Cannabis Startups should have the same Opportunities as other Businesses

It's time to align federal law with state actions on cannabis by legalizing and decriminalizing marijuana sales, use and possession.

When veterans Wanda James and Scott Durrah of Denver wanted to start their business, they couldn't go to the Small Business Administration to apply for a loan.

That's because they are in the cannabis industry, and cannabis entrepreneurs are locked out of traditional sources of capital, including capital from the government, such as SBA loans, because, under federal law, marijuana is still illegal.

At the state level, adult use of marijuana is now legal in 19 states, as well as in Washington, D.C., and medical cannabis is legal in 37 states. But because federal law still classifies marijuana as a Schedule 1 controlled substance (alongside heroin), businesses that operate legally under state laws face added difficulties starting and maintaining operations. 

Certain demographics of people face still more challenges when trying to get into the legal cannabis business. 

An uneven playing field for cannabis entrepreneurs

James and Durrah were the first Black cannabis dispensary owners in the United States. 

"We (cannabis entrepreneurs) don't have the opportunity to go into the SBA or a Wells Fargo to get a loan as you would for any other business," James said. 

Cannabis businesses must deal with other obstacles that are different from those that noncannabis business entrepreneurs face:

- Dealing with a Schedule 1 drug means cannabis entrepreneurs cannot write off their staff's salaries, marketing or other regular office expenses when it comes time to do their taxes. And, as any small business owner can tell you, being able to write off expenses is critical for owners to reinvest in their operations and keep the company afloat. 

- Because of the status of federal law on cannabis, most of the marijuana industry is a cash-only business without access to traditional sources of capital. James' business, for example, has a depository account, which is not the same as a traditional bank account. She can't take out a line of credit from the bank, or get a loan – all she can do is deposit her cash and write checks. 

- Finally, that same lack of access to traditional banking and capital (like a bank loan and credit), which is a roadblock for all cannabis entrepreneurs, has a disparate effect on women-owned and Black and minority-owned businesses, groups with historically less access to outside capital. 

While arrests for possession and sale of marijuana have long fallen harder on Black and Latino Americans, now, as legal marijuana businesses are booming in some states, these groups are being left behind. Less than 2% of cannabis business owners or executives are Black.

For minorities and women, who lag behind white male entrepreneurs, the lack of access to capital is a main factor behind their underrepresentation in the cannabis industry.

Remedies for cannabis business discrepancies 

There are solutions for all of this trouble. Most Americans support cannabis legalization, and three senators have introduced updated legislation: the Cannabis Administration and Opportunity Act, which includes much-needed changes for a comprehensive decriminalization and legalization plan at the federal level. 

It's time to align federal law with state actions on cannabis by legalizing and decriminalizing marijuana sales, use and possession. States should continue to regulate in-state cannabis commerce and also incentivize programs for women- and minority-owned or -operated businesses so they have the same opportunities as their white, male counterparts to be successful in a lucrative industry. 

There's a lot of money to be made in the legal cannabis industry, and a lot of tax money to put toward education or other public interest works. It's time everyone gets a fair shake.