WEEDING THROUGH LOS
ANGELES’ SOCIAL EQUITY
PROGRAM

Case Study Conducted By: Chris Nani
& Austin Slutsky

1

 Acknowledgements
We’d like to thank each and every individual and organization that helped support our
case study. From the social equity applicants who shared their intimate journeys through
Los Angeles’ application process to the government officials who candidly spoke to us
about their jobs, thank you for your support. Additionally, we’d like to specifically thank
the Minority Cannabis Business Association for sponsoring our case study.

Grading System
This case study examines Los Angeles’ social equity program and its efficacy at
promoting opportunities for those impacted by the War on Drugs. The program was
scored using metrics developed by Chris Nani. Specific factors instrumental to the
success of a social equity program are worth twice the amount of points and are denoted
in the rubric section by a (2x). The rubric can be found at the end of the report.
The rubric grades individual objective factors that make up a large part of social equity
programs. A factor that scores a one is considered severely lacking in numerous areas
with no signs of improvement. A score of five typically denotes a factor that has
potential, but is still being developed. Full marks may be awarded when a program has
been implemented and there are demonstrated results of success.
This case study is a snapshot of Los Angeles’ social equity program as of May 1, 2019.
Further case studies may be needed in the future to ensure the program is fully
implemented and meeting the needs of Los Angeles. Due to the constant evolution of the
cannabis industry, scores may change as new regulations are implemented.

2

 Executive Summary
Overall, Los Angeles has a below average social equity program, with the potential of
improving as the program continues to roll out. Los Angeles’ social equity program
inception and framework scored well by providing those impacted by the War on Drugs
by providing broad opportunities in the cannabis industry. However, the implementation
of the program has not met expectations.
Los Angeles’ program received high marks in some Accessibility Factors. The program’s
expansive eligibility criteria permit the majority of individuals harmed by the War on
Drugs access to the program. Los Angeles does little to support the expungement
process, but the score benefits from California’s automatic expungement review system.
The program does a good job reserving licenses for social equity applicants and
providing assistance during the application process bolstering their overall score.
However, there is anecdotal evidence of applicants being exploited for their equity from
shareholders.
Under the Environment Factors, Los Angeles earned less than half the possible points. As
the program currently exists, it does not promote the long-term success of applicants and
does little to address existing market concerns affecting applicants in the short-term.
Educational services offered by the program are minimal. Incubators provide little
support and some have allegedly abused their position as Tier 3 applicants. Some
government officials and city council members appear to be more interested in promoting
their own agendas rather than the future of the social equity program. Los Angeles
currently does not have a community reinvestment fund which severely limits the
outreach and potential of the social equity program.

Final Score: 85 out of 140

3

 Accessibility Factors
Score: 52 out of 70
Application Process (2x)
Score: 6 out of 10
Rationale: Los Angeles is currently in
the process of identifying vendors to
provide technical assistance to
applicants. All three tiers receive priority
processing for non-retail licenses, with
Tiers 1 and 2 receiving priority
processing for retail licenses as well. A
fee deferral option is being developed
for Tier 1 applicants. However,
extensive delays in the process have
placed undue hardships amongst
applicants.
Recommendations: Develop strategic
partnerships with local businesses to
provide pro bono services to applicants
during the application process. Provide
additional funding to expand available
technical services and expedite the
application process. Expand fee deferral
options to be more inclusive of
applicants. Research the implementation
of a low or zero-interest start-up loan
program for applicants.

Eligibility (2x)
Score: 9 out of 10
Rationale: Eligibility is broadly defined
and inclusive of the majority of
individuals harmed by the War on
Drugs. The program encourages
individuals who have not been harmed
by the War on Drugs to contribute by
providing support and assistance to
higher tiered individuals.
Recommendations: Continue to monitor
eligibility requirements and ensure
impacted areas from the War on Drugs
are represented. Consider expanding
eligibility requirements to include
immediate family of individuals with
non-violent cannabis convictions.
Expungements
Score: 9 out of 10
Rationale: This score is based on
California’s automatic expungement
review system, Los Angeles does not
improve upon the state’s mandatory
expungement process. Clinics are not
routine but information to find clinics is
accessible online.
Recommendations: City and county
government officials should work
together towards improving the
expungement process. Additional
legislation aimed at expanding the

4

 eligibility of convictions and providing
funding for expediting the expungement
process should be implemented.

