He Was Arrested For Weed At 13, And He’s Selling It Legally At 27

Seun Adedeji is among Black entrepreneurs pushing for a share of a $16 billion legal pot industry dominated by Big Business. He Was Arrested For Weed At 13, And He’s Selling It Legally At 27

He Was Arrested for Weed at 13, and He’s Selling It Legally at 27

Seun Adedeji, Founder And Chief Executive Officer Of Elev8 Cannabis Dispensaries, Outside His Store In Athol, Mass.

In the hinterlands of central Massachusetts, Seun Adedeji works the crowd with an evangelist’s flair. “We’re here to get you guys medicated and elevated,” he says. At his store’s grand opening this month, he and his customers—some in khakis and leaning on canes, others in psychedelic T-shirts and ripped jeans—greet each other with pandemic-friendly elbow bumps.

Adedeji is a cannabis entrepreneur. In his skinny suit, T-shirt, and wing tips with no socks, he looks the part.

His shop, not so much. It’s a low-slung brick building that used to be a gas station in the former mill town of Athol, population 12,000. It still could be mistaken for one, except for the bright green marijuana leaf balloons hanging from the ceiling, the pre-rolled joints under the counter, and the rainbow of artisanal glass pipes on top.

As a 27-year-old Nigerian immigrant with only a high school diploma, Adedeji had to start small. He’s a rarity in the $16 billion-a-year U.S. legal marijuana business: a dispensary owner who is Black.

His company’s name, Elev8 Cannabis, has a double meaning. It’s about getting high, of course, but also alludes to the legalization movement’s social equity mission. Advocates call for government support of Black-owned cannabis companies to reverse the devastating toll of the war on drugs and mass incarceration on minority communities.

At age 13, Adedeji himself was arrested for selling pot. Yet, for all the talk of justice, it’s White corporate types—many from Wall Street, Silicon Valley, big liquor and tobacco—who have come to dominate the lucrative emerging industry.

Adedeji, who wears a gold pendant with inspirational words from the poet Maya Angelou, argues that Black people deserve access to legal pot’s windfall profits. He says it would be a step toward repairing the inequities of systemic racism: “We need to create generational wealth in the minority community.”

This argument is gaining currency amid a booming pot industry. On Nov. 3, voters in Arizona, Montana, New Jersey, and South Dakota will decide whether to legalize recreational marijuana, as have 11 other states and the District of Columbia since 2012. (Thirty-five permit medical marijuana.)

Some state and city governments have also started social equity programs for marijuana businesses. Massachusetts and Illinois, as well as Oakland and Los Angeles, are among the most developed. These efforts generally give a leg up to business owners with nonviolent marijuana convictions, who live in neighborhoods with disproportionate drug arrests.

Help can include training, breaks on regulatory fees, and priority in awarding licenses and loans. “None of these programs have been a smashing, immediate success” because of the challenges facing disadvantaged businesses, says Shaleen Title, who holds the social equity seat on the Massachusetts Cannabis Control Commission.

The Minority Cannabis Business Association estimates that only 200 of the nation’s more than 7,000 licensed dispensaries are Black-owned. Adedeji’s company, which wasn’t part of the official state social equity effort, is one of the few in Massachusetts.

The main barrier is money. Opening a dispensary typically costs $500,000 to $1.5 million, according to cannabis industry tracker Arcview Market Research. Banks loans aren’t an option, because the federal government still considers marijuana illegal. Wealthier people have access to networks of family and friends—and even private equity—edging out the disadvantaged.

In a further roadblock, social equity efforts have sparked opposition, including lawsuits from other aspiring licensees that claim unfair treatment. The programs have also been gamed: States have had to crack down on companies that use minority owners as fronts, in some cases taking effective control through onerous lending arrangements.

Consider Adedeji, who needed $1 million for his first Massachusetts shop. A large marijuana industry supplier loaned him the money, at 8% interest, but also levied a $3 per item fee and specified that Adedeji had to buy 70% of his product from the lender, Massachusetts records show. After a state investigation, the bigger company dropped those conditions.

Some opponents of legalization dismiss the social equity pitch. Kevin Sabet, an Obama administration drug-policy adviser, says big corporations will end up reaping the rewards of legalization, while poor neighborhoods bear the cost of increasing pot use.

“It’s dangling money in front of communities that deserve richer opportunities,” says Sabet, president of Smart Approaches to Marijuana, which supports decriminalization, rather than commercialization.

