Attorney and cannabis policy advocate Amber Littlejohn recently announced her departure as executive director of the Minority Cannabis Business Association, an organization she joined in 2019 that focuses on policies aimed at redressing the harms caused by cannabis prohibition.During Littlejohn's tenure, the MCBA released the National Cannabis Equity Report, which marked the first comprehensive effort to examine the social equity programs in states that have implemented them to gauge their impact and offer policy recommendations for bringing those adversely affected by the war on drugs into the regulated industry.
Littlejohn spoke to Law360 just a few days before leaving the MCBA to discuss the state of social equity policies, the systemic challenges faced by small operators and the proposals on Capitol Hill to end federal prohibition. This interview has been edited for clarity and length.
What do you think are some of the biggest misconceptions that the public has about cannabis?
I think first and foremost [the idea] that people who have consumed or use cannabis as medicine are criminals, or somehow are not law-abiding citizens. From the beginning of prohibition in this country, they've really tied cannabis — a plant that, if you look around, I think very much does the opposite of instill anger and aggression in people — to criminal behavior. It's disappointing. So getting people away from the idea that if you smell cannabis or see somebody consuming cannabis, that they are somehow a criminal or a bad person. And that stigma unfortunately still exists as much as cannabis support has grown around the country.
What does the public misunderstand about the cannabis industry?
I think it's a misunderstanding that equity really is out front and an integral part of the cannabis industry. And while we'd like it to be so, there are only 15 state-level social equity programs, and those programs have to date been minimally effective in actually creating equity within the industry. We are not seeing the level of community reinvestment that was promised. We are not seeing the level of criminal justice reform that was promised. So I think it's important for people to understand that while the rhetoric is strong around equity and reform in the cannabis industry, the reality of those endeavors is really different.
How do you define equity in the cannabis space?
I would just say that equity should be woven throughout every element of cannabis policy. But generally speaking, I look at cannabis equity in four pillars.
[First], an equitable industry: creating equity and diversity within the industry, ensuring that people who have been most impacted by prohibition, folks existing in the legacy market, have the opportunity to participate meaningfully in the legal market
Second, an equitable community: helping to restore power to communities that have been most harmed by cannabis prohibition.
Third, equitable justice. This is getting people out of prison and jail. This is limiting cannabis-related contact with people that have been historically disproportionately policed concerning cannabis
And then lastly, equitable access: ensuring that veteran status, housing benefits status, disability status, none of these things would impede people's access to safe cannabis products.
If you could wave a policy wand, what would you like to see instituted in this country as far as cannabis policy?
First and foremost, I'd like to end federal prohibition, which was implemented contrary to the recommendations of experts. And now we have been stuck with a policy that was intended to wreak havoc and create harm in the Black community. So I would love to see the end of prohibition. Not only would this be great for those sitting in jail, and for those communities still being overpoliced, but it would create a real meaningful pathway to success for small cannabis businesses as well. The dual system of state-legality/federal-illegality is difficult for even large, well-funded firms to navigate. It's nearly impossible for small firms to navigate.
What are the major challenges for small businesses trying to get on their feet in this industry?
First, I would point to inequitable access to capital. Because of the federal banking situation and federal prohibition continuing to exist, most people that start cannabis businesses started through either personal wealth or friends and families. And then when you get into the individuals that have either been justice-involved or otherwise seriously impacted by the war on drugs and cannabis prohibition, that becomes even more inaccessible.
Next would be the limited licensing schemes. Arbitrarily limited and capped licenses at the state level have really created an overinflated value for licenses and a scarcity that has priced most people and most small businesses out of the running. You have some states where you have only a handful or not even a handful of licensed operators that are diverse firms.
And then lastly, I would say it's taxes, both state-level taxes and federal taxes are extraordinarily punitive. At the federal level, we have [Section 280E of the U.S. Tax Code] that treats state-legal cannabis businesses like criminal enterprises and taxes them accordingly.