Shareholder/Ownership
Requirements
Score: 5 out of 10

Restricted Licenses
Score: 8 out of 10

Rationale: There is evidence of
shareholders sidestepping safeguards to
have more control over the applicant’s
business. Although the program has
minimum equity baselines, applicants
are largely unaware of their equity
rights. Shareholders take advantage of
this knowledge gap by extorting higher
equity from applicants. Shareholders
financial disclosure requirements are
cumbersome but not to a degree to deter
a significant amounts of investors.
However, applicants are required to
make a good faith effort to compose half
their workforce of residents in the
nearby vicinity.

Rationale: Los Angeles has a 1:1 ratio
between social equity applicants and
non-social equity applicants. Although
Los Angeles has a ratio in place, several
hundred licenses were given to
businesses, effectively capturing the
market, before the social equity program
was implemented. Social equity
applicants are now exclusively being
processed until the 1:1 ratio is met.
Delivery licenses must be awarded to
verified Tier 1 and Tier 2 applicants
before they become available to the
public.
Recommendations: Provide a timeline of
the licensing process to promote stability
and transparency for the program.
Increase frequency of updates about the
licensing process. Continue to
incentivize non-social equity applicants
through priority processing. When the
need for new license types arise, (i.e.
consumption lounges or cannabis
licenses for restaurants) initial licenses
are reserved for social equity applicants.

5

Recommendations: Develop a system to
ensure applicants have meaningful
ownership control and equity within
their license. Applicants should advocate
for higher amounts of equity based on a
culmination of the factors below. Draft a
document that explains the minimum
baseline equity amounts for applicants.
The document should also state equity
within a company should be allocated
based on prior cannabis industry
experience, resources contributed, and
business acumen. Require social equity
applicants to read and sign this
document before awarding their license.

 Environment Factors
Score: 33 out of 70
Educational Services (2x)
Score: 5 out of 10
Rationale: Currently, Los Angeles’
program focuses on helping applicants
through the application process with
technical assistance. However, the
educational services criteria is directed
towards post-licensing success and there
are concerns applicants will not succeed
long-term due to their lack of business
acumen. Having an incubator program
that requires mentorship is a positive,
although the impact of such mentorship
is questionable. Additionally, the
program provides educational services
through websites and workshops.
Commissions are also in place to provide
updates on regulations and receive
feedback.
Recommendations:
Provide funding to develop financial
literacy and other business courses to
support applicants’ business acumen.
Encourage business leaders outside the
cannabis industry to provide mentorships
with applicants. Incentivize partnerships
with businesses to provide supplemental
workshops to the program’s courses.

6

Incubator Program (2x)
Score: 5 out of 10
Rationale: The incubator program
encourages applicants and businesses to
work together through a tiered system of
priority licensing to incentivize
partnerships. However, incubators are
not designed to ensure post-incubation
success of applicants. Additionally, there
is evidence of predatory sponsorships
being prevalent in the incubator
program. In some instances, incubators
extort equity from applicants for services
or spaces they’re obligated to already
provide. Applicants are given a
temporary space for three years with
little directions as to what to do postincubation.
Recommendations: Review and consider
the Department of Cannabis
Regulation’s original proposal to allow
Tier 3 applicants to pay the equivalent
value of space they would have provided
an applicant. The money can then be
reallocated to Tier 1 and 2 applicants to
secure a site location. Draft a document
that explains equity requirements for
applicants emphasizing requirements
Tier 3 businesses are obligated to fulfill
as part of the program. Establish a
reporting system to ensure neither social
equity applicant nor business abuse their
position.

 Real Estate/Cap Limit
Score: 5 out of 10

Community Reinvestment Fund
Score: 3 out of 10

necessary to prevent or limit excessive
rent increases for cannabis businesses.

Rationale: There is no community
reinvestment fund from cannabis tax
revenues. However, there are outreach
events to increase the visibility of the
program. Businesses cannot become
involved in the community reinvestment
fund due to its non-existence.

Government Responsiveness
Score: 5 out 10
Rationale: There are multiple avenues
for providing feedback with questions or
concerns about the program, but
responses are often delayed. Policymakers are largely informed of the social
equity program but may not work to
address issues. There is cooperation
across political party lines and both
parties meaningfully contribute to
cannabis legislation. However, interest
groups significantly influence individual
policy-makers, and there have been
allegations of government officials
placing private interests above the social
equity program. Los Angeles residents
have reported city council members have
revised regulations to favor personal
interests at the expense of the social
equity program.
Recommendations: Funding should be
increased to add additional staff at Los
Angeles cannabis regulatory agencies.
Provide policy-makers with a monthly
update highlighting the most important
issues impacting the program and what
can be done to address them. Foster open
and transparent communication between
regulatory agencies, elected officials,
and interest groups.

