor must an applicant declare where their money came from—after all, it’s green. It has no nationality! But it does have a source—and, maybe, the source matters.

Or maybe not.

Burgos admitted it’ll take an “uphill climb” for his bill to become law, and for there to be a first state to closely examine the source of money in its cannabis industry.

Current indications are that the bill will go nowhere. With their 23-seat majority, Republicans hold all the strings in Pennsylvania’s 203-seat House of Representatives, including when—or if—to call a bill for a hearing. Burgos’ bill is currently assigned to the Pennsylvania House Health Committee, chaired by Republican State Rep. Kathy L. Rapp. In a phone message last month, Rapp said Burgos’ bill isn’t a priority.

“As of now, I don’t have any plans to call a hearing,” said Rapp, who claimed “there’s not a lot of days in the Fall to do hearings. So I don’t think I’ll be doing a hearing on this resolution but thank you for reaching out to me.”

Despite support from Democratic Gov. Tom Wolf, Republicans have also successfully blocked proposals to legalize cannabis for all adults 21 and over in the state.

And there may be resistance within the cannabis industry to Burgos’ bill—if there’s any attention paid to it at all.

In an e-mail, Meredith Buettner, executive director of the Pennsylvania Cannabis Coalition, an advocacy organization whose members include some of the other biggest cannabis companies in the US, called the Burgos bill “a reaction to a reactionary sentiment that there were multistate operators that had Russian ties. I believe that sentiment has been widely dispelled at this point,” she said. In any event, “it’s not an issue I’ve heard any buzz about.”

There may be too many other issues competing with Americans’ attention. There may also be unclear answers to straightforward questions. And, for now, there won’t be any requirement for cannabis companies to tell the public exactly where their capital originates.

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