Social Equity in Cannabis: The Promise and Pitfalls Across the U.S.

In 2019, Illinois simultaneously legalized recreational cannabis and
launched a statewide social equity program aimed at equalizing access for
justice-impacted individuals and marginalized groups. The rollout quickly
became tangled in lawsuits — a now-typical occurrence — delaying issuance
of the first license until 2022. Similar scenarios have played out across
the country as more states look to repair the harm done by the war on drugs.

While Illinois was the first to incorporate a statewide program as part of
adult-use legalization, social equity efforts already had taken root across
the nation, some more successfully than others. Massachusetts implemented
what is generally acknowledged as the first statewide social equity program
in January 2018, more than a year after voters legalized a recreational
market. Before that, beginning in 2017, Los Angeles, Oakland, and other
California cities launched local initiatives to boost equity.

Today, the majority of states that have legalized recreational cannabis
either included social equity provisions in their enabling legislation or
retroactively implemented programs years later. Each program is unique,
with no universal definition or provisions. Common features include
preferential licensing, financial assistance, criminal record expungement,
and operational support.

Qualifications for applicants vary across programs, too. Typical
requirements include residence in areas of disproportionate impact,
previous cannabis-related convictions, membership in a racial or ethnic
minority, and military veteran status, to name a few.

The lack of a cohesive definition of “social equity” or global set of
program objectives has spawned its own set of issues. Who qualifies and
what support should exist? Who really gets a slice of the pie? Scan the
internet and you’ll see disdain for programs that fall short while
oversight agencies give lip service to vague goals alongside success
stories about businesses that couldn’t have succeeded without a program’s
support. This paints a confusing picture.

Here’s what we discovered by speaking with people on the front lines across
the United States. What’s working? What’s not? What’s next?
Where the journey begins — and stalls
[image: Beatrice Carranza, founder and CEO, BACHAZ]Beatrice Carranza,
founder and CEO, BACHAZ

Beatrice Carranza, founder and chief executive officer at Colorado-based
edibles brand BACHAZ, heard about the state’s then-two-year-old social
equity program through word of mouth in 2022. “I was like, ‘Wait a minute.
All of those qualifications are talking about my story,’” she said. “The
struggles we faced as a family for possession. It affected us and followed
us through many years.”

Carranza recalls a smooth application process. She submitted all the
requested documents and waited weeks to months between rounds of
correspondence with the state. When eventually she was approved, she felt
both vindication and validation. “When [cannabis] was first legalized, we
got pushed away,” she said. “Everything in my past had affected me and not
given me that opportunity. Getting this license was a gold ticket. Now
things were real.”

Michael Marinaro, too, was approved with ease. “I was accepted almost
instantly when I wrote my story,” said the founder and CEO of
Massachusetts-based brand BadaBloom.
[image: Kennis Littleton, founder, Canna Gemz]Kennis Littleton, founder,
Canna Gemz

The application and licensing process has not been as smooth for everyone,
though. Kennis Littleton, founder of Canna Gemz, is among the 776 social
equity license applicants in Minnesota. Since November 2024, he has awaited
lottery results from the state’s Office of Cannabis Management (OCM). Twice
delayed by court action including lawsuits alleging some applicants were
improperly disqualified and others represented “straw men” designed to game
the system, the lottery to fill 249 social equity slots was expected to
take place in June.

For Belicia Royster, the process was even more frustrating. Hers were among
the applications for Illinois’s first points-based lottery. Although she
partnered with multiple existing companies and entrepreneurs from
California, “none of these opportunities turned into a license,” she said.
The experience inspired her to found the Social Equity Empowerment Network
(S.E.E.N.) and become a plaintiff in a lawsuit about the process.

Legislative wrangling skewed the Illinois lottery’s results by awarding
extra points to military veterans, Royster believes. “It basically turned
into a veterans program because of the points game,” she said, leaving many
prohibition-impacted applicants without a high enough score to qualify. “If
you weren’t a veteran *and* social equity, you weren’t going to get [a
license] because you were missing out on those points.”

Learning from experience, she enlisted a veteran friend’s partnership for
the next round. However, since the state didn’t put a cap on the number of
applications, the pool became flooded with more than 4,000 applications
from wealthy, well-connected entrepreneurs, including many out-of-state
players, she said. “You get all these rich people partnering up with social
equity applicants who can afford to put in fifty applications, whereas
regular people like me could only put in a couple,” said Royster. “They
were essentially giving out seventy-five dispensary licenses to twenty-one
connected people with perfect scores.”

Eventually, Royster received two craft cultivation licenses. But “two years
later we’re still not operational, because the money has dried up,” she
said.
The funding gap

Acquiring a license through a social equity program is just the first step.
Once applicants have completed that leg of the journey, becoming — and
staying — operational presents another complicated array of challenges.
Social equity license holders are no different from other licensees when it
comes to one basic business necessity: funds.