7

Recommendations: Establish a fund that
earmarks at least 2% of existing tax
revenue from cannabis sales for
community reinvestment. An example of
a proposed community reinvestment
fund could be the failed tax ballot
initiative “Cannabis Reinvestment Act”
from November 2018. Increase outreach
efforts in neighborhoods
disproportionately impacted by the War
on Drugs. Permit cannabis businesses to
contribute and engage with their
community through the reinvestment
fund.

 Scoring Rubric
Accessibility Metric (Out of 70 Points)
Factors
Application Process
(2x)

8

1-3

4-7

8-10

Overall, the application
process is tedious and
offers minimal to no
support for social
equity applicants; the
program offers no fee
waivers, zero interest
business start-up loan,
or technical assistance
(1) or vaguely provides
assistance during the
application process
with no defined
services listed. No
legal services are
available. Severe
delays in the
application process are
frequent and have
consistently impeded
applicants ability to
start their business.

The application
process offers limited
assistance such as
document review or a
help center that can
aid applicants in
obtaining all
requirements
necessary to complete
the application.
Applicants receive
priority processing
and may be tiered; the
program offers fee
waivers or zero
interest business startup loans; there is a
planned technical
assistance component
that offers general
assistance and
potentially legal
services. The program
may have consultants
but additionally relies
on volunteers to
support it. Funding for
support services may
either be limited or
non-existent. The
application process
experiences delays
that disrupt the
timeline of
implementation and
applicant’s business
plans.

The application
process is expedited
with assistance from
trained workers and
offers free limited
legal or technical
services to review the
application and
ensure accuracy.
Additionally,
applicants receive
priority processing
over normal
applicants.
Applications may
also receive a chance
to be corrected
without loss of
priority, status, or
incurring a penalty;
The program offers
fee waivers and zero
interest business
start-up loan along
with industry specific
and business
ownership technical
assistance with
allotted funds to hire
skilled consultants or
an equal equivalent.
Legal services are
also available either
on a pro bono basis
or reduced rate. There
are infrequent to no
delays in the
application process.

 Eligibility (2x)

9

Eligibility is narrowly
defined and fails to
include a majority of
the individuals harmed
by the War on Drugs.
The criteria severely
limits the ways an
individual can be
eligible for the
program.

Eligibility is defined
with multiple tiers
based on the impact
from the War on
Drugs. The program is
able to successfully
include a majority of
individuals harmed by
the War on Drugs. A
successful program
will include as part of
its eligibility defined
geographic areas or
zip codes for
individuals
disproportionately
harmed by the War on
Drugs, a defined lowincome status, and
eligibility for certain
prior cannabis
convictions.
Eligibility factors do
not take into account
the jurisdiction’s
unique history.

Eligibility is broadly
defined with multiple
tiers based on the
impact from the War
on Drugs . Eligibility
may be defined by
geographic areas or
zip codes for
individuals
disproportionately
harmed by the War
on Drugs, a defined
low-income status,
eligibility for certain
prior cannabis
convictions, and
potentially extending
eligibility to
individuals with
immediate family
who have certain
cannabis convictions.
Other eligibility
factors are also
considered based on
the jurisdictions
unique history.
Additionally, the
program permits
individuals who have
not been harmed by
the War on Drugs
eligibility to the
lowest tier within the
program in exchange
for providing support
and assistance to
higher tiered
individuals.

 Expungements

The program does not
offer any expungement
services for applicants.
(1)

The program requires
applicants to
affirmatively apply
for expungements and
may require multiple
documents and letters
of recommendations
for applicants
applying for
expungement. The
expungement program
has a low-use rate and
requires significant
effort. Clinics may be
available but they are
not consistently
available to
applicants.

Automatic
expungements (10) or
the program has a
simplified version for
expungements that
requires minimal
effort on the
applicant’s part. The
program offers
expungement clinics
on a consistent basis
that help further
expedite the process.

Restricted Licenses

There is minimal
thought to reserving
any type of licenses for
social equity
applicants.
Furthermore, the
program does not have
any ratio for initially
processing social
equity applicants
compared to the
general public. (1)

There is a ratio for at
least one type of
license with priority
licensing going to
social equity
applicants and then
businesses willing to
incubate them. The
program has at least a
1:2 ratio for social
equity and is
consistently involving
applicants in the
licensing process.

