The challenges and opportunities for social equity applicants in the cannabis industry

The legalization of cannabis has opened doors for many aspiring entrepreneurs, and with the legalization of adult use marijuana in 2022, Missouri ushered in a new class of cannabis entrepreneurship – creating a constitutional requirement to expand the cannabis industry to include smaller, privately owned businesses that are tied to equity and opportunity for many of those most impacted by the war on drugs and socioeconomic factors.

While an opportunity exists to enter the cannabis industry at the ground level, for social equity applicants, the path to establishing a successful cannabis business is fraught with challenges. While social equity programs aim to level the playing field, significant obstacles remain.

Social equity programs are designed to provide opportunities to those who have been marginalized by previous cannabis laws. Despite these intentions, applicants face numerous hurdles. In Missouri, many of the qualifying criteria are linked to economic indicators that signify a significant lack of funding and resources compared to many entrepreneurs in more traditional cannabis businesses.

Financial Burden

Starting a cannabis business requires substantial capital. From application fees to licensing costs, and the expenses of setting up a compliant operation, the financial burden can be overwhelming. Many social equity applicants lack access to traditional banking services and investment, exacerbating these challenges. The lack of financial resources and investment is a significant barrier for social equity applicants. With revisions to the structure of 280E round the bend, there is hope that new cannabis businesses may have access to more traditional avenues for financial support.

Limited Access to Real Estate

Securing a location that meets state and local zoning laws for cannabis businesses is another significant hurdle. Real estate for cannabis operations is limited and often expensive. Additionally, landlords may be hesitant to lease properties to cannabis businesses due to the stigma still associated with the industry.

Market Competition

Even if a social equity applicant overcomes the initial barriers, they face intense competition from well-established players in the industry. Larger companies with more resources can afford to dominate the market, making it difficult for smaller, equity-focused businesses to gain a foothold.

   

In Missouri, however, the market competition for microbusinesses will be significantly different. While dispensaries will face the challenge of battling the existing licensees and big brands, wholesalers benefit from the creation of a submarket which restricts microbusiness dispensaries to only buying from other microbusinesses. This effectiuvely levels the playing field for microbusinesses while preserving much of the precious shelf space for new and emerging brands.

The Impact of Descheduling Marijuana

One of the most significant potential changes on the horizon for the cannabis industry is the descheduling of marijuana at the federal level. Currently, marijuana is classified as a Schedule I substance under the Controlled Substances Act, which creates numerous complications for cannabis businesses, particularly those owned by social equity applicants.

Descheduling marijuana would allow cannabis businesses to access traditional banking services. This change would make it easier for social equity applicants to secure loans, manage finances, and operate more efficiently. The current reliance on cash transactions is not only cumbersome but also increases security risks.

Descheduling could also make federal grants and support programs available to cannabis businesses. These resources could provide much-needed financial assistance and support services to social equity applicants, helping them to overcome some of the financial and operational barriers they face.

Reduction in Stigma

Descheduling marijuana would help reduce the stigma associated with the cannabis industry. This change could lead to an increased willingness of existing companies and organizations to do business with cannabis businesses and a broader acceptance of cannabis companies in the mainstream community.

While the path to establishing a cannabis business as a social equity applicant is challenging, it is not impossible. By leveraging available resources, forming strategic partnerships, and advocating for systemic change, social equity applicants can overcome these obstacles. The potential descheduling of marijuana at the federal level offers a promising future, with the potential to significantly reduce barriers and open new opportunities for these entrepreneurs.