Adedeji disagrees, and his life story represents legalization’s promise. At 5, he emigrated with his family from Lagos, Nigeria. Growing up on Chicago’s South Side, he got into fights and was expelled from school. He never forgets being fingerprinted after his arrest for selling pot in middle school. “I felt like my life was over,” he says.

The charges were dropped, and he straightened out. After high school, he moved to the West Coast and channeled his aggression into mixed martial arts on the Ultimate Fighting Championship circuit. He also worked selling cellphones, rising to become a company manager.

In 2017 he opened his first pot dispensary in Eugene, Ore., which he still runs. When he wanted to open a second, he chose Massachusetts because it had a less saturated market. He moved to Boston and secured licenses to operate three dispensaries in the state—the first in Athol, where he paid just $50,000 to buy the former gas station.

At the shop’s grand opening, about two dozen people, wearing masks, wait in a socially distanced line to enter. Noreen Perez, 52, a former dog groomer, seeks help for her anxiety and pain. Bruce Fowler, 78, an Air Force veteran and retired toolmaker, arrives on a motorcycle adorned with an American flag, and has come just to browse.

The scene is a far cry from the crowds at some of the bigger, better-financed White-owned dispensaries. In the affluent Boston suburb of Brookline, the New England Treatment Access, or Neta, shop occupies a soaring Beaux Arts-style former bank building listed on the National Register of Historic Places.

A company called Parallel, whose chairman is the billionaire heir to the Wrigley gum fortune, owns the dispensary. Before Covid-19, it could see 2,500 customers a day, making it one of the most successful in the country. (Neta says it promotes social equity through grants and diversity in hiring and training.)

Athol may not seem the most natural market for a Black-owned pot business. The town is more than 90% White. In the 2016 presidential election, its voters favored Donald Trump, whose Justice Department has often been unfriendly to legalized pot. Local officials nonetheless welcomed Adedeji’s business, as did Chamber of Commerce members, for the potential boost it may deliver to the local economy and tax revenue.

To support Adedeji on the day of his store opening, delegations arrive from other Black-owned cannabis businesses: Boston’s Pure Oasis, the state’s first Black-owned dispensary; JustinCredible Cultivation, in Western Massachusetts; Sticky, a three-shop Michigan chain; and Maryland’s Tetragram, which runs an app for recommending strains of pot.

Tahir Johnson, an aspiring cultivator and National Cannabis Industry Association diversity manager, drove eight hours from Washington to be Adedeji’s first customer. He paid $60 for two pre-rolled joints and a package of cannabis-infused Belgian milk chocolate.

Marc Ostberg, a branch manager of BankHometown, visits from just down the block for a tour. Inside, hip-hop plays on the sound system. A faint, telltale scent hangs in the air. Adedeji raves about the store’s soothing indica and animating sativa cannabis blends. Ostberg, who wears a plastic face shield with his conservative suit, nods and smiles.

Their conversation highlights both the challenge and possibility of the new venture. “Have you ever been elevated before?” Adedeji asks. “No? One day, we’ve got to change that up.”

Banks Navigate Hazy Regulations To Serve Cannabis Businesses

Financial institutions and fintech companies have been relying on data and old-fashioned site visits to manage risks.

Many financial institutions looking to offer banking services to the expanding number of legal cannabis growers and distributors in the U.S. are still limited by spotty regulations and expensive compliance efforts.

The disparities between federal and state laws governing the use of marijuana and hemp, and the differences across states, are inhibiting banks from stepping into what has become a lucrative and legal business in many areas.

Regulators have issued scant guidance and some of the existing advisories are outdated or set few clear obligations for banks, such as information that a bank should ask for from potential clients, financial institutions say.

Some financial institutions have created their own internal guidelines—from database tracking of a plant’s life cycle to old-fashioned site visits—so that their risk profile remains low and they remain in compliance with the broad intent of the wide swath of state and federal laws.

“The reason that bankers are so reluctant to get into this industry is primarily the compliance; [there are] very intensive compliance requirements, more than any other industry,” said Mel Barnes, chief operations officer at Oklahoma State Bank. The Norman, Okla.-based community bank began providing services to legal medical marijuana businesses in January.

Fewer than 700 banks and credit unions were actively providing banking services to marijuana-related businesses as of June, according to the Financial Crimes Enforcement Network, the anti-money-laundering unit of the U.S. Treasury Department, which tracks the number.

Over the past decade, 11 U.S. states have legalized the recreational use of marijuana for adults and 22 more allow it to treat certain medical conditions with prescriptions. But the use, sale or possession of marijuana is illegal under federal law.

