Why Rhode Island Cannabis Activists Want Worker-Owned Co-Ops

June 29, 2021

This may be the year Rhode Island legalizes marijuana for adult use. But state lawmakers and the governor, having struggled to negotiate an agreement, will likely punt the issue until at least September. Simultaneously, a statewide social justice coalition is pushing for a groundbreaking introduction of worker-owned cannabis businesses.

Yes We Cannabis is demanding that one of four mooted cannabis licenses be reserved for worker-owned cooperatives. If implemented, Rhode Island would become the first state to ever mandate the creation of such co-ops.

“Working Rhode Islanders and minority-owned businesses have to be a part of this industry,” Maggie Kain, a volunteer with Yes We Cannabis Rhode Island, told Filter. “We have to repair the harm, and we also have to protect ourselves from these multi-state, corporate entities that have really taken over and given no room for regular people. Especially those who spent time in jail for participating in an industry that will be a profit for the state.”

Yes We Cannabis has presented state lawmakers with amendments reflecting these demands. However, Kain said it’s unlikely that any proposal will be signed into law before July 1, when the state budget is due. The coalition is preparing to write a full bill in the hopes it will be considered by lawmakers later in the fall.


Three Proposals and Missed Opportunities

Rhode Island’s elected officials have proposed three different legalization bills this year. The first was introduced by Governor Dan McKee (D), proposing to regulate a legal marijuana market and award 25 licenses a year for the first three years.

A bill from Senate Majority Leader Michael McCAffrey (D), proposed with the Senate health committee chair, went a bit further. It would create a five-member cannabis control commission to review and issue all cannabis licenses—similar to that in neighboring Massachusetts. McCaffrey also proposed a process for expunging past marijuana convictions, and a “cannabis equity fund” to reserve a proportion of the profits for helping marginalized and impacted people open their own marijuana businesses.

In response to criticisms of both proposals by cannabis justice advocates, Representative Scott Slater (D) introduced a third bill on May 27 that is perhaps the most progressive of the three.

Slater’s bill would limit the dispensary licenses issued, but would effectively guarantee that for the first three years, all licenses would go to social equity applicants and existing medical marijuana companies. It would also create a “social equity fund” to support disadvantaged business creators, as well as automatic marijuana record expungement.

In states where marijuana is legalized for adult use, lawmakers are increasingly requiring courts, rather than people with marijuana convictions, to file petitions to for expungement—thus making the process “automatic.” The process can still often take years, slowed by recalcitrant courts or prosecutors. But when it does work, it can expunge tens of thousands of records in a single day.

On June 22, the Rhode Island Senate voted in favor of the second bill: McCaffrey’s. The House has indicated it won’t hold a vote on it yet, likely pushing the issue into the fall.


The Road to Worker-Owned Co-Ops

Community and political organizations throughout the state argue that none of these proposals would sufficiently reverse the harms of marijuana prohibition. Yes We Cannabis Rhode Island is urging its supporters to call on their local lawmakers, including the governor, to prioritize racial and economic justice in any legalization bill.

These demands include automatic expungement of marijuana convictions, awarding half of all cannabis licenses to social equity applicants—and half of that number to worker-owned cooperatives—and implementing “labor peace” agreements for cannabis industry workers.

Such agreements protect workers from employer interference in efforts to organize their workplaces. In exchange, labor unions promise to not initiate strikes or work stoppages. This is an important provision in a cannabis industry where more and more workers are unionizing.

Potentially the coalition’s most ambitious and innovative demand relates to worker-owned cooperatives—businesses or organizations where the workers, or “members,” are also the owners. No clear regulation defines co-op structures across the US, with different states creating their own rules (or lack thereof). But globally, co-ops often follow seven guiding principles.

“Worker owned co-ops tend to be more equitable,” Anh-Thu Nguyen, a policy researcher at the Democracy At Work Institute, told Filter. Her organization focuses on research and development of worker-owned co-ops, and she has studied cannabis co-ops specifically.

“We’re now seeing in the US severe wealth inequality and traditional corporate businesses that are really extractive of the people at the bottom who are doing most of the work,” Nguyen said. “Most if not all of the time, co-op businesses are launched, built and developed in low-income and communities of color that have had many resources extracted from them.”

Mandating that a quarter of all businesses be worker-owned would accomplish something that’s never been done.

Co-ops can have different internal structures, including differences in how they share revenues and profits. But at their core, they are intended to be equally owned by all members, all of whom get a vote on rules and policies. A director and a janitor, under this model, should have the same voting power.

