Oakland’s pot permitting system, the focus of a rancorous debate at City Hall, was designed as a form of reparations for the U.S. war on drugs: In awarding licenses for marijuana businesses, it gives preferential treatment to people with past pot convictions.

But state law empowers regulators in Sacramento to deny licenses to such people — and a cannabis business needs both a city permit and a state license before it can operate.

Now some legal observers are wondering whether Oakland has given false hope to a group that officials say they are trying to help.

“I definitely see the possibility of a permit being issued to a potential licensee in Oakland, and then they don’t get the state license, which means they wouldn’t be legally authorized to operate a business,” said Assemblyman Rob Bonta, D-Alameda.

Bonta was the lead author of the state’s Medical Marijuana Regulation and Safety Act, which established regulations for cannabis businesses as the state heads toward legalizing recreational pot. He said he agrees with the sentiments behind Oakland’s equity permit program, which prioritizes licenses for former offenders and people who live in certain parts of East Oakland with high numbers of marijuana arrests.

“I think they have the right spirit,” he said. “But I do think these (rules) have the potential to fall down.”

A spokeswoman for California’s Bureau of Medical Cannabis Regulation said state regulators may deny a license to people who have committed a crime related to the business they seek to enter.

That “does include a felony conviction for the illegal possession, sale, etc., of controlled substances, including cannabis,” bureau spokeswoman Laurel Goddard wrote in an email. “We will be looking at these on a case-by-case basis.”

Although it passed by a unanimous City Council vote in May, the equity permit program has become a point of contention among city officials and people in the cannabis business — and now four of the council’s eight members have proposed changing it.

The program, pushed by council members Desley Brooks and Larry Reid, sets aside half the city’s permits for people who fit a narrow set of criteria: either they were jailed on marijuana convictions in Oakland within the past decade, or they have lived for at least two years in one of six designated police beats where marijuana arrests were highly concentrated in 2013. Two of those beats are in Brooks’ East Oakland district, two are in Reid’s, and two straddle both districts.

Equity applicants must own at least a 50 percent stake in the business for which they seek a permit.

Critics of the program say it will scuttle the city’s pot trade. They say few people will qualify for equity permits and that everyone else will be left waiting in line, because the proposed law stipulates that one equity permit must be handed out for every general permit issued.

That problem could be exacerbated if state regulators deny licenses to equity-permit holders with marijuana convictions, Bonta said.

“It’s one thing to be permissive and say, ‘Hey, a felony won’t count against you because we don’t want to carry forward wrongs of the past,’” Bonta said. “It’s another to say, affirmatively, that you’re going to get something because you had a felony conviction.”

Naresh Channaveerappa, an attorney in Modesto who represents cannabis businesses in Oakland and other cities, contends that it’s unconstitutional for Oakland to give preferential treatment to anyone seeking a permit, including an ex-convict.

“Anyone who is harmed by this preferential treatment has legal ground to challenge it,” Channaveerappa said.

Despite the potential conflicts with state law, some advocates in Oakland want to extend the equity program to even more people with records — for drug crimes committed more than 10 years ago, and in cities beyond Oakland.

“I know that in other cities, having past convictions is a barrier to entry, which is unfair to everybody,” said Terryn Buxton, a cannabis consultant whom Brooks chose to represent her district on the city’s Cannabis Regulatory Commission.

“Whether you’re a street dealer or you run a farm in Humboldt, you shouldn’t be frozen out,” Buxton said.

Brooks, who did not return phone calls, says the equity program is the only way to combat systemic racism in the booming marijuana industry. Most of those incarcerated for drug crimes are still black and Latino, while the top marijuana entrepreneurs are mostly white, Brooks says.

In a recent Facebook post, Brooks vehemently opposed the Cannabis Regulatory Commission’s attempts to make more people eligible for equity permits. She accused members of the commission and their supporters in the industry of trying to dilute the program.

Council members Dan Kalb, Abel Guillén and Annie Campbell Washington have suggested scrapping the program that they voted for in May and creating a different system that still offers loans and assistance to people with marijuana convictions, without explicitly favoring their applications over other would-be pot business owners. Councilwoman Rebecca Kaplan has proposed expanding the equity permit program to include more police beats and more people with marijuana convictions.

Joe DeVries, who is an assistant to the city administrator and helps run the city Cannabis Regulatory Commission, said he consulted state regulators this year about Oakland’s intent to provide licenses to formerly incarcerated people.

“They seemed amenable to working with us,” he said, acknowledging that those conversations took place before Brooks introduced the equity program.

But now the city’s cannabis permit system is on hold while the council members squabble over whether to change it. And the state’s deadline is looming: Oakland has until January 2018 to put together a system that works and get all of its cannabis businesses permitted.

Rachel Swan is a San Francisco Chronicle staff writer. Email: rswan@sfchronicle.com

Twitter: @rachelswan