CT company being paid $600,000 to screen some cannabis license applicants

Photo of Julia Bergman
Employees work at the Cleaver Leaves plant, a company that produces cannabis for medical purposes, in Pesca, Colombia, Thursday, Sept. 1, 2022. Last year Colombia's government approved the export of dry cannabis flower for medical purposes. And legislation to allow the sale of the cannabis for recreational use is currently under discussion. (AP Photo/Fernando Vergara)

Employees work at the Cleaver Leaves plant, a company that produces cannabis for medical purposes, in Pesca, Colombia, Thursday, Sept. 1, 2022. Last year Colombia's government approved the export of dry cannabis flower for medical purposes. And legislation to allow the sale of the cannabis for recreational use is currently under discussion. (AP Photo/Fernando Vergara)

Fernando Vergara / Associated Press

As Connecticut establishes its legal weed market, the state is giving preference in licensing to so-called social equity applicants who live in areas that were targeted by past drug enforcement.

It’s a move that a growing number of states where adult-use cannabis is now legal have taken as they’ve sought to address disparities from the war on drugs and enable those communities that were targeted to participate in the legal market. States have differed in their approaches to creating racial equity in an industry that is dominated by white business owners.

In Connecticut, half of all licenses are reserved for social equity applicants, who must meet established thresholds for income, residency, and business ownership. Most applicants for cannabis licenses in Connecticut must go through a lottery system compared to merit-based system that exists in other states.

To help navigate a new industry in the state, the Social Equity Council that oversees this process has turned to a major auditing and accounting firm, CohnReznick. The firm is charged with developing a system for reviewing equity applicants to ensure they comply with the rules and to recommend applicants for approval or denial. The contract is worth up to $600,000 and is effective until Dec. 31.

While the council has the final say as to whether an applicant advances to the provisional licensing phase, it rarely, if ever, has strayed from CohnReznick’s recommendations. So far, the council has approved 16 cultivator applicants, six retailer applicants, and more than a dozen other equity applicants for licenses ranging from food and beverage to delivery service.

“CohnReznick was chosen for their ability to provide valuable expertise in reviewing the applications, which includes complex analysis of income and residency documents and business structures,” said Kristina Diamond, a spokesperson for the Office of the Social Equity Council.

The council hired the firm earlier this year from a state list of qualified bidders. Diamond said the council, which didn’t have enough staff in place at the time to take on the task of reviewing applications, asked the five accounting firms on the state’s list of qualified bidders to respond to a request proposal. CohnReznick was the only firm to respond. The firm’s contract is paid for through the council’s budget.

Other states such as Washington and Illinois have also hired cannabis consultants as they’ve set up their legal marketplaces. In Washington, officials hired advisers on an array of topics from how much weed to grow to how to test, label and package the product. Illinois also hired an accounting giant, K.P.M.G., to grade cannabis applications — a process that came under fire through a series of lawsuits that delayed the licensing rollout there.

Connecticut’s licensing process is also being challenged in the courts with denied applicants arguing that the state’s social equity council denied applications based on incorrect information regarding business ownership and arbitrary interpretations of the law. Connecticut does not pre-review applications ahead of the lottery - a process that sets it apart from other states. Only certain applicants are able to revise their applications

“Connecticut is doing this in a very unique way,” said DeVaughn Ward, senior legislative counsel for Marijuana Policy Project, a Washington D.C.-based nonprofit that advocates for legalization. “It’s (too) early to tell whether it’s going to be a smashing success or whether it’s going to be an utter failure.”

The approach could lead social equity applicants in Connecticut “to get licensed very quickly, get to market quickly,” Ward said. “We’ll see how it all pans out.”

So far, the legal challenges have not disrupted Connecticut’s rollout of its adult-use market. As of Wednesday, the state Department of Consumer Protection had issued provisional licenses to five cultivator applicants and two retailer applicants. They now have 14 months to comply with requirements to receive a final license.

The cultivators who received a preliminary license include Connecticut Cultivation Solutions, LLC, Connecticut Social Equity, LLC, FFD 149 LLC, Insa CT, LLC, and Quinnipiac Valley Growth Partners, LLC. The retailers to receive provisional licenses are Slap Ash LLC and Jack.

julia.bergman@hearstmediact.com