“While the licensing barrier is lower for social equity entrepreneurs, none
of the [other barriers] are lower,” said Shannon Donnelly, executive
director for the Center for Social Equity Support in Colorado. “We’re
always going to run into the barriers of running a small business.”

Donnelly has been consulting with social equity entrepreneurs since 2018.
Justice-impacted herself, she previously worked as a cannabis process
navigator, a position in which she created programs to assist social equity
entrepreneurs. After leaving her regulatory role, she started the Center
for Social Equity Support to provide mutual aid and incubators for social
equity businesses. She believes the social equity programs with funding
built in from the beginning are headed in the right direction.

“Colorado had ten years of legalization with established businesses before
we looked at social equity,” she said. “But states on the east coast, like
New York or Massachusetts, have actually built money in to support these
businesses from the ground up. Programs with funding built into them do
better overall for entrepreneurs.”

But funding is not always easy to come by in these programs, even in states
that appear to have prioritized financial aid for license winners. In
Massachusetts, social equity entrepreneurs can access an “immediate needs
grant” to jumpstart operations. Marinaro used the resource to pay rent and
other BadaBloom startup costs. But the grants don’t cover attorney fees or
construction costs, which also come with hefty price tags.

The state separated the grants program into four tiers: the first for entry
into the industry, the second for imminent or outstanding expenses for
essential business operations, the third for acquisition of final licensure
and start of operations, and the fourth for funds to improve and expand the
existing business.
[image: Michael Marinaro, founder and CEO, BadaBloom]Michael Marinaro,
founder and CEO, BadaBloom

BadaBloom was approved for a $50,000 immediate needs grant and received the
money right before Christmas 2024. “It was the best gift I’ve ever gotten
in my life,” Marinaro said.

After the depleted fund was replenished in early 2025, Marinaro received an
additional $250,000. Alongside his gratitude for support, he emphasized
that BadaBloom and other businesses still need much to achieve success. “I
could have spent my $250,000 in about three minutes,” he said.

BadaBloom, like many others in Massachusetts, had been brand-building for a
long time before any funds became available. “We were ready to go the whole
time, just trying to make rent and mortgage, stay alive, and not go under,”
Marinaro said. “A lot of small companies went under. I believe some of
those companies would still be alive if that fund had come [back online]
earlier.”

As Littleton awaited the lottery results in Minnesota, he remained hopeful
about access to capital. In March, the state’s Department of Employment and
Economic Development announced two new grant programs to fund social equity
businesses. “As they roll out these programs and they become more readily
available, it’s going to be good,” he said. “Minnesota is usually very good
about these types of programs.”

For Carranza in Colorado, recent access to capital has had a positive
impact, though she echoed others in saying her business could use more
financial help. The first grant she received totaled $25,000 to help with
operational costs of starting the business. Then she received a second
grant to assist with packaging and expansion, followed by a recent $20,000
grant. “I wouldn’t be here if it wasn’t for that,” she said. “It’s not a
lot of money compared to other states, but I have been able to work and
stretch [the grant funds] out as much as I can. Can you just imagine if we
had more money and resources?”

In May, Carranza was gearing up for a pitch-deck competition that will
grant three existing businesses $50,000, $75,000, or $100,000. Hosted by
the Colorado Office of Economic Development and International Trade, the Cannabis
Business Pitch Competition was open to Colorado licensees with at least 51
percent social equity ownership.

As for Royster, who is based in Illinois but has worked with social equity
programs across the nation, she believes there needs to be more
reinvestment of cannabis tax revenue into social equity businesses. More
than a dozen state agencies — from the Department of Agriculture to the
Department of Financial and Professional Regulation — are involved in the
Illinois industry in some way, and they all have their hands in the same
pot. “That needs to be streamlined in order for some of these funds to
trickle down to the program that they designed and is failing,” she said.

She recently spoke at the state capital during a Department of Agriculture
celebration of Black cannabis farmers and the billions of dollars the
industry has contributed to state coffers. “It’s all smoke and mirrors,”
she said. “Those billions didn’t make it to social equity businesses. So
how can we fix that? I want to challenge every state to make sure that when
creating this lane for small businesses in a big pond, we make sure
everybody eats.”
Equity, exploited

While many of the big issues plaguing social equity programs across the
nation could be alleviated to some extent by more access to capital,
several other factors also are at play. Predatory practices and alleged
gaming of the system are continuing sources of controversy.

For years, social equity programs have been plagued by predatory investors
offering to form partnerships with social equity applicants. The investors
often provide financial assistance or fully fund an operation, ostensibly
helping social equity applicants get the foundation they need for success.
But these partnerships often end with the investors taking control of the
business by either buying out or casting out the original social equity
applicant. The scheme can provide multiple benefits for the non-equity
partner, including reduced licensing fees and priority in the application
queue.

Predatory licensing arrangements have been around since the inception of
cannabis social equity programs, with media mentions going back to at least
2018. As more states create programs, these types of agreements will
continue to try to gain an unfair advantage.

