Why Diversity Isn’t Increasing in the Cannabis Industry

By Donnie P.

The cannabis industry is booming. In 2021, cannabis sales grew by more than 40%, generating $17.5 billion in revenue.

While many marijuana businesses are seeing record sales and healthy profits, many of their owners don’t look like me. I’m one of the few African-American dispensary owners in Louisiana, and I think it’s time we change that.

How can we increase the number of minority and women-owned cannabis businesses?

We need to legalize medicinal and recreational marijuana across the country, address the issue of licensing, and correct the wrongdoings of the criminal justice system.

Why It’s So Hard to Break into the Cannabis Industry

Although many states have legalized marijuana, it remains illegal at the federal level.

Recently, a measure to decriminalize marijuana nationwide passed in the U.S. House of Representatives. Unfortunately, the bill is expected to die in the Senate, meaning marijuana will remain a Schedule I drug.

First and foremost, monetary barriers can impede African Americans from owning cannabis businesses.

Due to the illegal status of marijuana, these companies often have trouble raising funding. Historically speaking, the racial wealth gap means that some folks can afford to enter this industry, and others can’t.

Take the upfront costs of opening a cannabis business, for example. You need a lot of capital to even get the process started.

In some states, just applying for a license can run upwards of $20,000. Add on rent, supplies, and operational costs, and you’re looking at $700,000 easily.

Unlike most small businesses, those looking to break into the industry can’t go to the bank and secure a loan.

Most banks won’t work with cannabis businesses as long as marijuana remains an illegal substance on the federal level.

Licensing Fail to Meet Capital Requirements

Licensing is not only expensive, but also complicated. Most applications for licensing fail to meet capital requirements, and many states limit the number of licenses available, creating a highly competitive pool.

This prevents a large portion of Americans from even entering the industry. While many states are working to make licensing more equitable, the results have been lackluster.

To make matters worse, operating a cannabis business also makes filing taxes tricky. While most businesses can benefit from tax exemptions and write-offs, cannabis business owners don’t have this luxury.

Under Section 280E of the Internal Revenue Code, those whose trade “consists of trafficking in controlled substances” are not allowed to receive those benefits. Therefore, we have to pay a lot in federal taxes.

Congress should legalize cannabis on the federal level to help banks participate in the industry, alleviate funding issues, and fix the problems with the tax code.

The government should also create more equitable systems for licensing.

The Justice System is Unjust

Perhaps even more important is the need to address the racial inequalities in the justice system.

African Americans are arrested for possessing cannabis four times more often than White Americans, while studies show both groups use the drug at nearly the same rates.

When non-violent drug offenders serve their time and get out, they face the stigma of having a criminal record.

It becomes difficult, if not impossible, for them to find a job, as evidenced by the disheartening unemployment rate among those with criminal records.

White-Owned Cannabis Businesses Are Allowed to Thrive

Without a job, they struggle to secure housing, assimilate into society, and create a new life. They may also lose their right to vote.

Meanwhile, cannabis businesses, most of which are owned by White people, thrive right in front of their eyes.

Much of the legislation being introduced to legalize marijuana includes a process to expunge the convictions of those with non-violent possession charges.

Doing so would free thousands of people to contribute to their communities.

To achieve a diverse cannabis industry that benefits all Americans, the government must do its part and pass legislation to correct its wrongs.

About the Author

Donnie P. is the owner and founder of cannabis dispensary, Green Leaf, as well as a business investment company, OSD Group LLC. He’s an author, entrepreneur, and philanthropist.