The Struggle of Social Equity Cannabis Entrepreneurs Amidst Banking Barriers and Legal Challenges
Recent coverage highlighted how banking and social equity in the cannabis industry are connected.
Spotlighting the story of the owners of Massachusetts cannabis dispensary Firehouse, a recent Forbes article (1) highlighted the effect of lack of access to banking and traditional loans on social equity licensees attempting to start their cannabis businesses. Several factors continue to complicate the already challenging situation, such as the recent ban by Mastercard on cannabis purchases (2) and lawsuits against some social equity programs (3).
“I believe the architects of the social equity programs are doing their best to create advantages for the individuals they want the programs to serve,” commented Patrick Rea, fund manager for Poseidon Asset Management, a cannabis-focused investment fund (1). “Still, unless changes come to the other headwinds every cannabis business faces, the potential for low/no investor returns is hindering further investment in social equity entrepreneurs.”
The article explained the journey of the owners of Firehouse cannabis shop from social equity licensee applicants to their yearslong multiple attempts to secure capital and real estate needed to establish their shop (1). Their story exemplified the fact that even with solid and well-meaning social equity programs, few shops in the nation have actually succeeded because of them (1). Ultimately, the article concluded that the best way to move forward is for the Secure and Fair Enforcement (SAFE) Banking Act to finally pass and create lending opportunities, a sentiment shared by Firehouse (1).
“We are poised to be a genuine, locally focused cannabis retail experience, but our success story sheds light on the greater issue faced by social equity businesses like ourselves,” Firehouse cannabis shop stated in a LinkedIn post last week (4). “To truly empower entrepreneurs of color and those impacted by cannabis prohibition, federal banking reform is urgently needed. Congress must pass legislation like the SAFE Banking Act, which opens access to the banking system and institutional lending for the cannabis industry, and ensure that people impacted by the War on Drugs can access that banking.”
References
- Krane, K. What’s killing Social Equity in cannabis? lack of banking https://www.forbes.com/sites/kriskrane/2023/08/01/whats-killing-social-equity-in-cannabis-lack-of-banking/?sh=6a9052915a9f (accessed Aug 10, 2023).
- Colli, M. MasterCard bans cannabis debit card purchases https://www.cannabissciencetech.com/view/mastercard-bans-cannabis-debit-card-purchases (accessed Aug 10, 2023).
- McEvoy, E. New York halts dispensary licenses amid lawsuit over cannabis equity https://www.cannabissciencetech.com/view/new-york-halts-dispensary-licenses-amid-lawsuit-over-cannabis-equity (accessed Aug 10, 2023).
- Firehouse on linkedin: What’s killing social equity in cannabis? lack of banking https://www.linkedin.com/feed/update/urn:li:activity:7092557513451024384/ (accessed Aug 10, 2023).
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