The program offers
an initial 1:1 ratio for
social equity
applicants requiring
50% of licenses to go
to social equity
applicants. The
program may initially
stop the licensing
process until a certain
number of licenses
have been processed
for social equity
applicants. The
program also
promotes social
equity applicants
throughout the
process incentivizing
investors and nonsocial equity
applicants to partner
with them.

10

 Shareholder/Ownership There are no
requirements for
Requirements
shareholders or
ownership interest (1).
The program requires
minimal disclosure
from shareholders and
may not require
disclosure of other
ownership interests.
Shareholders exercise
significant influence
over management and
can control daily
events.
There is no minimum
amount of equity a
social equity applicant
must own in their
business or the amount
is less than 20%.
Neither applicants nor
shareholders may sell
their interests.

11

Shareholders have
indirect influence over
the business. There
may be evidence
within the program of
shareholders
circumventing
control-safeguards.
The social equity
applicant has a
minimum amount of
equity that cannot be
reduced in the
business. Social
equity applicants may
not sell their equity.
Minimum equity
baselines are
established with
higher tiers requiring
applicants to retain
more equity.
Shareholders may sell
their interest but
paperwork and
regulations make the
process cumbersome
and act as a deterrent.
Applicants may be
required to sign a
document
acknowledging their
rights before receiving
a license to allow
applicants to make
informed decisions
about their equity and
rights as a social
equity license holder.

Shareholders exercise
indirect influence
over the business as
permitted by
regulations and there
is minimal evidence
of shareholders
circumventing
regulators. Social
equity applicants are
required to have
minimum amount of
equity in their
business that cannot
be reduced with the
highest tier requiring
at least 51% equity.
Social equity
applicants may sell
their interest to other
social equity
applicants if
permitted by
regulations. Social
equity applicants may
not have an
ownership interest in
more than three
different businesses.
Shareholders may sell
their interest with
regulatory approval
and the process
permits the sale at a
reasonable speed.
Applicants are
required to sign a
document
acknowledging their
rights before
receiving a license to
allow applicants to
make informed
decisions about their
equity and rights as a
social equity license
holder.

 Environment Metric (Out of 70 Points)
Factors
Educational
Services (2x)

12

1-3

4-7

8-10

The program offers no
educational services (1)
or offers limited
services with no plan to
improve services.
Additionally, services
maybe either be
underfunded or
unsustainable.

There are established
educational services
with the long term
goal of helping
applicants establish
successful business
practices. However,
educational services
lack funding and/or
parts of the services
are not fully
developed. Services
may include basic
financial literacy,
compliance courses,
and employee
management. The
program may work
cooperatively with
local businesses to
provide community
classes or seminars.

The program
provides educational
services that teach
applicants to
successfully run a
business and
actively engage
other local
businesses to
support the program.
Services may
include classes,
written materials,
and mentorships.
Applicants may
additionally be
required to intern at
other cannabis
businesses to learn
from experienced
leaders how to
effectively run their
business in
connection with
services provides by
the program.

 Incubator
Program (2x)

13

There is no incubator
program (1) or there are
only occasional
classes/meetings where
social equity applicants
can go to learn more
about how to run their
businesses. There is no
official program for
matching applicants
with businesses.
Businesses can
circumvent social
equity programs by
incubating/sponsoring
social equity
applicants. Incubators
fail to provide any
assistance and/or offer
very little support.

There is an incubator
program that
encourages
businesses to work
with social equity
applicants. The goal
of the incubator is to
help social equity
businesses become
independent and
successful at the end
of their incubation
period. There may
be a simple vetting
process for matching
businesses and
applicants for the
incubator program.
The SEP requires
businesses to
provide free or
greatly reduced rent
or utilities for a
minimum amount of
specified years and
mentorship in
business skills.
There is infrequent
predatory
sponsorship.
Sponsors provide
adequate support for
businesses but may
lack the resources,
knowledge, or time
to adequately
prepare an applicant
to be independent
after the
sponsorship.

