Massachusetts Cannabis Control Commission Chair Troubled By “Predatory Financing Deals”

By Colin A. Young

The chairman of the Cannabis Control Commission raised concerns Thursday with what he said are “predatory financing deals” being offered to entrepreneurs and businesses from communities disproportionately harmed by the decades of marijuana prohibition and renewed the agency’s call for the Legislature to make an alternate funding source available.

As he opened Thursday’s meeting, Chairman Steven Hoffman noted that commissioners would be considering two delivery courier and seven delivery operator applications, license types that are currently available exclusively to participants in the CCC’s social equity program and economic empowerment applicants.

Though he was pleased to see “such momentum” behind those delivery license options, Hoffman said he is “deeply troubled by continuing reports” of social equity and economic empowerment applicants being targeted by would-be investors with financing deals that include things like forced sales once the exclusivity period has ended, control over key hiring and personnel decisions and cash distributions significantly disproportionate to stated equity ownership.

“While we have no jurisdiction over private negotiations between investors and prospective applicants, once we receive an application we have the authority and we’ll continue to use that authority to look at all relevant contracts, including financing contracts, to ensure compliance with our regulations as they relate to cap limits, required [economic empowerment applicant] or [social equity participant] control and disclosure requirements,” the chairman said. “And if there are violations, we have the necessary tools to enforce compliance. I am determined to put an end to predatory lending practices in the industry and commit to use all the resources available to the commission to do so.”

But, Hoffman said, many prospective licensees also “feel that they have no choice but to agree to egregious terms” since there are no alternative sources of financing available to them.

“In that context, I respectfully again implore the Legislature to take action to create a public source of financing for these deserving entrepreneurs,” he said.

Last year, Hoffman said the social equity fund issue was one that he and former commissioners “have been beating our heads against the brick wall for a number of years on.”

Social equity fund proposals gained no traction during the last legislative session. The Joint Committee on Cannabis Policy held a hearing in June on a handful of social equity fund bills (H 158/S 63 from Rep. Dan Hunt and Sen. Nick Collins, H 166 filed by Rep. Hannah Kane, H 177 from Rep. Dave Rogers and H 178 filed by Rep. Jon Santiago) but none of the bills have emerged from the committee for further review and debate among lawmakers. The committee faces a deadline of Feb. 2 to make recommendations on bills under its review.

Massachusetts was the first state in the country to mandate that equity and inclusion be part of its legal cannabis framework and was the first to launch programs specifically designed to assist entrepreneurs and businesses from communities disproportionately harmed by the decades of marijuana prohibition.

Access to the capital necessary to start a business has repeatedly been singled out as a serious impediment facing social equity program participants or economic empowerment priority applicants as they try to break into the industry. Out of more than 1,000 applications submitted to the CCC as of November, just 232 came from social equity program participants or economic empowerment priority applicants, CCC Director of Government Affairs and Policy Matt Giancola said in the fall.

Commissioners in November put the agency’s new outreach strategy to use advocating for the creation of a state-run fund to help people disproportionately harmed by the War on Drugs establish themselves in the legal cannabis industry.

“The commission supports the adoption of a state-administered fund that includes both public and private funds for economic empowerment and social equity program participant applicants and licensees to receive low- or zero-interest loans or grants for the purpose of obtaining licensure and operating their establishment,” the policy statement that was unanimously adopted by the CCC reads.

In addition to a letter spelling out the CCC’s position to the Legislature, Commissioners Ava Callender Concepcion and Nurys Camargo planned as a next step to meet with lawmakers and other stakeholders to promote the commission’s position on a social equity fund.

Concepcion said Thursday that she and Camargo met with the Massachusetts Black and Latino Legislative Caucus in December to talk about the work of the commission and to discuss the social equity fund issue.

“I thought it was a really, really great conversation. It was a lot of good questions, good dialogue. So I just wanted to thank all the members of the Black and Latino Legislative Caucus for having us and I hope that and I don’t believe that that will be the last of our conversations,” the commissioner said.