Hemp, a variety of the cannabis plant and used for its fibers that are woven into rope and textiles, was legalized nationally in 2018. But some states don’t allow possession of any kind of cannabis, including hemp.

“It is actually very easy for a hemp producer to inadvertently, or perhaps not, produce a product that is legally classified as [marijuana] rather than hemp,” said Dan Roda, co-founder and chief executive of fintech company Abaca in North Little Rock, Ark., which provides banking services to cannabis businesses. “They could be producing a full legal substance to produce an unlawful one, or one that should be produced in a heavily regulated environment.”

Some banking regulators have started to catch up and clarify their expectations. FinCEN said in guidance in July that financial institutions should tailor their anti-money-laundering programs to hemp-related customers’ risk profiles.

Sales of products with a high concentration of tetrahydrocannabinol, or THC, the chemical in cannabis that causes psychological effects, as well as products containing a high level of cannabidiol—a derivative of cannabis that has become a popular additive in drinks and foods—are estimated to total around $34 billion for 2020, according to New Frontier Data, a cannabis market research firm.

Mike Ford of Denver, N.C., reached out to his bank of 30 years to help with the launch of his industrial hemp-growing firm early last year. He was turned down.

“You bring the word cannabis up and they just put their fingers in their ears and say, ‘oh my God, go away,’” Mr. Ford, 50 years old, said.

His company, Square Inch LLC, relies almost entirely on online transactions for sales of hemp and products such as a sports cream that contains cannabidiol, he said. The alternative of sales through cash only would have made the business very difficult to maintain, he said.

“[Lack of] banking is what leads the industry to have a black eye in many ways,” Mr. Ford said.

Peoples Bank, a Newton, N.C.-based community bank, has offered banking services to hemp-related businesses, including Mr. Ford’s business. Marijuana for any purpose remains illegal in the state, but growing hemp, which contains less than 0.3% THC, is legal.

Peoples Bank’s compliance group set up detailed categories for the kinds of businesses they could encounter, from growers to processors to dealers, and has relied on documentation, site visits and lab tests to ensure compliance, said Heather Allen, a Bank Secrecy Act officer at Peoples Bank.

The bank reports monthly on its risk indicators to its board of directors, and monitors its portfolio to make sure it remains “within our internal ability to manage it,” she said. The bank currently has fewer than 100 such customers in the hemp industry and is considering an expansion, she said.

The bank questions the businesses on every step, gathering details on what they are growing, how they are growing it and how they are harvesting the crop. For instance, such monitoring allows bank officers to determine whether cannabis flowers are being grown for extracting fiber or for cannabidiol.

Treasury’s FinCEN regulations require banks and lenders to confirm that hemp growers are compliant with the state, tribal government or the U.S. Department of Agriculture licensing requirements by either obtaining a written declaration from the clients or a copy of the license.

A spokesperson for FinCEN said the agency’s 2014 guidance regarding banking for marijuana-related businesses remains in place and the agency continues to review it. The agency also is tracking the numbers of depository institutions providing banking services to marijuana-related businesses through the Suspicious Activity Reports, or SARs, which are required if a bank provides services to a marijuana-related customer, the spokesperson said.

Banks are no longer required to file SARs on customers who cultivate hemp, a group of financial regulators, including FinCEN, said in December. But FinCEN said in July that financial institutions still need to conduct due diligence and monitor transactions for hemp-related businesses.

Abaca, the Arkansas fintech company, which has over 100 cannabis banking clients across eight states, works with chartered financial institutions to provide commercial banking services to regulated marijuana and hemp businesses, and relies on technology and data to manage the risks. The company uses databases maintained at the state regulatory level to follow the production cycle of each plant to when the final, refined product is harvested from the plant, Mr. Roda said.

Such investments in technology, staffing and training on regulatory reporting can make compliance expensive for banks, said Oklahoma State Bank’s Ms. Barnes.

But it is also an opportunity for the banks, she said. “Being able to figure out a way to have a banking relationship with this booming industry was our goal,” she said.

Updated: 4-12-2021

Weed Customers Are Everyone’s Dream Demographic

Companies across industries are chasing an attractive new demographic. These dream customers are more likely to own pets and to love fashion, to want kids and to consider starting their own business. They also make quite a bit of money — and are still spending it during the pandemic.

Who is this ideal mystery consumer? None other than the cannabis user, once viewed as an anti-materialistic layabout. They’re so attractive a demographic, in fact, that some consumer-goods and technology companies are actively courting them as customers.