There is a
structured,
potentially tiered,
incubator program
that robustly
matches the most
qualified businesses
to social equity
applicants. The
incubator program
must include at least
4 of the 5 following
requirements: (i)
free or greatly
reduced rent and
utilities for a
minimum amount of
specified years; (ii)
mentorship in
business skills; (iii)
technical assistance;
(iv) a reporting
system to ensure
neither social equity
applicant nor
business abuse or
mistreat the other;
and (v) a system that
allows social equity
applicants and
businesses to
anonymously
provide suggestions
and complaints
about the existing
program.
There are little to no
reported cases of
predatory
sponsorship and
businesses that do
incubate applicants
fully provide all
required services.

 Real Estate/Cap
Limit

14

Zoning regulations
restrict the amount of
licenses for cannabis
related businesses
preventing a SEP from
effectively existing.
There are no
regulations or controls
in place to protect
cannabis businesses
from rate increases in
rent based on their
cannabis nature. The
governing body does
not plan on expanding
permits or land for
cannabis businesses.

Zoning regulations
allow for a SEP to
exist but limits on
licenses or
appropriately zoned
land prevent
competition and
growth. There may
be regulations set in
place to prevent rent
increases but they
are either unenforced
or are ineffective.
The governing body
has a set agenda with
future plans of
expanding permits or
land for cannabis
businesses. Cannabis
businesses may have
to receive special
zoning permits per
business.

Zoning regulations
liberally permit
cannabis businesses
to exist with either
no cap on licenses
or permit enough
businesses to
support a SEP
program and spur
competition. There
is some form of
protection from rent
increases. There are
plans to expand
license caps if there
are any caps.
Regulations permit
cannabis businesses
to be zoned in
industrial and
business zones at a
reasonable rate in
comparison to other
jurisdictions of
similar size.

 Government
Responsiveness

15

The program is
unresponsive to
challenges and
complaints. The
program frequently
fails to address issues
and does not attempt to
correct them. Decisions
are heavily influenced
by interest groups
and/or the governing
body is internally
divisive. Government
offices and regulators
lack communication
and general
accountability for their
actions.
Political minority
parties are not
represented in the
government body.

The program has a
system to receive
general feedback and
commentary but may
not respond timely.
Policy-makers have
a general
understanding of the
program but known
issues still exist that
have not been
addressed. An
agenda for
addressing issues
within the program
may be present but is
ineffective.
Politics play a role in
the decision-making
process and there is
cooperation across
political affiliations.
Minority parties can
voice their opinion
but do not
significantly
contribute to the
decision-making
process. There is
communication
between the local
and state
government to
ensure the needs of
the community are
addressed. Interest
groups are present
and may
significantly
influence individual
policy-makers.

The program
provides multiple
outlets for feedback
and commentary,
responding at a
reasonable rate to
comments and
questions. Policymakers have an indepth understanding
of community
issues. Policymakers may also
provide routine
updates on the
progress of any
proposed regulations
or legislation.
Political affiliations
are minimized and
policy-makers base
their decisions off
public interest.
There is significant
cooperation across
political affiliations.
Minority parties are
able to voice their
opinion and
contribute to the
decision-making
process. Local and
state government
effectively
communicate to
prevent any
confusion between
varying
requirements.
Interest groups are
represented but do
not assert an undue
influence over
policy-makers.

 Community
Reinvestment

16

There is no
reinvestment of
cannabis tax revenues
for improving the
program or welfare of
the community.
Additionally, there is
no outreach program
that promotes the
visibility of the social
equity program.

Less than 2% of the
total tax revenue
from cannabis sales
or less than two
million dollars is
allocated to
reinvesting in the
community with no
plans to increase the
amount.
Alternatively, there
may be minimal
reinvestment in the
community. An
outreach program
exists and hosts
occasional events to
draw attention to the
social equity
program and to
encourage diverse
applicants to apply.
Cannabis businesses
are involved in the
community
reinvestment fund
but it’s unclear how
active or meaningful
their involvement is
in the community.
Cannabis businesses
may be involved
through volunteer
work, pro bono
services, or financial
contributions.

At least 2% of the
total tax revenue
from cannabis sales
or amounts greater
than two million are
allocated to
reinvesting in the
community and
there are plans to
sustain or grow the
amount of funding.
The outreach
program uses
multiple platforms
to access the public,
including social
media, and routinely
hosts public events
promoting the social
equity program,
educating the public
on cannabis, and
actively seeks
applicants for the
social equity
program. Cannabis
businesses are
actively involved in
the community
reinvestment fund
through multiple
means, involvement
may be evidenced
by leadership in new
community projects,
recruiting other
businesses to
support the program,
and providing
educational
seminars to the
public.