As Connecticut prepares to launch its legal adult-use cannabis market later this year, the state is now open to applications from “social equity” cultivators—subject to a $3 million licensing fee in each case. The fee flies in the face of lawmakers’ promise that legalization will benefit communities most targeted by the drug war.
Cannabis cultivators will be licensed to grow and produce cannabis, selling their products to other businesses rather than directly to consumers. The $3 million licensing fee is written into the law, so can’t be reduced or waived unless lawmakers take action.
Jason Ortiz, president of Students for Sensible Drug Policy (SSDP), told Filter that this was not what advocates like him fought for in Connecticut. Lawmakers and Governor Ned Lamont (D) approved provisions like this one in last-minute compromises over the bill.
“So the government is going to charge someone who is certified as low-income multiple millions of dollars in order to skip the line. That is in no way, shape or form equitable.”
On paper, social equity applicants are getting an earlier opportunity to apply for a cultivator license; the state will hold a lottery to award additional licenses later this year. But the astronomical fee effectively wipes out that benefit. MJBizDaily reported that $3 million is likely the highest fee for social equity applicants anywhere in the US.
“So the government is going to charge someone who is certified as low-income multiple millions of dollars in order to skip the line,” Ortiz said. “That is in no way, shape or form equitable.”
Yet Connecticut is, in theory, committed to social justice in legalization. The state’s Social Equity Council states that its goal is to “[ensure] that funds from the adult-use cannabis program are brought back to the communities hit hardest by the ‘war on drugs.’”
In Connecticut as elsewhere, cannabis prohibition has targeted Black and other marginalized communities. The ACLU found that in 2018, Black residents were over four times likelier than white residents to be arrested for marijuana possession—and that despite the state decriminalizing marijuana in 2011, racist disparities in enforcement actually got worse afterwards. Nationwide, Black and white people use marijuana at similar rates.
“Licensing is being used to keep poor folks, people of color out of the industry,” Ortiz said. “If we’re going to say that fees can be unlimited, we’re creating a very blatant pay-to-play situation.” He suggested that advocates should push for federal intervention to prevent the provision, though that’s unlikely.
Would-be social equity cultivators in Connecticut whose businesses are located in “Disproportionately Impacted Areas”—designated by the state for high rates of drug convictions or unemployment—were able to apply for licenses as of February 3. But the state defines social equity applicants quite broadly, only requiring that at least 65 percent of a business be owned by an individual with less than 300 percent of the “state medium household income” in the past three tax years.
The fee makes it likely that a small group of well resourced companies will benefit instead. Connecticut previously legalized medical cannabis in 2012, and there are currently only four licensed cultivators in the state—all of them large corporations operating in multiple states, and none of them headquartered in Connecticut.
The state will now allow these medical license-holders to jump into the adult-use market. They can apply to expand to adult-use whenever they want—unlike social equity cultivators, who have a limited 90-day window to apply. To transition, they must first pay a $3 million fee as a producer, or $1 million as a dispensary owner. But Connecticut will cut those fees in half if the companies agree to partner with social equity applicants, through “Equity Joint Ventures”—business entities that are at least 50 percent owned by a social equity applicant.
And therein lies the game in Connecticut: incentivizing social equity applicants to partner with multi-state cannabis corporations. Equity applicants are incentivized to enter these agreements because the larger companies have more money and resources; the companies get their entry fees reduced.
Ortiz slammed the “Equity Joint Ventures”, arguing they only exist to benefit established medical cannabis companies, not disadvantaged businesses. The medical companies can enter into an unlimited number of joint ventures, exempting them from limits on how many licenses one company can hold.
“We’re going to see a crunch at the legislature to change something before the end of the year.”
“Because they’re unlimited, it means the current operators can set up 20 or 30 of them, and they get to skip the lottery, skip the whole process and will dominate all the real estate in the state before the lottery even happens,” Ortiz said. “So you have very limited licensing for the general population and equity applicants, and unlimited licensing for the multi-state operators.”
Ortiz and other advocates are pressuring the Governor to repeal limits on the number of licenses available and create a more equitable market. And he predicted that voters will push lawmakers to do something, too. “People are going to start freaking out about the details and we’re going to see a crunch at the legislature to change something before the end of the year.”
Photograph of a cannabis cultivation facility by Alexander Lekhtman