Criminal Conviction Restrictions For Marijuana Licensing

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CRIMINAL CONVICTIONRESTRICTIONS FORMARIJUANA LICENSINGby Allie HowellSeptember 2018

Reason Foundation’s mission is to advance a free society by developing,applying and promoting libertarian principles, including individualliberty, free markets and the rule of law. We use journalism and publicpolicy research to influence the frameworks and actions of policymakers,journalists and opinion leaders.Reason Foundation’s nonpartisan public policy research promoteschoice, competition and a dynamic market economy as the foundationfor human dignity and progress. Reason produces rigorous, peerreviewed research and directly engages the policy process, seekingstrategies that emphasize cooperation, flexibility, local knowledgeand results. Through practical and innovative approaches to complexproblems, Reason seeks to change the way people think about issues,and promote policies that allow and encourage individuals andvoluntary institutions to flourish.Reason Foundation is a tax-exempt research and education organizationas defined under IRS code 501(c)(3). Reason Foundation is supported byvoluntary contributions from individuals, foundations and corporations.The views are those of the author, not necessarily those of ReasonFoundation or its trustees.

TABLE OF CONTENTSPART 1:JUSTIFICATIONS FOR LICENSE RESTRICTIONS. 1PART 2:COSTS OF CRIMINAL CONVICTION LICENSE RESTRICTIONS . 4PART 3:SUMMARY OF CRIMINAL CONVICTION RESTRICTIONS BY STATE. 73.1 Alaska. 83.2 California . 83.3 Colorado . 93.4 Massachusetts . 93.5 Nevada.103.6 Oregon .103.7 Washington .113.8 Other States .11PART 4:THE HYPOCRISY OF CRIMINAL CONVICTION RESTRICTIONS IN THE MARIJUANAINDUSTRY .12PART 5:SHOULD THE MARIJUANA INDUSTRY PAY REPARATIONS FOR THE DRUG WAR? .14PART 6:CONCLUSION .17ABOUT THE AUTHOR .19Allie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING1PART 1JUSTIFICATIONS FORLICENSE RESTRICTIONSBoth medical and recreational marijuana businesses require a state-issued license. In manystates, working in the industry as a budtender, medical caregiver, or cashier also requires apermit. Some state licensing authorities have prohibitions on those with certain criminalconvictions from working in the industry. In other states, “good moral character” clausesgive licensing authorities the ability to reject an applicant based on criminal history.Criminal conviction restrictions are an attempt to use past behavior to predict public safetyrisks in the future. In most industries, these restrictions are defended as necessary forconsumer safety. In the legal marijuana industry, consumer safety concerns are coupledwith a desire for the industry to comply with the Cole Memo. The Cole Memo was issued in2013 by then-Deputy Attorney General James Cole in response to legalization inWashington and Colorado. The memo lays out the following key enforcement priorities formarijuana:1. Preventing the distribution of marijuana to minors2. Preventing revenue from the sale of marijuana from going to criminal enterprises,gangs, and cartels3. Preventing the diversion of marijuana from states where it is legal under state law insome form to other statesAllie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING24. Preventing state-authorized marijuana activity from being used as a cover or pretextfor the trafficking of other illegal drugs or other illegal activity5. Preventing violence and the use of firearms in the cultivation and distribution ofmarijuana6. Preventing drugged driving and the exacerbation of other adverse public healthconsequences associated with marijuana use7. Preventing the growing of marijuana on public lands and the attendant public safetyand environmental dangers posed by marijuana production on public lands8. Preventing marijuana possession or use on federal propertyThe memo expects that legal states implement “strong and effective regulatory andenforcement systems” because “[i]f state enforcement efforts are not sufficiently robust toprotect against the harms set forth above, the federal government may seek to challengethe regulatory structure itself in addition to continuing to bring individual enforcementactions, including criminal prosecutions, focused on those harms.”1 States that voted tolegalize marijuana under the Cole Memo worked to meet its objectives. In Washington, forexample, regulatory decisions made by the Liquor and Cannabis Board were “made with theCole Memo in mind.” 2Restrictions on licensure for convicted criminals is justified because, according toregulators and law enforcement, it reduces the likelihood that the legal industry will beused for criminal enterprises by so-called bad actors.3 As summarized by Ken Corney,President of the California Police Chiefs Association, marijuana regulations have “strongprotections against black market activity. A key component of these protections—and1Cole, James M. “Memorandum for all United States Attorneys.” U.S. Department of Justice Officeof the Deputy Attorney General. Aug. 29, 2013829132756857467.pdf2“Executive Summary.” Washington State Liquor and Cannabis NAL.PDF3Garofoli, John. “Medical Marijuana Law Could Ban Pot Felons from Industry.” San