Pot social equity plan hits major milestone — and could expand

Washington state is opening up 45 cannabis retail licenses this month to people who meet social equity criteria — part of an effort to diversify the state's legal pot industry — and more social equity licenses could be on the way.

Why it matters: More than 10 years after Washington voters legalized recreational marijuana use by passing Initiative 502, the industry remains dominated by white entrepreneurs.

By the numbers: As of 2020, two-thirds of the state's population was white, while 82% of pot retail stores in Washington were majority owned by white residents, according to data reported to the state Liquor and Cannabis Board.

• Hispanic people made up about 14% of the state's population, but held majority stakes in only 2% of retail pot shops.
• The rate of Black ownership of pot shops also lagged population figures slightly.

Background: Ollie Garrett, a member of the Liquor and Cannabis Board, told a state Senate panel that when licenses opened up a decade ago, "Black and brown people who may not have had access to traditional channels of capital or business experience were at a disadvantage."

• Limits on licenses are making it difficult to correct those social equity issues, liquor board officials said, even as the state's pot industry has surpassed $1 billion in yearly sales.

What's happening: The 45 licenses up for grabs this month are part of a social equity program designed to help.

• Right now, the licenses are going unused either because they were revoked, forfeited, canceled or never issued, sometimes due to local ordinances that ban pot shops.
• Applicants who have served time in prison for a cannabis offense will get higher priority when it comes to distributing the social equity licenses, according to a state scoring rubric. So will applicants who make less than the state's median income, and who have lived in areas with high rates of drug convictions, poverty, and unemployment.

Of note: Race isn't part of the evaluation because it's federally illegal to consider it, said Becky Smith, the LCB's licensing division director. But Smith told Axios the categories should capture many people who were hurt by the war on drugs.

• A 2012 analysis found that before cannabis was legalized, Black, Latino and Indigenous people in Washington were arrested for possessing the drug at higher rates than white residents.

State of play: More licenses aren't available for the social equity program right now, due to a state policy limiting the total number of retail stores to 556 statewide.

• A bill in the Legislature would add another 52 cannabis retail licenses, 100 processing licenses, and 10 producer licenses for use as part of the program.
• If lawmakers approve that plan, it will be the first time the state has made more retail pot shop licenses available since 2016, and the first time it will have accepted applications for new producer and processor licenses since 2013.

What's next: The LCB is accepting applications for the 45 existing social equity licenses through March 30.

• The plan to add more licenses for the program has a public hearing today before the House Committee on Regulated Substances & Gaming.