Cannabis co-ops are not a new idea. Several states have provisions that support them. But current laws often create practical barriers for these businesses, and demonstrate misunderstandings of what a co-op is. Yes We Cannabis Rhode Island’s proposal to mandate that a quarter of all businesses be worker-owned would accomplish something that’s never been done in any US state.

Massachusetts created a “craft cannabis cooperative” license reserved for farmers, requiring that a cannabis cooperative business submit a Schedule F tax form—one that typically only farmers will use—before applying for a license. State law prevents cannabis co-ops from selling directly to consumers, such as through a dispensary. 

On paper, Massachusetts has also promised unique benefits to cannabis co-ops—they receive priority in licensing, meaning their application is reviewed faster others. They also pay lower licensing fees and can sell wholesale to retailers. But in practice, no cannabis cooperatives have actually opened for business since Massachusetts legalized in 2016.

New York, which legalized adult-used marijuana in April, also created a special co-op license. But while it allows co-ops to grow, manufacture and distribute cannabis, it prevents them from owning a retail dispensary.

Meanwhile California allows for a group of licensed cannabis cultivators to form a co-op that farms no more than four acres altogether. The co-op benefits from sharing fixed costs and being able to collectively sell products to other businesses. But once again, the benefits of co-op licenses are arbitrarily given only to farmers.

Outside of the cannabis industry, any business can be a co-op. Co-ops include grocery stores, housing projects and ride-sharing services. Businesses in the legal cannabis industry now include everything from dispensaries to home delivery services to weed lounges; all of these could be worker-owned cooperatives—if public policy allowed.

Co-ops in the cannabis industry are not unique in facing these barriers, however. Most people simply are not aware that co-ops are an option. Schools don’t teach about them. Government and lending agencies don’t make it easy for them to raise money.

“We operate in a model that assumes that individual entrepreneurs are the default,” Nguyen said, “that the people who start small businesses are one person, maybe two or three people. We think about a solo visionary who goes in with an idea and raises a bunch of money.”

Because marijuana remains federally banned as a Schedule I substance, a cannabis co-op getting a loan from a bank is often not an option. And lack of education additionally makes lenders unwilling. Nguyen said that community development institutions or banks that might otherwise support local small businesses can be very hesitant to extend loans to co-ops. “A co-op will come in with 10 worker-owners and the bank says, ‘What is this, why are there 10 people who own this business?’”

It’s one thing to encourage cannabis co-ops. But requiring them would be a game-changer. 

Two federal proposals could help cannabis co-ops overcome these barriers. The SAFE Banking Act—which has now passed a House vote twice since 2019—would allow banks and financial institutions to work with marijuana businesses without facing federal criminal charges. Senator John Hickenlooper (D-CO) has also introduced a bill to support co-ops by tweaking a federal loophole to allow the Small Business Administration (SBA) to give them loans. Currently, co-ops are effectively excluded from receiving SBA loans.

It’s one thing to encourage cannabis co-ops. In an industry where it can cost at least $1 million to open a business selling a product that’s still federally banned, it’s difficult to imagine how they can compete. But requiring cannabis co-ops—as the Rhode Island coalition proposed—would be a game-changer. 

To avoid the pitfalls of other cannabis co-op efforts—and, frankly, of the whole cannabis equity movement—Rhode Island will need to create some smart guidelines.

“How will this be implemented, and what current legal structures exist to facilitate creation of worker co-ops?” Nguyen asked. “Do co-ops receive technical assistance and training? Are there laws that help these businesses be incorporated as worker co-operatives and not be ‘pseudo co-ops’ owned by corporate entities? How do we make sure it’s community-centered and based, and impacting the communities most harmed by the War on Drugs?

One answer is widespread implementation of cannabis equity funds. They’ve been proposed in Massachusetts, though are not yet law. Under New York’s new marijuana legislation, the Empire State Development Corporation—together with the state cannabis commission—will administer equity grants to local organizations providing services to areas disproportionately targeted by marijuana arrests.

Regardless of what happens in Rhode Island, cannabis co-ops have a long way to go. But even if the  Yes We Cannabis push is not successful, it will certainly help in getting the public interested to learn more about co-ops. As the conversation around “cannabis equity” becomes increasingly central in legalization debates, worker co-ops may be a way for advocates to advance more transformative measures.



Photograph by Taber Andrew Bain via Flickr/Creative Commons 2.0

Alexander Lekhtman

Alexander is Filter's staff writer. He writes about the movement to end the War on Drugs. He grew up in New Jersey and swears it's actually alright. He's also a musician hoping to change the world through the power of ledger lines and legislation. Alexander was previously Filter's editorial fellow.

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