New Jersey’s Cannabis Rules Trap Social Equity Founders in Debt

Opinion: New Jersey’s Cannabis Rules Are Trapping Social Equity Entrepreneurs in Preventable Debt

New Jersey promised equity. The State said it would build an industry where women, minorities, and people harmed by prohibition could finally lead and thrive. The CREAMM Act and NJAC 17:30 were created to protect us. On paper the intent is noble. In practice the rules around conditional licensing are forcing social equity entrepreneurs into a financial corner that many cannot survive.

I say this with love for my state, respect for the regulators, and full understanding of why safeguards exist. But I also say it as someone who lives inside the system every single day. The conditional license structure, as it exists right now, traps founders in unnecessary debt and blocks the very investors who should be allowed to help them grow.

Conditional license rules protect founders in theory, but restrict them in reality

The rules require conditional license holders to maintain at least fifty one percent ownership, control, and decision making authority during the conditional period and for two years after converting to an annual license. The intention is to make sure social equity founders cannot be pushed out by predatory investors.

I respect that intention. It matters. But in practice these rules create a financial environment that is almost impossible for new operators to navigate.

A cannabis business requires serious capital long before a dollar of revenue comes in. Security, equipment, testing, rent, insurance, architectural work, packaging, staffing, and compliance do not wait for the rules to bend. When you tell a founder that they can only raise money through debt, because offering meaningful equity would violate their conditional control, you are setting them up for struggle.

Debt only financing is not protection. It is a barrier.

Every startup raises equity to build a foundation. Equity allows a business to grow without drowning itself in bills before it opens. New Jersey’s rules remove that option for conditional licensees. The only pathways left are loans, revenue share deals, and private financing arrangements that stack costs on top of costs.

Debt is not protection. Debt is pressure. And pressure without capital is a threat to the survival of the very businesses the State claims to uplift.

Even qualified minority and woman investors are blocked from participating

The most painful part is this. Even if I want to raise equity from other minority or woman investors who meet the same social equity qualifications the rules still treat them the same as any other outside investor.

The question is never “Are these investors aligned with the purpose of the program.”
The question is always “Will the original ownership group still maintain full majority control.”

This leaves no room for shared ownership among qualified social equity peers. No room for collective advancement. No room for growing a community of founders who look like the communities that were harmed by prohibition.

We say we want diverse ownership. We say we want minority participation. The rules prevent that from happening in a natural and healthy way.

Under capitalization is a bigger risk to equity than predatory investors

The industry speaks often about predatory investors. I understand the concern. I have seen the contracts. I have seen the harm they can cause.

But the bigger and more immediate threat is under capitalization.

Most conditional license holders are:
Paying rent.
Carrying construction expenses.
Purchasing equipment.
Hiring initial staff.
Working with lawyers, architects, and compliance consultants.
Testing products they have not yet sold.
Maintaining insurance.

These expenses do not care about timelines. They do not pause for regulatory protection. When you restrict founders to debt only financing, you create a situation where financial collapse becomes more likely than predatory control.

The rule designed to prevent harm is unintentionally creating its own version of harm.

The CREAMM Act promises equity, but the rules limit investment from the very communities it uplifts

The CREAMM Act emphasizes fairness, diversity, and economic participation. But conditional licensing rules prevent social equity founders from raising capital from people who share their identity, their values, and their lived experience.

A woman founder should be able to raise equity from other women.
A Black founder should be able to partner with other Black investors.
A social equity founder should be able to grow with social equity investors.

Instead, the rules lock us into a structure that limits growth, limits collaboration, and limits long term success.

New Jersey can fix this without weakening safeguards

A smart solution already exists. New Jersey can allow conditional license holders to raise equity from investors who also meet social equity qualifications, while still keeping clear limits that protect founders from exploitation.

This approach would honor the original intent of the law. It would keep control in the hands of the communities the program was built for. And it would give founders access to the capital they need to build sustainable and successful businesses.

Final Thought

Equity is not only about ownership. Equity is also about access. Access to capital. Access to opportunity. Access to the financial tools every other industry relies on.

If New Jersey truly wants social equity businesses to thrive, it must remove the financial barriers that make survival harder than it needs to be. Conditional license holders should not be forced into debt. They should not be excluded from raising capital among their own communities. And they should not be limited by rules that do not reflect the real world realities of what it takes to build a cannabis business.

This is my perspective. And it is rooted in both lived experience and a deep belief that New Jersey can still keep its promise to the people it claims to champion.