L.A. Social Equity Contracts Raise Big Questions for Cannabis Entrepreneurs

Los Angeles’ social equity program for cannabis business owners is under the microscope again.

The Los Angeles Times reports:

The latest controversy centers around 4thMVMT, a company founded by a well-to-do businessman who partners with Black entrepreneurs to obtain cannabis licenses. The company positioned itself as one of the program’s biggest winners by partnering with at least 13 of the applicants scheduled to receive temporary approval this week to start operating after meeting certain conditions. An attorney who reviewed one of 4thMVMT’s partnership contracts has raised alarms over what she says are “predatory” business practices baked into the agreements. Meanwhile, competitors of 4thMVMT have seized on the contract language to attack the company.

The contract allows a subsidiary of 4thMVMT to buy out the “social equity” partners if they refuse a “lawful direction/instruction” from the company, according to a copy of the contract reviewed by The Times. The buyout price is set at $200,000, an amount experts on the state’s cannabis trade say is far less than the likely market value of a licensed pot shop in Los Angeles.

Yvette McDowell, an attorney representing one of the contractees says the city failed to properly vet the contracts. The current language sets up what “sounds like an employer-employee relationship,” she said.

CalMarijuanaPolicy has previously covered concerns about exploitation as they relate to social equity measures. Los Angeles’ program has also been at the center of a number of controversies. Just a few month ago, it was determined that the city had made mistakes, though not intentionally, which led to some cannabis applicants gaining early access to the first come, first served licensing system. 

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