Business/Economy, Denver, Exclusives, Marijuana, Politics

Sharf: Denver’s ‘social equity’ scheme a license to discriminate

Denver has just awarded its first “social equity” marijuana hospitality license.  Whatever one thinks about marijuana legalization or the forms it has taken, the problem here isn’t pot.  The problem is with the very idea of a “social equity license” for conducting business.  It’s the city government actively finding a way to discriminate, and it won’t stop with pot shops.

On April 19, 2021, the Denver City Council followed a number of other states and cities in adopting a so-called “social equity license” for marijuana retail outlets, cultivation locations, and hospitality locations.  The license criteria are based on a model published by the National Association of Cannabis Businesses (NACB), and adopted by the Colorado Department of Revenue’s Marijuana Enforcement Division.

In summary, someone can apply for such a license if they resided in a Development Zone, Opportunity Zone, or Disproportionate Impacted Area for 15 out of the 31 years from 1980-2010; if the applicant’s household income was less than 50% of the state median income; or if the applicant or anyone in the applicant’s immediate family was even arrested for a marijuana offense, never mind convicted.

In theory, the whole program is intended to make up for years when people who had had brushes with the law over marijuana were prevented from operating in the industry, but if so, why include the income or geographic criteria?

While facially neutral, both the state and proponents acknowledge that race plays a major factor in adopting these criteria.  The state’s website, “acknowledges the effects of decades of criminal enforcement of marijuana laws on communities of color.”  And Peter Marcus of Terrapin Care Station is quoted in Denverite as saying that “What we’re really trying to do with legalization is righting the wrongs of a systemically racist, failed drug war,” specifically referring to the new licensing regime.

One might have thought that, in the case of those who’ve had legal problems with marijuana, exempting those troubles from consideration would be enough, when combined with the income and residence allowances.  Instead, the city has declared that only “social equity” applicants will be considered for this license until July 1, 2027, locking out people who meet no special criteria, but simply see a business opportunity.

Dangerously, one searches in vain for the limiting principle here.  The city issues licenses for at least 70 different occupations and business types, from auctioneer to wreck and towing services.  Currently, aside from marijuana licenses, the Excise and Licenses Department doesn’t specifically mention diversity, equity, and inclusion (DEI) in its hearing policies and procedures.

However, the city government has made it clear that DEI is one of its top priorities, with statements to that effect in many of the department descriptions.  The city’s 2022 budget uses the word “equity” 290 times, and only twice does it refer to finance.  Its Office of Social Equity and Innovation commands more than a million dollar budget this year.

One of the root assumptions of Critical Race Theory is that all aspects of American law and society have conspired against minorities in the past.  In theory, all of those business or occupations requiring licenses could be required to “make up” past injustice by locking out allegedly privileged applicants for an arbitrary period of time.

The instinct to help people who’ve been down is both laudable and very American.  But lines must be drawn.  That instinct cannot be translated into the profoundly un-American practice of telling middle-class entrepreneurs that they need not bother applying for government licenses.

Joshua Sharf is a senior fellow in fiscal policy at the Independence Institute, a free market think tank in Denver.

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