Arizona’s industry garnered a lot of negative attention because of
predatory practices impeding the success of the social equity program. In
June 2024, the Arizona Center for Investigative Reporting revealed Alicia
Deals, the first Black woman to run a social equity dispensary in the
state, remains one of the few equity license holders to retain 100-percent
ownership of her business. Attorney Jimmy Cool told digital newsroom Arizona
Mirror the state’s program sets up licensees to fail, so many equity
license holders either enter predatory partnerships or sell their
multimillion dollar asset to corporate dispensaries for “a few
hundred-thousand dollars.”

Missouri was also hit hard by such practices. Last year, regulators rescinded
more than thirty microbusiness licenses because of their connections to
groups or individuals who had flooded the lottery with predatory
partnerships.

Arizona and Missouri are not alone. Delaware’s Office of the Marijuana
Commissioner posted a warning last year: “The Office of the Marijuana
Commissioner (OMC) has received reports of out-of-state entities contacting
potential social equity applicants in Delaware. These entities may be
trying to trick you into paying for help securing a social equity license.”
The notice warns against paying upfront fees for obtaining a license and
cautions potential applicants to beware of “unsolicited calls, postcards,
or emails promising to guarantee a license.”

Marinaro said he’s been approached by investors with dishonest motives.
“Being a social equity applicant, you just have predatory people always
trying to attack you,” he said.

Finding support, particularly on dispensary shelves, is also a struggle for
some social equity brands. Carranza said she sees dispensaries claim to
support social equity brands, but the product on their shelves tells a
different story. “It’s more of the big guys. Who is paying more to have
their product in the dispensary?” she said. “I’ve heard some of the big
brands are paying up to a dollar for each sale. You’re obviously going to
sell the products that make you commission.”

Donnelly created a Cannabis Cares program at the Center for Social Equity
Support to address this issue. The organization provides badges to
businesses that give back to their communities, including a social equity
supporter badge. “If I can get a dispensary to care about having a shelf
for social equity entrepreneurs, then that’s a win for me because those
entrepreneurs have a pipeline to revenue,” she said.
Rewriting the rules

If one thing is clear about social equity, it’s that nothing is truly
clear. Each state’s regulators run their own programs and seemingly are
learning as they go. As Littleton noted, “It’s very much a ‘building the
plane as they fly it’ type of situation.” He credits other social equity
entrepreneurs for keeping his spirits up through networking mixers and
events. He also gives kudos to the Minnesota Office of Cannabis Management
for its support. “They’ve done a wonderful job of creating tools, videos,
webinars, and other communications,” he said.

Carranza said both funding and regulations need to change for a better
future. She pointed to securing real estate as a particularly challenging
aspect of getting a business off the ground. “You need to have the
establishment before you can get the business license,” she explained. “It
took me over a year and a half to get approval. I’d get a yes, and then
once they heard ‘cannabis’ it was a no.”

Royster believes changes on a federal level must happen for more meaningful
change to happen downstream. “I’m sure it’s far from happening, but I’d
like to see the federal government support smaller businesses that are in
this space so harm doesn’t continue to happen,” she said.

For Donnelly, regulatory modifications are key, too. But she also said it’s
important to look at the larger picture. “We have to change the way we look
at success in these programs,” she said. “A lot of people ask me about
social equity and I turn the question around and say, ‘Is small business
working in America?’ If we don’t think small business is working, how do we
expect that a small business that is disadvantaged in multiple different
areas is now going to get over barriers that a [traditional] small business
can’t even get over?

“It’s the same with regulations,” she added. “If we just loosened
regulations on small businesses as a whole, social equity would rise.”
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What’s fair in cannabis? It’s complicated.

1. What is a cannabis social equity program?

Cannabis social equity programs aim to create a fairer industry by
supporting individuals and communities disproportionately affected by
cannabis prohibition. These programs often provide licensing advantages,
funding, technical assistance, and criminal record expungement.
2. Why do cannabis social equity programs struggle to succeed?

Many programs face challenges such as inconsistent regulations, limited
access to funding, bureaucratic delays, and predatory partnerships. Without
adequate financial and operational support, many licensees struggle to
launch or sustain their businesses.
3. Who qualifies for a cannabis social equity license?

Qualifications vary by state, but common criteria include having a past
cannabis-related conviction, living in an area impacted by the war on
drugs, or being a member of a historically marginalized group. Some states
also offer points or priority to military veterans.
4. How are social equity cannabis businesses funded?

Funding sources include state grant programs, private investors, and
incubator initiatives. However, many programs lack sufficient capital, and
funding rarely covers all startup costs. Entrepreneurs often cite funding
gaps as the biggest barrier to success.
5. What are predatory partnerships in cannabis licensing?

Predatory partnerships occur when investors exploit social equity
applicants to gain priority access to licenses, often pushing them out of
the business once it’s operational. These exploitative arrangements are a
growing concern in many legal markets.