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Cloud 9 Cannabis CEO and co-owner Sam Ward Jr., left, and co-owner Dennis Turner pose at their shop, Thursday, Feb. 1, 2024, in Arlington, Wash. Cloud 9 is one of the first dispensaries to open under the Washington Liquor and Cannabis Board's social equity program, established in efforts to remedy some of the disproportionate effects marijuana prohibition had on communities of color. (AP Photo/Lindsey Wasson)
GENE JOHNSON Associated Press
Published: 22 April 2024

ARLINGTON, Wash. (AP) — When Washington state opened some of the nation's first legal marijuana stores in 2014, Sam Ward Jr. was on electronic home detention in Spokane, where he had been indicted on federal drug charges. He would soon be off to prison to serve the lion's share of a four-year sentence.

A decade later, Ward, who is Black, recently posed in a blue-and-gold throne used for photo ops at his new cannabis store, Cloud 9 Cannabis. He greeted customers walking in for early 4/20 deals. And he reflected on being one of the first beneficiaries of a Washington program to make the overwhelmingly white industry more accessible to people harmed by the war on drugs.

“It feels great to know that I’m the CEO of a store, with employees, people depending on me,” Ward said. “Just being a part of something makes you feel good.”

A major argument for legalizing the adult use of cannabis was to stop the harm caused by disproportionate enforcement of drug laws that sent millions of Black, Latino and other minority Americans to prison and perpetuated cycles of violence and poverty. Studies have shown that minorities were incarcerated at a higher rate than white people, despite similar rates of cannabis use.

But efforts to help those most affected participate in — and profit from — the legal marijuana sector have been halting.

Since 2012, when voters in Washington and Colorado approved the first ballot measures to legalize recreational marijuana, legal adult use has spread to 24 states and the District of Columbia. Nearly all have “social equity” provisions designed to redress drug war damages.

Those provisions include erasing criminal records for certain pot convictions, granting cannabis business licenses and financial help to people convicted of cannabis crimes, and directing marijuana tax revenues to communities that suffered.

“Social equity programs are an attempt to reverse the damage that was done to Black and brown communities who are over-policed and disproportionately impacted,” said Kaliko Castille, former president of the Minority Cannabis Business Association.

States have varying ways of defining who can apply for social equity marijuana licenses, and they're not necessarily based on race.

In Washington, an applicant must own more than half the business and meet other criteria, such as having lived for at least five years between 1980 and 2010 in an area with high poverty, unemployment or cannabis arrest rates; having been arrested for a cannabis-related crime; or having a below-median household income.

Legal challenges over the permitting process in states like New York have slowed implementation.

After settling other cases, New York — which has issued 60% of all cannabis licenses to social equity applicants, according to regulators — is facing another lawsuit. Last month, the libertarian-leaning Pacific Legal Foundation alleged it favors women- and minority-owned applicants in addition to those who can demonstrate harm from the drug war.

“It's that type of blanket racial and gender preference that the Constitution prohibits,” said Pacific Legal attorney David Hoffa.

Elsewhere, deep-pocketed corporations that operate in multiple states have acquired social equity licenses, possibly frustrating the intent of the laws. Arizona lawmakers this year expressed concern that licensees had been pressured by predatory businesses into ceding control.

Difficulty in finding locations due to local cannabis business bans or in obtaining bank loans due to continued federal prohibition has also prevented candidates from opening stores. In some cases, the very things that qualified them for licenses — living in poor neighborhoods, criminal records and lack of assets — have made it hard to secure the money needed to open cannabis businesses.

The drafters of Washington's pioneering law were preoccupied with keeping the U.S. Justice Department from shutting down the market. They required background checks designed to keep criminals out.

“A lot of the early states, they simply didn’t have social equity on their radar,” said Jana Hrdinova, administrative director of the Drug Enforcement and Policy Center at Ohio State University’s Moritz College of Law.

Many states that legalized more recently — including Arizona, Connecticut, Ohio, Maryland and Missouri — have had social equity initiatives from the start.

Washington established its program in 2020. But only in the past several months has it issued the first social equity retail licenses. Just two — including Ward's — have opened.

Washington Liquor and Cannabis Board Member Ollie Garrett called the progress so far disappointing, but said officials are working with applicants and urging some cities to rescind zoning bans so social equity cannabis businesses can open.

The state, which collects roughly half a billion dollars a year in marijuana tax revenue, is making $8 million available in grants to social equity licensees to help with expenses, such as security systems and renovations, as well as business coaching.

It also is directing $250 million to communities harmed by the drug war — including housing assistance, small-business loans, job training and violence prevention programs.

Ward's turnaround is one officials hope to see repeated.

He started dealing marijuana in his teens, he said. In 2006, a customer pulled a gun on him, and Ward was shot in the hand.

A single father of seven children, he continued dealing drugs to support them, he said, until he was indicted in 2014 — along with 30 other people — in an oxycodone distribution conspiracy. He served nearly three years in prison.

Ward, now 39, spent that time taking classes, working out and training other inmates. He started a personal training business after he was released, got a restaurant job and joined a semipro football team, the Spokane Wolfpack.

That's where he met Dennis Turner, a Black entrepreneur who briefly owned the team. Turner had worked as a restaurant manager on cruise ships, for the postal service and as a corrections officer before investing his savings — $6,000 — in a friend's medical marijuana growing operation. They used the proceeds to help open a medical dispensary in Cheney, a small college town southwest of Spokane, that eventually became an adult-use marijuana retailer.

In Washington's social equity program, Turner saw an opportunity to make Ward a business executive. The two joined Rashel Palmer, whose husband co-owns the football team, in launching Cloud 9 at a cost of around $400,000. They picked Arlington, Washington — 320 miles (515 kilometers) away — because it's a quickly growing city with limited cannabis competition, they said.

Ward “saw me as a guy that he looked up to, that did good business, was self-made and came out the trenches, and he just wanted to pick my brain,” Turner said.

Turner is working to open cannabis stores in New Mexico and Ohio through social equity programs in those states. He hopes one day to sell them for tens of millions of dollars. In the meantime, he intends to use his businesses to support local charities, such as the Boys and Girls Club in Arlington and the Carl Maxey Center, which provides services to the Black community in Spokane.

Another new social equity licensee is David Penn Jr., 47, who helped persuade Pasco, in south-central Washington, to rescind its ban. Penn, who is Black, was arrested on a crack cocaine charge as a teenager. In 2011, he was kicked out of his apartment after a marijuana bust.

A friend with two other cannabis outlets is financing Penn's store. His location, a dirt-floored building next to a gas station, still needs to be built out. State grants will help, but won't be enough.

“It's like they're giving you the carriage, but you need the horses to get this thing going,” Penn said.

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