First Approvals for Recreational Marijuana Growers Spark Debate over Equity and Ownership

Connecticut’s Board of Social Equity voted Tuesday to approve 16 of 41 applications from businesses seeking to grow recreational marijuana. Qualified applicants with $3 million in investment capital and plans for a large-scale operation effectively avoid a lottery system that has been criticized as unfair to small local farmers and applicants for areas disproportionately affected by people in their 50s. drug war.

These are the first approvals of marijuana businesses by the board, which was created by the Legislature to oversee the expansion of the marijuana industry in Connecticut and to ensure that it benefits people affected by the war on drugs.

In May and June, the Department of Consumer Protection received tens of thousands of applications from companies seeking to become microgrowers, manufacturers, retailers, packers and transporters in a separate selection process that will be chosen by lottery Sixty-three percent of the approximately 37,000 applications are identified as social equity applicants.

The applications approved Tuesday were for growers who intend to grow more than 15,000 square feet of marijuana. Accepted applicants must still complete a background check through the Department of Consumer Protection and pay the state $3 million for a provisional license.

Andrea Comer, deputy commissioner of the Department of Consumer Protection, hailed the approvals as an important step in helping people whose lives have been negatively affected by the war on drugs.

“Our actions today will be transformative for those seeking social equity,” Comer said. “We recognize that this will be a life-changing decision for those approved.”

Of the 16 approved applicants, five were businesses located in Hartford, two in Waterbury, three in New Britain, two in Bridgeport and one each in Middletown, Manchester, Southington and Stamford.

A debate on heritage property

Council members debated how to balance helping Connecticut residents who have been disproportionately harmed by the criminalization of marijuana while ensuring that wealthy sponsors don’t benefit from the social equity license without providing at least 65 percent participation and a controlling vote. , in business.

The council hired the company CohnReznick review applications and recommend which applicants should be accepted or denied.

According to Geoffrey Magon, a representative of CohnReznick, many of the applicants were rejected by his company because they did not reside in a disproportionately affected area or did not meet the income requirements to be considered social equity applicants.

But the board was divided among eight applicants who were rejected by CohnReznick solely on the basis of questions about the degree of ownership and control of the equity applicant.

Councilor Subira Gordon said she was concerned that applicants had been turned down because of a “lack of clarity” or “ambiguity” in their application. Gordon told council members that the original legislation was flawed and that he was concerned that the council was denying applications without granting interviews or an opportunity to respond to the council’s decision.

“This is life-changing. This is big business. And these are big decisions we’re making today,” he said. “I understand one hundred percent that the legislation was flawed … However, I think we have an opportunity to make it right.”

Magon told the committee that the eight applications were rejected because the firm had doubts about whether the social equity applicant actually had the control and ownership stipulated by law.

By law, when a grower applies for a social equity license, the applicant must own and control 65 percent of the business. Ownership, Magon explained, means the applicant must own 65 percent of the equity associated with the business, while control means the applicant has voting power in the business and oversight of day-to-day operations. .

“There were some cases where there were additional agreements that took that control further out of the hands of these social equity applicants,” Magon said.

Magon said that in some cases multiple agreements governing operations and management were conflicting or ambiguous.

“The umbrella agreement might say at the top 65% ownership in control and then a related agreement, a related clause, a sub-clause could come in and say, well, in the case of XYZ, we considered day-to-day control and the kind of property activities. , I would restrict it further and say you only have 20% of the votes or something of that nature,” he said.

Council member Michael Jefferson said he agreed with CohnResnick’s findings.

“One of my concerns … early on was the idea that we could have shell companies, shell companies, shell people for people who have the resources to create an entity in the cannabis industry,” Jefferson said. . “I think this is the concern of the whole community. Who really runs this store? Who really runs these establishments?”

Council member Edwin Shirley agreed.

“I think that in some cases we are seeing sponsors who tell us under what conditions they are willing to make the investment. And we’re not accepting that,” Shirley said.

But Gordon said he was concerned about “erring on the side of denial” and closing a door on people who might have legitimate welfare claimant status but could be turned away because of a mistake in the documentation

“A person with a smart lawyer could fix all the deals to make it look nice and go through our process. And the person who’s actually a social equity applicant, he didn’t have a fancy lawyer, but he’s going to be the person who runs the business day to day, but that just couldn’t be reflected on paper for a while. many reasons,” Gordon said.

Council member Corrie Betts said she felt the council should not vote against applicants if there was any question about whether or not they met the criteria.

“My concern is that when there is a gray area and when ambiguous things are mentioned in making these decisions, you have to be very careful in making that, to make sure that everyone gets their fair share.” , he said.

Gordon added that he believed applicants should go through the Department of Consumer Protection, where their applications could be vetted through a more thorough process.

“Saying no right now shuts down the conversation for today. And I think that’s what worries me the most,” Gordon said. “There are a lot of different checks and balances after today that allow a lot of people to look at everything and say, no, that clearly didn’t meet the criteria for a license.”

But Comer said that while the Department of Consumer Protection would conduct background checks and oversee the licensing of growers, it was not tasked with determining whether applicants met social equity criteria, that was the council’s job.

Ultimately, the board voted 8-2 to deny the eight applications that CohnResnick found did not meet the ownership and control requirements.

Comer said applicants who were denied can appeal to the state Superior Court.

When asked for the names of the applicants, Kristina Diamond, spokeswoman for the Social Equity Council, said the council was in the process of notifying the applicants and had not yet released their names.

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