FranciscoChronicle. Sept. 16, 2015. phpAllie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING3consistent with laws for other state licenses—is permitting the state to deny a businesslicense to a person with a felony conviction if there is a public safety concern.”4Restrictions on licensure for convicted criminals is justified because,according to regulators and law enforcement, it reduces the likelihoodthat the legal industry will be used for criminal enterprises by socalled bad actors.Since Attorney General Jeff Sessions has rescinded the Cole Memo, there is concern thatstates must be even more careful to maintain a safe, legal market that doesn’t imposeexternalities on the community.5 In Massachusetts, Cannabis Control Commissioner BritteMcBride cited Sessions’ policy as reason to automatically disqualify license applicants withtrafficking convictions for drugs other than marijuana: “[W]e no longer have the relativesafety of the Cole Memorandum. We are dealing in a world where unwanted federalattention could lead to undermining the industry we’re working really hard to establish. Ithink it is common sense to understand that the engagement of individuals withconvictions for dangerous drug crimes could potentially bring the exact unwanted attentionI think we're trying hard to avoid.”64McGreevy, Patrick. “New Law Could Put Some Medical Marijuana Dispensaries Out of Business.”Los Angeles Times. May 13, 2016. pensaryfelon-owners-20160513-story.html5Sessions III, Jefferson B. “Memorandum for all United States Attorneys.” U.S. Department of JusticeOffice of the Attorney General. Jan. 4, 2018. 196/download6State House News Service. “Drug Trafficking Conviction Would Bar Employment in Legal PotIndustry.” Worcester Business Journal. March 1, -employment-in-legal-pot-industryAllie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING4PART 2COSTS OF CRIMINALCONVICTION LICENSERESTRICTIONSWhen evaluating any regulation, one should consider if the supposed benefits outweighany unintended consequences. For criminal conviction restrictions, one must considerwhether the potential reduction in crime in the legal marijuana market is beneficial enoughto make it worth the reduction in employment opportunities.Researchers estimate that 8% of the U.S. population has felony convictions and 33% of theAfrican American male population has a felony conviction. California, Massachusetts andWashington were three of the top five states for African Americans convicted of felonies.7While good data on how this impacts marijuana business ownership is lacking, there havebeen numerous complaints that these restrictions disproportionately keep minorities out ofthe legal marijuana industry.Further, broad restrictions undermine the legal market by forcing some to stay in the blackmarket, as summarized by a Blue Ribbon Commission report on marijuana regulations forCalifornia: “If a strategy of legalization is to bring current participants in the illicit market7Flurry, Alan. “Study Estimates U.S. Population With Felony Convictions.” UGA Today. Oct. 1, -felony-convictions/Allie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING5who are willing to comply with regulations into the legal market, then categoricalexclusions of people who have in the past or are currently in the illicit market would becounterproductive, leaving many to continue working in the illicit market. Such categoricalexclusions would also exacerbate racial disparities given past disparities in marijuanaenforcement. For these reasons, categorical exclusions that are too broad, and that overlyrely on past convictions as predictors of future behavior, should not be considered.”8California’s early medical marijuana market provides some evidenceof how much market reduction criminal conviction restrictions maycause.California’s early medical marijuana market provides some evidence of how much marketreduction criminal conviction restrictions may cause. The industry did not require statelicenses until 2018, but California was the first state to legalize medical marijuana. As aresult, Casey O’Neill, board chairman of the California Growers Association estimated thatin 2016, 25–30% of the group’s 500 members had felony drug convictions.9 Given that theblack market continued to thrive during this period, it seems likely that these people weretrying to move out of illegal markets and into legal ones.10There is also evidence that burdensome occupational licensing for convicted criminalsmakes recidivism more likely. A study conducted by the Center for the Study of EconomicLiberty at Arizona State University examined the relationship between occupationallicensing laws and new crime recidivism rates (new crime recidivism does not includetechnical violations such as a parole violation). States with the highest occupationallicensing burdens, including prohibitions on ex-prisoners receiving licenses, saw anincrease in three-year new crime recidivism of 9.4% between 1997 and 2007. This is in8Newsom, Gavin, Keith Humphreys, and Abdi Soltani. “Pathways Report: Policy Options forRegulating Marijuana in California.” Blue Ribbon Commission on Marijuana Policy. July 22, /uploads/2015/07/BRCPathwaysReport.pdf9McGreevy, Patrick. “New Law Could Put Some Medical Marijuana Dispensaries Out of Business.”10Yackowicz, Will. “Legal Cannabis Entrepreneurs Get a Rude Awakening: A Thriving BlackMarket.” Inc. Jan. 4, 2018. ational-marijuanaand-black-market.htmlAllie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING6comparison to a 2.6% average increase in survey states and a 4.2% decrease in states withthe lowest occupational licensing burden.11States with the highest occupational licensing burdens, includingprohibitions on ex-prisoners receiving licenses, saw an increase inthree-year new crime recidivism of 9.4% between 1997 and 2007.11Slivinski, Stephen. “Turning Shackles into Bootstraps.” Center for the Study of Economic Liberty atArizona State University. Nov. 7, 2016. 