In Ohio, African-Americans left behind in 'green rush' for legal weed profits

Ohio's fledgling medical marijuana industry promises vast riches for investors fortunate enough to land one of the state's coveted marijuana business licenses.

But income inequality and a legacy of racism tied to marijuana prohibition has stunted participation among African-Americans and other racial minorities in Ohio's new "green rush.''

"They're either locked up or locked out and can't get in the game now that it (marijuana) is legal,'' said State Rep. Alicia Reece, a Roselawn Democrat and past president of the Ohio Legislative Black Caucus.

As a group, blacks and other minorities have been disproportionately prosecuted for drug crimes but are the least likely to profit from legalized marijuana.

More: Ohio's medical weed program: Questions and answers

Blacks suffer most, rarely profit from weed

Blacks are 3.73 times more likely than whites to be arrested for marijuana possession and other offenses, according to a widely cited study by the American Civil Liberties Union, using the FBI's Uniform Crime Report data.

That, despite the fact that the rate of illicit drug use is roughly the same across racial lines, the 2016 National Survey on Drug Use and Health found.

Drug convictions more serious than a misdemeanor automatically disqualify medical marijuana license applications in Ohio and most of the 30 states and District of Columbia where the drug is legal.

Black participation has also been stymied by a growing wealth gap, which made African-Americans the only racial group to have lower median household income in 2016 than 2000, according to the U.S. Census Bureau's Current Population Survey.

Medical marijuana business costs are high

Limited access to private capital can be a major barrier for marijuana companies, which are mostly unable to obtain basic financial services, including a line of credit or a loan.

That hurts in Ohio, which has some of the country’s highest licensing fees for medical marijuana businesses, including a $180,000-a-year charge for large medical marijuana growers.

The black caucus was instrumental in adding language to the state's medical marijuana law that requires at least 15 percent of cultivator, processor, or laboratory licenses go to "economically disadvantaged'' groups.

Those groups include blacks, American Indians, Hispanics or Latinos, and Asians.

But the inclusion goal hasn't helped much.

Only two of the 24 provisional licenses awarded in Ohio to large and small marijuana growers went to economically disadvantaged applicants, based on an Enquirer analysis of licenses issued by the Ohio Department of Commerce.

The growers licenses were split into two groups: Level 1 licenses for large growers with up to 25,000 square feet of growing space, and Level 2 for small growers with up to 3,000 square feet of space.

Two of the 12 licenses for large growers went to economically disadvantaged groups - just over the 15 percent threshold established in the law.

State falls short on inclusion

But there simply weren't enough qualified applications among the 38 submitted by economically disadvantaged businesses to meet the 15 percent mark for Level 2 licenses, according to a commerce department spokeswoman.

No gower's licenses were issued in the Cincinnati area.

The law does not specify any penalty or remedy for missing the threshold. If no applications or an insufficient number of qualified applications are submitted, licenses will be "issued according to usual procedures,'' the law states.

Eligibility requirements included securing a site, submitting detailed business and operations plans, meeting certain capital requirements and passing a criminal background check, according to the state's cultivator application checklist.

Sixty provisional licenses for dispensaries, up to 40 for processors and an undetermined number for testing laboratories will be awarded later this year before the state's Medical Marijuana Control Program becomes fully operational Sept. 8.

But the state is likely to continue to struggle to meet its inclusion goals for blacks and other marginalized groups.

Nationwide, only about 4 percent of legal marijuana businesses are black-owned, and just 19 percent are owned by any racial minority, according to a survey last fall by Marijuana Business Daily, a national trade group.

Rev. Damon Lynch III touts weed benefits

That hasn't stopped the Rev. Damon Lynch III of New Prospect Baptist Church in Roselawn from throwing his hat in the ring.

Lynch, who is black, founded Green Rx LLC, which is one of 376 businesses vying for licenses to run medical marijuana dispensaries in Ohio.

Lynch said he and the eight other mostly African-American investors backing Green Rx are confident in their proposal for a 7,000-square-foot dispensary at 8420 Vine St. in Hartwell, which is one of 15 dispensary locations proposed for Cincinnati.

Undaunted by the national statistics, the pastor and civil rights activist said he's determined to beat the odds and redress decades of discrimination dating back to Harry Anslinger's racist push for weed prohibition in the 1930s.

Anslinger, former Federal Bureau of Narcotics' Commissioner, was famous for saying: "Reefer makes darkies think they're as good as white men," which was the catalyst for the 1936 propaganda film “Reefer Madness.”

War on Drugs based on racist ideology

More recently, the so-called War on Drugs launched by President Richard Nixon in the 1970s has left generations of blacks and other minorities stained with drug arrest records.

Under Republican President Ronald Reagan, the national rate of drug arrests per 100,000 black adults ranged from a low of 554 in 1980 to a high of 2,009 by the end of his term in 1989, according to a recent analysis of FBI arrest data by Human Rights Watch.

Blacks were arrested for marijuana at a much higher rate than any other group under the Reagan administration.

"If we don't participate in this burgeoning industry when we’ve been subject to the worst penalties and just sit back and let others accrue all the wealth while we’ve done all the suffering, I would say shame on us,'' Lynch said.

Thomas Rosenberger, executive director of the National Cannabis Industry Association of Ohio, said the trade association is working to address racial disparities in the legalized marijuana business and include more minority entrepreneurs.

But they can only do so much, he said: "We absolutely do recognize that minority communities are disproportionately affected by prohibition. But at the end of the day, on the legislative level, we can only do what the senators and state reps are willing to do.''

Even when lawmakers attempt to level the playing field, challenges remain.

In Ohio, Hilliard-based PharmaCann Ohio Inc. - a white-owned company that was rejected for one of 12 cultivator licenses granted to big growers - is suing the state over the 15 percent requirement that it describes as "an unconstitutional racial quota."

A successful lawsuit would create yet another roadblock for aspiring entrepreneurs like Lynch and his investment partners who view the legal marijuana industry as a potentially transformational source of wealth for African American communities.

Legal marijuana sales booming

Sales of medical marijuana in Ohio could reach $400 million a year, according to estimates from Marijuana Business Daily, depending on the number of patients buying the drug from dispensaries.

Overall, the U.S. legal marijuana industry is expected to grow from $6.7 billion in 2016 to $22.6 billion in 2021, according to marijuana data tracker, Arcview Market Research.

Sharing in such windfall profits would go a long way toward staving off the rapid decline in wealth for black households, whose collective net worth could fall to zero by 2053, according to Forbes.

"Part of our goal is to build wealth in the black community to fight against those predictions and prognostications,'' according to Lynch, who said his dispensary would offer full- and part-time jobs to dozens of workers.

Lynch and his group aren't alone.

Seventy of the more than 300 applications for dispensary licenses were submitted by economically disadvantaged business, according to the State of Ohio Board of Pharmacy, which is reviewing the licenses.

Locally, basketball legend Oscar Robertson is a high-profile black investor in Cincinnati-based CannAscend Ohio, which lost its bid for a cultivator's license in a controversial selection process but is still in the running for processing and dispensary licenses.

Still, critics argue a pastor shouldn't be involved in the legal weed business no matter how well-meaning.

Lynch's response is simple. He views medical marijuana as an extension of his ministry.

"Other than medical professionals, nobody deals with more sick people than pastors,'' Lynch said. "We're not doing this to help people get high. We're doing this to help people with a prescription from a doctor. If this was recreational, I wouldn't be involved.''