The Shocking Truth About Legal Weed: How Big Business Hijacked a Grassroots Movement

Cannabis prohibition has long been a cornerstone of America's war on drugs, with staggering arrest rates underscoring its impact. In 2018 alone, over half a million people were arrested for cannabis offenses, comprising more than 43% of all drug arrests in the U.S. Yet, the landscape is shifting.

Cannabis reform has become one of the most successful social movements in recent history, with 24 states and Washington, D.C. now permitting adult use.

Despite federal prohibition, the Biden administration's efforts to reclassify cannabis from Schedule I to Schedule III could significantly ease federal restrictions. This move is anticipated to bolster the U.S. cannabis industry, which is projected to generate over $30 billion in retail sales by 2024.

However, the legal cannabis industry has been a mixed bag. High entry barriers have stifled many small businesses, with a 2023 survey revealing that less than 25% of U.S. cannabis businesses are profitable. The market is largely controlled by a handful of large, predominantly white-owned, multistate corporations. A 2021 report highlighted that less than 2% of U.S. cannabis business owners are Black.

These outcomes stem from compromises made by cannabis activists to appease the business community. States yet to legalize cannabis should heed these cautionary tales to avoid replicating the same power dynamics legalization aimed to disrupt.

Equity has been a key concern for many activists. Washington state, for instance, legalized cannabis in 2012 with laws designed by local activists and supported by the American Civil Liberties Union. Their focus on protecting small independent operators included residency requirements for license holders and limits on the number of licenses and the amount of cannabis grown. These measures have allowed small businesses to secure a larger market share in Washington than in other states.

By 2016, the corporate world had awakened to the lucrative potential of legal cannabis. In California, local activists had spent years crafting a progressive legalization initiative with protections similar to those in Washington. However, Silicon Valley billionaire Sean Parker’s $8.5 million-backed campaign overshadowed these efforts, leading to a more business-friendly bill devoid of residency requirements or license caps.

Michigan’s cannabis industry offers a contrasting narrative. Activists resisted corporate pressure to draft a business-friendly bill, opting instead for low entry barriers that favored small operators. Despite reduced financial backing and closer campaign spending, voters overwhelmingly supported the bill. Yet, Michigan still grapples with racial equity issues, with Black and Latino ownership at 3.8% and 1.5%, respectively.

States like Illinois and New York have implemented specific racial equity provisions in their cannabis laws, though success varies. Illinois has seen some progress, with 27% of business owners identifying as Black, but only 5% as Latino and 3% as Asian. New York aims to allocate at least 50% of its licenses to equity applicants, but early results have disappointed equity advocates.

Excessive regulations and fees remain significant barriers for people of color seeking to enter the industry. Stakeholders benefiting from the current system fiercely protect their market share, complicating reform efforts. Washington, for instance, took eight years post-legalization to pass reforms aiding equity applicants, yet the percentage of Black cannabis business owners remains low.

The consolidation trend in California is particularly telling. The number of cannabis licenses has plummeted from 18,000 to 4,000, and the number of legal brands has shrunk from 6,000 to 1,600. A 2022 L.A. Times analysis revealed that the top 10 growing operations hold 22% of the state’s cultivation licenses.

The beer industry's success with craft breweries, which reached a 13% market share in 2021, offers a glimmer of hope. If the legal cannabis industry fails to pursue a more diverse and progressive direction, it risks undermining the social change that inspired many activists.

Is the legal cannabis industry doing enough to support small businesses and promote racial equity?