01-Turning-Shackles-into-Bootstraps.pdfAllie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING7PART 3SUMMARY OF CRIMINALCONVICTIONRESTRICTIONS BY STATEFor recreational marijuana, all states restrict who will be issued a marijuana businesslicense based on criminal conviction history. Some states only look at recent criminalhistory, such as the 10-year look-back period for completed sentences in Nevada andWashington. All states but California and Washington prevent people with certain criminalconvictions from even being employed in marijuana establishments. The following stateby-state descriptions look only at criminal conviction restrictions for the initial licenseapplication. Restrictions may be more stringent for renewal applications. There may beother restrictions related to criminal behavior in each state, such as a good moral characterclause, that are not discussed.Allie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING3.18ALASKA12Business Owner RestrictionsEstablishments may not be licensed to owners, officers, or agents with a felony convictionin the last five years or those still on parole for felony convictions. Also banned are thosewho have sold alcohol without a license or to someone under 21, those with certainmisdemeanors within the last five years, and people with certain class A misdemeanors formarijuana within the last two years.Employee RestrictionsMarijuana handler permits are required for licensees, employees, and agents of a marijuanaestablishment to be on the licensed premises. Those with felonies within the last five years,certain class A misdemeanors within the last two, and those on parole for a felony or underindictment for a disqualifying offense are not eligible.3.2CALIFORNIA13Business Owner RestrictionsLicense may be denied for convictions “substantially related to the qualifications, functions,or duties of the business.” Controlled substance convictions that are not substantiallyrelated and for which the sentence and probation are completed cannot be the sole reasonfor license denial.Employee RestrictionsNone12Alaska Administrative Code. 3 AAC Chapter s.pdf; Alaska Statutes. Chapter 17.38. The Regulation of als/9/pub/MCB/StatutesAndRegulations/AS17.38.pdf; “Marijuana Handler Permit Notice of Upcoming Changes.” Alcohol and Marijuana Control cinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). California Law.https://leginfo.legislature.ca.gov/faces/codes displayexpandedbranch.xhtml?tocCode BPC&division 10.&title &part &chapter &articleAllie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING3.39COLORADO14Business Owner RestrictionsIneligible from occupational licenses are people subject to or discharged from felonyconvictions in five years preceding the application, and felony controlled substanceconvictions in the ten years preceding their application date or five years from May 28,2013 (whichever is longer). Those with state marijuana possession or use felony convictionswhich would no longer be felonies can still get a license.Employee RestrictionsIn addition to owners, all managers and employees working in a marijuana establishmentmust be licensed. Key and support employees face the same criminal backgroundrestrictions as owners.3.4MASSACHUSETTS15Business Owner RestrictionsNo person who has been convicted of a felony in Massachusetts or in another state that wouldstill be a felony in Massachusetts can be a controlling person in a business. Prior convictionssolely for marijuana or another controlled substance possession are exempt from this ruleunless the conviction was distribution. The commission may determine that the applicant is notsuitable for licensure based on a suitability criterion for other legal issues.Employee RestrictionsAll employees, board members, directors, executives, managers, and volunteers must beregistered for each marijuana establishment. Marijuana establishment agents cannot havebeen convicted of an offense involving the distribution of a controlled substance to minorsin Massachusetts or any other state/territory. The commission may determine that theapplicant is not suitable for licensure based on a suitability criterion for other legal issues.Criminal conviction restrictions are more stringent for laboratory agents.14Code of Colorado Regulations. 