And even on the state level, the excise tax and the sales tax are set at a punitive rate that often create a situation where small businesses can pay an effective tax rate of 70% to higher when you combine state and federal. And this makes it really impossible for the legal cannabis industry to compete with the unregulated market that doesn't have to pay taxes.
I'm glad you brought up the unregulated market, which continues to persist in states where cannabis has been legalized. What do you think is causing that, and what do you think is the most productive way to talk about it?
I think there are a few factors. As I mentioned, taxes are a big factor. Unnecessary burdens to entry are another. Creating licensing frameworks that really don't address the skill set of the legacy market for instance. Many legacy operators in communities, for example like New York, operate their businesses exclusively on a distribution and delivery system. And so to offer them a large storefront may not be the best path to success for them or even the best utilization of the market that they've developed. So it makes it challenging to incorporate them into the legal system.There has to be effort invested in understanding who exists in the unregulated market. I think there is a tendency of law enforcement agencies and sometimes regulators to lump the unregulated market into the cartel gang member bucket when you have an entire spectrum of people: people that have come from families that have for generations sold and grown cannabis, people who are peacefully selling it to raise their family. There are also the opportunists that pop up at the beginning or before the inception of a legal market and create, you know, "gifting" shops. They really run the spectrum.
And so I think it's really important to figure out who's there and to create pathways for those who would like to transition into the legal space, and to identify ways to enforce cannabis laws against opportunists trying to exploit gray areas, or people that are organized crime entities that are preying on individuals and communities and engaging in labor trafficking. That is something that we all collectively, I think, agree does not belong in a lawful and responsible industry.
But on the flip side of that, we don't want to re-criminalize people that are otherwise law-abiding citizens, but for the fact that they have failed to complete the licensing process for an otherwise peaceful cannabis business.
What are some of the biggest divisions within the legalization movement or within the cannabis industry at this point?
I would point to the interstate versus anti-interstate [camps]: those who want to limit or delay interstate commerce to protect existing state markets, and those who want to open up an interstate market even before federal legalization. Again, I often think that both camps are taking somewhat extreme positions, and the likely solution exists in the middle, as it often does in arguments like this.Another division that I don't think folks talk about enough is that legalization doesn't actually benefit everyone. Companies that are doing OK within their states haven't really aggressively pushed or done the work to get us to the point of federal legalization. In the anti-legalization camp are people also who have seen the legal market crush their generations-old cannabis business that was otherwise thriving under the weight of really burdensome taxes and regulation.
And then lastly, something that we're really seeing emerging right now is equity versus nonequity. And you know, very few will come out and say, "Hey, we don't care about equity." But when it comes to actions and being willing to do meaningful work, to create equity within the cannabis industry, that is something that we see waning. There are companies that are doing away with their social equity departments and firing staff and scaling back investment in that area, really failing to recognize that social equity is a component of [environmental, social, and governance principles] and the impact that that can have on your valuation from long-term sustainability. I think, unfortunately, sometimes the industry behaves a little shortsightedly as it concerns that.
What are your thoughts on the three major pieces of federal legislation trying to end cannabis prohibition? These are the MORE Act in the House, the CAO Act in the Senate, and GOP Rep. Nancy Mace's States Reform Act.
So the MORE Act and the CAO Act were actually very similar to each other in that they put equity and criminal justice reform at the forefront. Both things that I am hoping continue throughout federal legalization efforts.
I think the CAO Act took an additional step of attempting to build out a legal framework for cannabis. I do have concerns [about U.S. Food and Drug Administration] involvement and [U.S. Alcohol and Tobacco Tax and Trade Bureau] involvement and ensuring that whatever regulatory burden is created is going to actually support small businesses and not completely eliminate them. As both those are written right now, it would be a very difficult if not impossible transition for a lot of small businesses.
We would definitely like to see the breadth of provisions that concern small businesses and small minority businesses expanded in both of those proposals, because again, while I think the spirit is there, we are hoping to see a lot more meat on the bones as it concerns actually how we would get it done.