That’s been the case at Uber Technologies Inc., which hired cannabis advertiser Fyllo late last year in its first attempt to specifically target pot users when advertising its food-delivery service, Uber Eats. And it’s not just about serving people who have the munchies after smoking marijuana, says Uber’s global head of media, Travis Freeman.

“A cannabis consumer is younger than the normal consumer, has more disposable income; they are busier than most, they are working all the time, exercising all the time, going on adventures all the time,” Freeman told me in an interview. The results have been good: Uber has found that cannabis users are more likely to watch and complete video ads than the average consumer.

Fyllo, the specialist in cannabis advertising working with Uber, said other companies from outside the marijuana industry are also trying to tap into this enticing demographic. The growing interest helped Fyllo close a $30 million funding round last week.

“We’re seeing a lot more mainstream brands,” Fyllo Chief Operating Officer Katie Ford said of the new breed of customer seeking out its services. “Some of the biggest alcohol companies want to target the cannabis consumer. Our platform allows them to do that.”

Gone are the old cliches about washed-up stoners. An MRI-Simmons survey from 2020 showed that people who consumed cannabis were 22% more likely than non-cannabis users to seek out variety in their everyday lives, 32% more likely to want to be first to try new products and services, and 25% more likely to make impulse purchases. They’re also good at influencing: They’re 27% more likely to keep social media feeds updated and 25% more likely to share their opinions by posting ratings or reviews.

That has Corporate America’s attention. A November survey by Forrester Consulting commissioned by Fyllo that talked to marketing executives at large U.S. companies showed that 82% were interested or very interested in having more insights into medical cannabis consumption. Likewise, 77% would be interested in understanding recreational cannabis consumption and 76% would be interested in CBD product consumption insights, showing just how crucial this demographic is becoming across industries.

Of course, some consumer-goods companies are targeting cannabis consumers for a different reason: They’re losing their slice of the pie and looking for a way to recoup losses.

“A beverage or liquor brand would want to target them because they’re losing market share,” said Fyllo CEO Chad Bronstein. “This is a way for them to keep talking to the consumers.”

Quote Of The Week

* “There’s a gray space between CBD wellness and recreational cannabis. We want to move into that fast growing space of high CBD and low THC products. I see cannabis wellness as the fourth leg after recreational marijuana, medical marijuana and CBD,” Deanie Elsner, chief executive officer of Charlotte’s Web, said in an interview with Bloomberg News.

Number Of The Week

* 65%: The rate of marijuana users in California who say cannabis brands don’t matter to them, according to a recent survey from Brightfield Group.

What You Need To Know

* Mexican cannabis legalization hit an unexpected snag in the Senate last week, where a revised version of a bill is under consideration.
* The U.K. government doesn’t plan to legalize cannabis, a press secretary for Prime Minister Boris Johnson said.
* Canopy Growth Corp. will buy Supreme Cannabis Co. in a deal valued at C$435 million ($346 million).
* Virginia lawmakers voted to legalize recreational cannabis, a move that could net the state up to $308 million in tax revenue by the fifth year.

Updated: 5-31-2021

A New York Prison Locked Men Up For Drugs. Now The Site Will Grow Marijuana

Town officials look to add jobs and tax revenue, but some parents and small growers aren’t thrilled.

Until closing a decade ago, a sprawling state prison in this town northwest of New York City locked up men convicted of drug offenses and other crimes.

Now Warwick aims to turn what was a medium-security complex in Orange County into a bustling regional hub for growing and processing cannabis. Its entrepreneurs hope to cash in on the state’s move this spring to legalize recreational marijuana for adults.

Local officials have recruited seven cannabis-related businesses to the Hudson Valley site, still marked by reddish brick buildings that at one point incarcerated nearly 1,000 men. In March the town provided tax incentives for Chicago-based Green Thumb Industries to buy 38 acres for a large cultivation and manufacturing facility.

Boosters say the new ventures will bring tax revenues and hundreds of good jobs. But some parents say making the town a marijuana production center could send children a message condoning drug use. Small growers statewide worry large companies, such as Green Thumb, will squeeze them out of the market. And even some fans of the project see risks ahead.

“It seems like everybody and his brother and sister want to get on the cannabis bandwagon,” said Richard Hull, a historian in Warwick. “There will be a lot of competition, but it’s certainly worth the risk.”

In March, New York became the 15th state to legalize recreational marijuana. Gov. Andrew Cuomo, a Democrat, signed legislation allowing possession of up to 3 ounces for people 21 and over.