1 CCR etail%20Effective%2002022018.pdf15935 Code of Massachusetts Regulations. Cannabis Control 18/03/27/935cmr500.pdfAllie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING3.510NEVADA16Business Owner RestrictionsOwners, officers, or board members convicted of an “excluded felony offense” may notobtain a license. This includes convictions that would constitute a category A felony ifconvicted in Nevada or convictions for two of more offenses that would constitute feloniesif committed in Nevada. Sentences completed more than ten years prior and offenses forconduct that would be immune from penalty under medical marijuana law (unless theconduct occurred before Oct. 1, 2001 or was prosecuted by another authority) do not count.Employee RestrictionsAll owners, board members, officers, contractors, employees, and volunteers must obtain amarijuana establishment agent card. Applicants also cannot have an “excluded felonyoffense.”3.6OREGON17Business Owner RestrictionsConvictions “substantially related to the fitness and ability of the applicant to lawfully carryout activities under the license” may result in application denial. Convictions for marijuanamanufacturing or delivery to persons 21 and older may not be considered if the convictionis from two years prior or there is only one conviction. Marijuana possession convictionsmay also not be considered.Employee RestrictionsMarijuana worker permits are required for employees carrying out certain tasks. Applicantsmay be denied permits based on certain felony convictions within the past three years (five16Nevada Revised Statues (NRS). Chapter 453D. 3DSec230; “Marijuana Establishment Agent Card Application and Checklist.”State of Nevada Department of Taxation. Nov. 18, tent/Forms/Agent%20application.pdf17Oregon Revised Statues. Chapter 475B. Cannabis Regulation. https://www.oregonlegislature.gov/bills laws/ors/ors475B.html; Oregon Administrative Rules. Oregon Liquor Control Commission.Division 25. Recreational Marijuana. les/OAR 845 Div 25 RecreationalMarijuana.pdfAllie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING11years for more than one conviction). All marijuana possession convictions and marijuanadelivery/manufacturing convictions from two years prior do not count.3.7WASHINGTON18Business Owner RestrictionsPoints are given to an applicant based on severity of offense. For felonies, points will beassigned for any conviction over the past 10 years. For gross misdemeanor andmisdemeanor convictions, the look-back period is three years. Applicants with eight pointsor more may not receive a license. Applicants currently under federal or state supervisionfor a felony receive eight points. A felony conviction is 12 points, a gross misdemeanor isfive points, and a misdemeanor is four. Two federal or state marijuana possessionmisdemeanors in the previous three years do not count toward points in the initialapplication. State possession convictions accrued after December 6, 2013 exceedingallowable amounts of marijuana still count towards points. A single state or federalconviction for marijuana growing, sale, or possession will be considered for mitigation onthe initial application. A decision to mitigate is made on an individual basis and is based onthe quantity of marijuana involved and other circumstances.Employee RestrictionsNone3.8OTHER STATESFor the 30 states and Washington D.C. with medical marijuana laws, the restrictions may beeven more stringent. For example, under the medical marijuana pilot program in Illinois,restrictions even apply to patients.19 In New York, a marijuana conviction automaticallykeeps one from working in a medical marijuana dispensary.2018Washington Administrative Code. Title 314. Chapter 314-55. Marijuana Licenses, ApplicationProcess, Requirements, and Reporting. http://apps.leg.wa.gov/wac/default.aspx?cite 314-5519Illinois Compiled Status. 410 ICLS 130. Compassionate Use of Medical Cannabis Pilot ProgramAct. ID 3503&ChapterID 3520“Marijuana Reform in New York: Diversity and Inclusion in the Marijuana Industry.” Drug PolicyAlliance. Sept. 2017. http://smart-ny.com/wpAllie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING12PART 4THE HYPOCRISY OFCRIMINAL CONVICTIONRESTRICTIONS IN THEMARIJUANA INDUSTRYSupporters of keeping those with certain criminal convictions out of the new industry claimthat doing so makes legal marijuana reputable. Last year, the CEO of medical marijuanaprovider Patriot Care wrote: “Permitting those who have demonstrated the interest andwillingness to ignore state and federal drug laws sends the wrong signals to those whowould participate in the legal, regulated industry.” The CEO’s statement was in response toefforts in Massachusetts to remove the ban on convicted drug felons in the medicalmarijuana program. Ironically, as pointed out in Forbes, all marijuana businesses—includingPatriot Care—are in violation of federal law.21content/uploads/2017/06/StartSMART DPA NY Marijuana Reform Diversity Inclusion 09.14.2017.pdf21Zhang, Mona. “Cannabis Industry Struggles With Hiring People With Past Pot Convictions.”Forbes. Oct. 4, 2017. s/#3069de2a5cd4Allie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING13Restrictions on participation in the marijuana market based on previous marijuana crimeshave been a contentious issue. In most industries, prior experience works in an applicant’sfavor. But in the marijuana industry, previous experience could have resulted in a criminalrecord. Further, it