The States Reform Act is an interesting proposal. I will definitely start by saying outside the expungement provisions, there are no equity provisions. Not incredibly surprising understanding that it came from the other side of the aisle. So to support something like that, I would definitely need to see a robust effort to incorporate addressing the harms of an intentional war on people of color that goes right through federal cannabis policy.
I will say though, when it comes to small business, the SRA actually has the least burdensome regulatory framework, and probably the most small-business-friendly framework that I've seen to date. So that is encouraging, because I think regulatory burdens are the little-discussed equity issue that I think the SRA was very thoughtful in addressing. So while the absence of equity essentially renders that proposal a nonstarter in its current iteration, I am definitely encouraged by the thoughtful approach to regulation.
What do you think were the missteps or missed opportunities as far as states trying to implement their equity policies?
Especially states that have implemented [legalization] over the last four years, they had the opportunity to learn from the mistakes of the past. One of the challenges is not actually reaching out and engaging small businesses enough when developing policy. Because what we've seen over and over again is cannabis policy essentially becoming a compromise between industry and criminal justice reform organizations, neither of which have any investment or concern about the viability and sustainability of small minority businesses in the space.
Another big misstep is the failure to provide funding and technical support before markets open. Only six state-level social equity programs provide direct funding to social equity applicants or licensees and none of them have provided that funding at the time that the market opened or the applications opened.
So while there may be, you know, licensing fee waivers, it doesn't waive the hundreds of thousands of dollars that it may cost to submit an application in a competitive market, and it doesn't necessarily provide the funding to stand the business up. When your social equity support dollars are coming from adult-use revenues, it may take months or years for it to get to the people that need it. The funding in Illinois for social equity applicants that was supposed to come from the early adult-use revenues is still not making it into the hands of equity operators in the system years later.
Do you have any thoughts about some of the states that are coming online now in the Northeast — New Jersey, New York and Connecticut — and some of the proposals that they have on the table right now?
Connecticut is another place where the proposals that are absolutely exclusionary are dressed up as equity. It would take millions of dollars to be part of the first round of licenses, and then I think everybody else was fighting for, I think, 12 licenses. So that becomes a near impossible uphill battle and just whether you can buy enough balls in the lottery to be successful. It's disappointing.
In New York, I think the [Marijuana Regulation and Taxation Act] did a fantastic job of prioritizing equity and the [Office of Cannabis Management] has stayed focused on creating equity. I think it is yet to be seen how many successful applicants can come out of this first round, whether the first round of applications and licenses are tied up in litigation, and really how the fund is going to work.
You know, to date, we don't have a single social equity program that is rolled out without being delayed due to litigation. So I am hopeful that we can get these businesses up and running for these justice-involved individuals and really get to looking at what the next few rounds of licenses look like and making sure that the legal supply chain is sufficient to support legal businesses competing with the unregulated market.
What is your take on the SAFE Banking Act?
I wholeheartedly support the SAFE Banking Act. MCBA has offered some clarifying amendments on things we think could improve both access to capital and equity. SAFE Banking isn't the magic fix-all, but it is an incredible first step that could provide relief. I think folks who are in mature cannabis states fail to recognize that as these markets open up, so few banks bank cannabis, that it's nearly impossible for a brand-new cannabis business to get a bank account. It means you're in a position where you're taking the risk of starting your initial account at a bank that very likely will freeze your funds. And people don't want to take that risk. On the ongoing situation with robberies, anything that we can do to remove cash from these premises is really something that I will continue to support. So I will definitely continue to keep working with lawmakers to push this through.
Is marijuana is a bad word?
I mean, in truth if you look back at so many words, in the English language, in a country with a history as troubled as ours, there are a lot of words with troubled history. I use the term cannabis. I don't use the term marijuana, but I frequently engage in policy, and the term marijuana is used in those settings. In the multitude of battles that I fight on a given day, I'm going to prioritize basic human rights and supporting struggling businesses. I will save the fight for that for someone else