Los Angeles Selects 100 More Social Equity Applicants Following Lawsuit

The city of Los Angeles’ Department of Cannabis Regulation last week announced that it had “successfully conducted the retail application lottery, also known as the Phase 3 Retail Round 2 Lottery,” during which it “selected 100 verified Social Equity Individual Applicants (SEIAs) for the opportunity to apply for a cannabis retail license in the City of Los Angeles.”

“The Lottery was the culmination of nine months of planning, including a verification process that allowed individuals to request verification as a Social Equity Individual Applicant (SEIA). More than 1,000 individuals requested verification and over 500 SEIAs met the criteria to participate and timely registered to be entered in the Lottery. Additional information on the SEIA criteria and process can be found here,” the city said in a statement on Thursday.

“The SEIA verification criteria align with the mission of the Social Equity Program (SEP) to promote equitable ownership and employment opportunities in the cannabis industry. The SEP is an integral part of the Department of Cannabis Regulation and provides economic opportunities for those most affected by the War on Drugs,” the statement continued.

That application process faced a legal challenge, when a Michigan man named Kenneth Gay sued the city last month. 

Per MJBizDaily, Gay “filed the California lawsuit a month after filing a similar suit in New York, where a federal judge ruled that state regulators couldn’t issue dozens of adult-use marijuana retail licenses until the legal action was resolved,” after it was determined that he “didn’t meet the criteria for eligibility under L.A. law, which requires an applicant to have a ‘prior California cannabis arrest or conviction’ and either be low income or live in an area identified as disproportionately affected by policing.”

In his lawsuit, Gay asserted that “he satisfied all three requirements, ‘except that the relevant events occurred in Michigan rather than California,’” and that his suit “also contended that because Los Angeles ‘enacted laws and regulations that provide a preference to California residents over out-of-state residents for the Lottery,’ the city’s social equity program violates the U.S. Constitution’s dormant commerce clause.”

The city’s Department of Cannabis Regulation explains that the latest lottery, which took place on December 8, was part of a “triple-blind, random selection process.”

“A ‘blind’ selection process means that the entity which selects the applicants does not know their identity. A ‘triple-blind’ process means that no one involved in the process, including FTI, DCR, and other City departments, knew the identity of who was selected until after the selection process had been completed and the data from each party was reconciled,” the regulators explained in a press release.

The city said that it “contracted with a third-party global business advisory firm called FTI Consulting Inc. (FTI) to administer the selection process.”

Social equity provisions have become a hallmark of cannabis reform efforts in states and cities across the country, with elected officials and policymakers cognizant of the importance of remedying previous harms of the War on Drugs.

California, which legalized recreational pot back in 2016, is no exception.

In September, the state’s Democratic governor, Gavin Newsom, announced that he “signed several measures to strengthen California’s cannabis laws, expand the legal cannabis market and redress the harms of cannabis prohibition,” per a release from his office at the time.

In addition to signing the measures, Newsom called “on legislators and other policymakers to redouble efforts to address and eliminate these barriers.”

“For too many Californians, the promise of cannabis legalization remains out of reach,” Newsom said at the time. “These measures build on the important strides our state has made toward this goal, but much work remains to build an equitable, safe and sustainable legal cannabis industry. I look forward to partnering with the Legislature and policymakers to fully realize cannabis legalization in communities across California.”