seems contrary to one of the key goals of legalization—minimizing theharms of the drug war—to continue to penalize license applicants for marijuana crimes.Further, it seems contrary to one of the key goals of legalization—minimizing the harms of the drug war—to continue to penalizelicense applicants for marijuana crimes.For recreational marijuana, most states have some limited exemption for past marijuanacrimes built into the law. In Nevada, the exemption is especially narrow: offenses forconduct that would be immune from penalty under medical marijuana law are exempt—unless the conduct occurred before Oct. 1, 2001 or was prosecuted by another authority.22Alaska specifically prevents those that have “within two years before submitting anapplication, been convicted of a class A misdemeanor relating to selling, furnishing, ordistributing marijuana or operating an establishment where marijuana is consumedcontrary to state law” from obtaining a license.2322NRS Chapter 453D.233 AAC Chapter 306.Allie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING14PART 5SHOULD THEMARIJUANA INDUSTRYPAY REPARATIONS FORTHE DRUG WAR?Given the hypocrisy of keeping drug criminals out of the legal drug industry, some statesand localities have taken the opposite stance that convicted drug criminals should receivepreferential treatment in licensing. In Massachusetts, for example, applicants “who are ableto demonstrate experience in—or business practices that promote—economicempowerment in communities disproportionately impacted by high rates of arrest andincarceration for offenses under state and federal laws, including the Controlled SubstancesAct” receive priority review. The state also has a social equity program for applicants whohave resided in areas of disproportionate impact for five of the last ten years, lived inMassachusetts for the past 12 months with a drug conviction, or are married to or childrenof convicted drug criminals and have been state residents for the past year. Social equityparticipants have access to training and assistance raising funds.2424“Summary of Equity Provisions.” Massachusetts Cannabis Control Commission. ons-with-6th-criterion-added-1.pdfAllie Howell Criminal Conviction Restrictions for Marijuana Licensing

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING15Given the hypocrisy of keeping drug criminals out of the legal drugindustry, some states and localities have taken the opposite stance thatconvicted drug criminals should receive preferential treatment in licensing.Ohio, Maryland, Florida, and Pennsylvania all have equity programs for their medicalmarijuana markets. A few localities in California have adopted similar measures forrecreational marijuana.25 Oakland, for example, requires that half of all permits must beissued to equity applicants during the initial permitting phase.26The underlying premise of these programs is that minorities who were more likely to bearrested for marijuana crimes and participants in the marijuana black market “paved theway” for the legal industry.27 Thus, as summarized by New York gubernatorial candidateCynthia Nixon: “We can't let them [rich white men] rake in profits while thousands ofpeople, mostly people of color, continue to sit in jail for possession and use.”28 Some stateshave opted for “marijuana forgiveness remedies,” to divert or expunge prosecution ofmarijuana charges that are no longer legal offenses, or are lesser offenses.29 While socialequity programs and preferential licensing attempt to address the issue, their impact hasbeen constrained thus far. The way to redress the injustices of the war on drugs is directlythough criminal justice reforms and forgiveness. Imposing mandates or quotas in the legalmarijuana market imposes costly economic distortions and ultimately hurts the samepeople.25Mock, Brentin. “California’s Race to the Top on Cannabis.” CityLab. Feb. 5, ia/551912/26“Become an Equity Applicant or Incubator.” City of , Mona. “Cannabis Industry Struggles With Hiring People With Past Pot Convictions.”28Riggs, Mike. “What Do Cannabis Entrepreneurs Owe Victims of the Drug War?” Reason. May 15,2018. arriors-want-to-write-th29Craven, James. “Marijuana Forgiveness Remedies.” Reason. June 4, giveness-remedies/Allie Howell

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING16The way to redress the injustices of the war on drugs is directlythough criminal justice reforms and forgiveness. Imposing mandatesor quotas in the legal marijuana market imposes costly economicdistortions and ultimately hurts the same people.For example, Oakland, California has so far granted 16 dispensary permits. Eight newpermits were given in January with six going to equity applicants. With 115 applicants foreight new permits, the city chose winners through two different processes. Four new permitholders were selected through a competitive point process—two of these permits went toequity-owned business. The other four permits were selected through a lottery drawing ofequity applicants. 30 While this program has

CRIMINAL CONVICTION RESTRICTIONS FOR MARIJUANA LICENSING Allie Howell 1 JUSTIFICATIONS FOR LICENSE RESTRICTIONS Both medical and recreational mari

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