Warwick, a town of about 32,000 residents, has quaint village streets and bucolic farms that draw families for apple picking in the fall. Its leaders haven’t yet decided whether to permit cannabis retail shops or lounges with on-site consumption. The new state law says cities and towns can opt out of allowing such dispensaries by Dec. 31.

Laura Ford, a resident with children aged 15 and 19, called the new hub for growing cannabis a “mixed bag.” She sees benefits for the local economy but worries about increasing the supply of a substance that for some users might be a gateway to more drugs. Then again, she noted, the town has long had stores for liquor, which can lead to alcohol abuse. “It’s not a cut-and-dried issue,” she said. “But I have teenagers and don’t like to think about them smoking pot.”

In the 1930s, the prison site served as a state reform school that tried to rehabilitate wayward New York City boys with chores tending vegetables, cows and chickens. In the late 1970s the state turned it into the Mid-Orange Correctional Facility for the surge of people being incarcerated during the national crackdown on drug offenses. It was shut in 2011, after the number of men there dwindled.

Town officials set up the not-for-profit Warwick Valley Local Development Corporation and paid the state $3.75 million for about 150 acres of prison property in 2013. Michael Sweeton, the town supervisor, said Warwick bought the site to avoid having it turned into condos or something undesirable. “We want to control our own destiny,” he said.

The idea of creating a hub for hemp emerged in 2018, he said, when the federal government took the plant off the list of controlled substances. The town worked with the Orange County Industrial Development Agency, which offered incentives to attract businesses. Now the former prison has seven ventures tied to a substance that was once banned, as well as a brewery and sports complex.

UrbanXtracts makes cannabidiol (CBD) oil, tinctures and other products. Phyto-Farma Labs LLC tests cannabis. Citiva Medical LLC has a license to grow medical marijuana. And three small manufacturers use CBD or hemp: Honey Buz and Farmbody for skin-care products, and Scripted Fragrance for candles.

“That’s the irony: There were prisoners in here for what we’re doing,” said Eran Sherin, founder of urbanXtracts. He said he aims to hire workers from disadvantaged backgrounds to promote social justice.

The big newcomer is Green Thumb, which pledged to invest $155 million and create at least 179 jobs within three years, with benefits and salaries starting at about $50,000. Mr. Sweeton said that when Green Thumb’s roughly $3 million purchase of property is completed, as is expected this summer, the Warwick not-for-profit will have recouped its costs for buying and fixing up the prison site.

In a deal approved by the county’s industrial development agency in March, Green Thumb got incentives worth about $30 million over 15 years, including a sales-tax exemption and property-tax reduction. The agency estimated benefits to the regional economy of $285 million during that period.

A 20-minute public hearing on the tax breaks drew comment from only one resident. According to a transcript, the man said citizens should have had more opportunity for input and scrutiny of the agency’s cost-benefit analysis, and more evidence that incentives were necessary to attract Green Thumb. The resident couldn’t be reached for comment.

Ben Kovler, chief executive of Green Thumb, said Warwick’s welcoming attitude was a key factor in picking the site. The company, which plans to build a large facility for growing indoors, is licensed to make medical marijuana and wants to add recreational products when possible. “Going to a place where they don’t want you is a recipe for disaster,” Mr. Kovler said.

Small New York growers worry they will be unfairly squeezed out by Green Thumb and other multistate companies, said Allan Gandelman, a Cortland County hemp grower who heads the New York Cannabis Growers and Processors Association.

Mr. Gandelman said growers need licenses in time to plant a 2022 crop, but the governor and state lawmakers haven’t yet appointed a control board to spell out licensing rules for making recreational marijuana.

Cuomo administration officials said they expect the board to be picked by the end of the legislative session in June, with regulations in effect at the start of 2022, followed by the granting of licenses and retail sales in the fall.

Mr. Gandelman said that unlike big corporations, his small growers can’t afford to scale up their infrastructure now in hopes of getting licensed. Large companies “are going to have a super-duper head start,” he said.

The new marijuana law gives priority to applicants disproportionately hurt by past enforcement of prohibitions, according to the governor’s office. The law also aims to grant half of the licenses to businesses owned by minorities and women, as well as distressed farmers and disabled veterans.

“We will see an open playing field where the smaller operators are really able to not just compete, but thrive,” said Norman Birenbaum, New York’s director of cannabis programs.

“The market is big enough for everybody,” Mr. Kovler, of Green Thumb, said. “There is enough demand for many entrepreneurs to do well.”

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