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Editor’s note: This is part 2 in an ongoing series that looks at the growing legal marijuana industry and its effect on the black community.

Zulu, a Maryland resident who calls himself the African Herbalist, sells marijuana on the black market. The 32-year-old is using a pseudonym to avoid being picked up for breaking the law in his home state and in the District of Columbia, where he delivers loose weed, edibles, oils and rubs to customers who call him. But Zulu says he’d much rather be in the business legally.

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“This is my passion. This is something I could do every day with no worries,” says Zulu, who works at a bar in Northwest Washington, D.C. But he tried and failed to get in on the legal ground floor in Maryland when the state was putting together rules for its legal medical-marijuana industry.

“There are so many restrictions and rules, it was virtually too hard for just anyone to get the license,” Zulu says. “You need to know someone or know somebody upfront—and that makes it hard for small businesses.”

Zulu says he had a business plan for what he hoped would be a small caregiver-collective dispensary, but he did not have the $2,000 initial grower-application fee or $250,000 biennial grower-license fee required under step one of the two-step application process; nor did he have the $1,000 initial dispensary application fee, or the $80,000 biennial dispensary-licensing fee required under Maryland’s process. In a good week, Zulu says, he makes about $400 from marijuana, but in a bad week it can be as little as $20 because he gives away some products to those who need them and to the homeless he sees on the district’s streets.

In Maryland, No Licenses for Black Businesses

Earlier this month, the Natalie M. LaPrade Maryland Medical Cannabis Commission awarded stage-one license preapprovals to 15 growers and 15 processors. None of the companies on tap for what are likely to be lucrative growing licenses is led by African Americans.

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“I think small guys were definitely not welcome to this game,” says Zulu, who says his primary reason for selling marijuana is to help senior citizens like his mother and others find relief from the pain of arthritis, eczema and other ailments. His products include everything from topical ointments for joint pain and skin problems, to a painkilling tincture for a friend suffering from cancer. “We know how to help … but … the people who got licenses were ex-cops and ex-political officials.”

The Washington Post reports that of the 144 companies that applied for the 15 growing licenses in Maryland, 26 had political ties, at least 30 had law-enforcement ties and 47 had ties to out-of-state corporations.

The diversity, or lack thereof, in the marijuana industry has been a concern for advocates nationwide. The law in Maryland, a state that is nearly one-third black, says regulators should “actively seek to achieve” racial and ethnic diversity in the industry. But a letter from the state’s attorney general’s office says it would be unconstitutional to consider an applicant’s race or ethnicity in the award of a license. Maryland’s Legislative Black Caucus chairwoman, Del. Cheryl Glenn (D-Baltimore), says she is considering ways to urge the commission named after her mother to award more licenses to companies owned by people of color.

Medical marijuana is legal in 25 states and in Washington, D.C., and recreational sales are allowed in four states­—Colorado, Washington, Oregon and Alaska. Growth and possession of recreational weed is allowed in D.C., as well, and laws legalizing pot are on the ballot this fall in nine states. California, Nevada, Arizona, Massachusetts and Maine are considering recreational-marijuana laws, while Florida and Arkansas are among states considering medical-marijuana programs. But an investigation by BuzzFeed estimates that only about 1 percent of the nation’s more than 3,500 marijuana dispensaries are owned by African Americans.

“It’s disappointing that the very people impacted the most by this part of the war on drugs are not now able to participate in what is now the legal regulated world,” says attorney Christian Sederberg. He’s with the so-called Marijuana Law Firm in Colorado, where weed is legal. “And it’s not just because of criminal backgrounds, but because these businesses in some states have high barriers to entry: lots of money, huge infrastructure costs and political connections. It’s not that no people of color have those, but it’s a classic American sort of new industry dominated by white men.”

The High Cost of Doing Weed Business

In Colorado the initial licensing fee to open a retail store is $3,000, but in New Jersey it is $20,000. Many applicants cannot meet the start-up capital requirements, which vary from $150,000 in Arizona to $250,000 in liquid assets as a prerequisite in Nevada.

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In New York, where the registration fee alone was $200,000 when the medical-marijuana program went online this year, the average applicant likely spent millions. The cannabis-business advising firm 4FrontAdvisors told MarketWatch the total capital and operating costs of New York dispensaries will be somewhere between $15 million and $30 million for each of the five companies granted operating licenses in the first year.

But people like Adam Bierman, co-founder and CEO of the California-based cannabis-management company MedMen, say costs such as those for New York make sense for states trying to make sure that those who get into this business actually know what they are doing.

“The average [New York] applicant that scored high probably spent somewhere around $5 million for that application process. … That’s reasonable for me,” says Bierman, whose company offers nationwide management services for dispensaries, cultivations and merit-based licensing applications. The company’s capital arm is a $100 million fund.

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“That’s giving you a license to address 20 percent of the [New York state] population. … To pull that feat off you’ve got to build facilities, hire people, that’s big business there. … Let’s not be surprised or naive about what this has become. States don’t want a free-market environment. That’s too hard to govern.”

He says people thinking they want to get in to an industry that’s becoming industrialized should consider pretending it’s not pot. What if, for example, Bierman asks, you wanted to get into the pharmaceutical, grocery or casino industries?

“The barrier of entry is extremely high,” Bierman explains. “Can you demonstrate tens of millions of liquidity? Can you lock up real estate that would allow you to build a grow facility? … Can you put together a cannabis-security team? You need to demonstrate to a state that you will be secure and protect that license.”

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He adds that there is much discussion in the industry on how what he calls the “completely failed drug war” has disproportionately affected people of color, and that there is a sentiment that since it has negatively affected such people for so long, they should be the ones who benefit from the commercial opportunities.

“Morally, you can say we should make sure [people of color] should get the upside,” Bierman says. “But on the flip side, these states have a huge undertaking and have to do what’s best for the state, colorblind.”

Partnerships Key for Blacks and Latinos

Longtime African-American marijuana activist and entrepreneur Wanda James gets furious when she talks about the racial disparity among the owners of weed businesses.

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“It angers me to my core!” rails James, founder and CEO of the Colorado-based Simply Pure dispensary and edibles. “Why do white men in Colorado … get to sell a billion dollars’ worth of weed, yet a black kid in Texas selling a $24 bag can still go to jail for a felony for a year? Your zip code determines whether you are a felon or a millionaire.”

But she stresses that though the business is not cheap, it is not impossible for blacks and Latinos to get involved as long as people of color move to make sure their paths to getting in aren’t permanently blocked.

“One, is being part of the rulemaking in every state, because they are putting barriers up,” James says, noting that in Colorado, if you had a drug felony, you couldn’t be in on the industry, but if you were a rapist, you could. “It’s stuff like that that makes no sense so it becomes dog whistle and racist because we have been targeted for the last 80 years and given ridiculous [weed] sentences.”

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James says that people of color need to lobby to make sure the barriers are reasonable, and that they have the tools to navigate them successfully.

“Let’s not think you can open a dispensary with $25,000 in the bank. We’ve got to be prepared with partnerships. It doesn’t matter that one person doesn’t have a million,” James explains, “but partnerships can be formed to take on investors and be ready to be in this industry in a big way. It does require business acumen, but if you’ve got the desire to do this, find the people you can partner with to make this happen. They’re out there. You just have to find them.”

James says wannabe marijuana entrepreneurs need to network with everyone from local officials in their city or town to members of weed-advocacy groups such as NORML, and maybe even the local Alzheimer’s Association, in that they may be interested in medical marijuana. The other major piece of this battle, she says, is getting elective officials and black clergy to stop saying negative things about cannabis and keeping people of color away from a substance that can help battle everything from cancer to autism.

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“When you look at the racism behind [the criminalization of cannabis], that’s why I become so angry at seeing so many black politicians falling into the trap of ‘Weed is keeping Ray-Ray on the couch.’ Instead of touching on drugs, touch on the black kids,” James says. “They are feeding our children into the criminal-justice system. Privatized prison systems get billion-dollar contracts.”

James also thinks that African Americans are missing out on the medical benefits of marijuana.

“I’m not seeing black autistic children being helped with cannabis oil,” James says. “Our clergy and elected officials are telling us how negative this is so we’re believing them and not even opening our minds to the possibilities of how this helps our children.”

In Oakland, Calif., Closing the Racial Gap

But there are efforts to help close the racial gap in getting involved in legal marijuana. In May, Oakland, Calif., City Councilmember Desley Brooks got the council to unanimously pass the “Equity Permit Program” (pdf), which sets aside half of medical-cannabis industry permits for people who have lived in the city's East Oakland neighborhood or have been to prison for a marijuana-related arrest. