Connect with us

Business

Opinion: The 5 biggest problems faced by cannabis social equity founders

Published

on

Social equity founders still face an uphill battle in the cannabis industry, despite policies specifically designed to level the playing field for minorities and those affected by the war on drugs.

While lawmakers’ social equity provisions help some founders get a foot in the door, they don’t always reduce barriers enough for those founders to turn a profit and keep the lights on in the long term.

Here are the five biggest problems social equity founders face in the cannabis industry – and how to navigate them:

1. Capital

Even with a cannabis business license in hand, social equity founders face a tremendous hurdle: financing their business plan.

Because of the federal prohibition of marijuana, many of the financial networks and investment tools that mainstream small and midsized businesses and startups rely on for financing simply aren’t available to cannabis businesses.

Banks, hedge funds and private equity funders often have shied away from the cash – and crypto-heavy – aspect of the cannabis industry – whether it’s because cash-only businesses suggest potential for fraud or because of the extra work required to keep accounts compliant.

An increasing number of financial institutions, ancillary services and grant programs, however, now specialize in marijuana brands – and many give priority to or are eager to work with, social equity founders.

A lawyer who specializes in cannabis business law can be particularly helpful in this arena.

It might feel counterintuitive to pay for expensive legal services when your company’s whole problem is an empty bank account.

But a good attorney who is plugged into your state marijuana industry will likely know fruitful places to start looking for capital and which options best align with your background and intended business.

2. Connections

Connections are important in any business, and they represent another challenge that cannabis social equity founders often must navigate.

Step 1 is to meet other entrepreneurs – particularly those in cannabis.

Because the marijuana industry is small, it often feels as if everyone knows everyone – even in bigger markets such as Denver, Los Angeles or New York.

Seek out networking opportunities around industry conferences such as MJBizCon or thought-leadership events such as the South by Southwest festival in Texas.

Awards ceremonies such as The Emjays also are great places to learn who’s who in the industry.

In addition, social equity applicants can join state or local cannabis business groups, where experienced and like-minded entrepreneurs can offer not only offer camaraderie but also pointers on how they have navigated the challenges and legal problems that social equity founders face.

3. Contracts

The path to success for marijuana companies rests on paperwork – more of it than mainstream businesses face.

That’s exactly why they need to engage a cannabis attorney early on.

Yes, attorneys can be expensive. But reading a contract wrong is potentially far more costly.

From dates to recitals to defining terms, representations and warranties, dispute-resolution clauses and the specific compliance requirements set by different state regulatory bodies, there’s a lot to keep track of.

The consequences for even unintentional missteps can be dire.

4. Taxes

Cannabis businesses have notoriously complicated tax issues.

Because taxes are collected federally as well as on the state level, federal prohibition has an enormous impact on how marijuana brands settle their accounts at the end of the year.

Section 280E of the federal tax code is a notorious thorn in the side of cannabis brands, as it stipulates that most of the expenses that mainstream businesses can deduct or use to qualify for tax credits are off-limits to marijuana companies.

Another bugaboo is that the way state and local excise taxes are enforced often favors large-scale enterprises over small to medium-sized businesses.

For example, a coalition of Colorado cannabis businesses in 2022 wrote to the state’s Marijuana Enforcement Division (MED) requesting a tax holiday to offset the burden of distribution that they saw as harmful to smaller operators and new entrants to the industry, including social equity operators.

As they are in several other states with regulated marijuana markets, Colorado cannabis regulations are structured in such a way that there can be a large gap between the average market rate by which wholesale prices are set and actual market prices.

Large marijuana enterprises and vertically integrated companies are at an advantage because they don’t have to pay additional taxes when products are transferred from the cultivation operation to their retail arm.

Smaller, horizontally integrated businesses must negotiate a contract price that might be very different from actual market prices, forcing newcomers and startups to sell marijuana for a lower rate than larger competitors.

In addition to bringing less revenue per pound, such pricing also distributes a heavier tax burden to companies that are already financially disadvantaged.

As the coalition put it in an open letter to the Colorado MED, “When the market experiences a steep decline, cultivators must continue paying a higher rate of taxation despite their declining revenues. … Any business that sells its crop for less than (the average market rate of) $991 per pound pays an effective tax rate of greater than 15%, and in effect they are subsidizing the tax burden for cultivators who can sell their crop for higher prices.”

5. Long-term resources

As social equity founders know well, it’s best to start off on the right foot.

A misstep on something as routine as a contract or taxation can not only mean lost revenue or human resources, but it also can result in the loss of a business license.

Social equity founders get priority for coveted licenses in states such as New York, where plenty of non-social equity-involved individuals would like to enter the market.

But despite that initial advantage, this cohort faces even greater challenges than average in an industry already full of hurdles.

There is always someone waiting in the wings for social equity founders to fail – and create a new space for their competitors in a fast-moving industry.

That’s why it’s so important to connect with long-term resources in the earliest days of launching a marijuana business.

Many states have special resources for social equity founders – from accelerators to advisory groups to grant programs intended to help social equity founders bridge capital and investment gaps.

Look for conferences dedicated to social equity leadership in cannabis or for broader industry events with dedicated panels or tracks designed to connect social equity founders with the expertise and tools they need to succeed.

And, of course, the connections you forge with fellow founders and ancillary companies serving marijuana businesses are invaluable.

Cannabis is a close-knit community full of potential allies and partners to lean on as you navigate this complex, fast-changing space.

Alyson Jaen serves as of counsel at Messner Reeves law firm. She specializes in corporate and business law for cannabis brands, including licensing and regulatory compliance. She can be reached at ajaen@messner.com.

Source: https://mjbizdaily.com/5-biggest-problems-faced-by-cannabis-social-equity-founders/

Business

EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

Published

on

By

A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

Continue Reading

AI & Technology

Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations

Published

on

By

Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).

The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.

Trial Push Despite Multi-Million Euro Settlement

The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.

Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.

A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.

Allegations of VAT Evasion Through Marketplace Sellers

At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.

Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.

Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.

Italian Government Named as Affected Party

In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.

Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.

Multiple Investigations Add to Pressure

The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.

Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.

In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.

Amazon Denies Allegations

Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.

Broader Impact on Europe’s Digital Economy

If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.

With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.

Continue Reading

Aviation

IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?

Published

on

By

Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.

Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.

Root Cause: IndiGo’s Market Monopoly

The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.

This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.

Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.

Government Intervention and Regulatory Weakness

The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.

Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.

The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.

If Telecom Giants Fail: A National Paralysis

The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?

If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.

In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.

E-commerce Monopoly: Another Fragile Ecosystem

The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.

Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.

A Wake-Up Call for Regulators

The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.

As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.

Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.

Continue Reading

Trending

Copyright © 2022 420 Reports Marijuana News & Information Website | Reefer News | Cannabis News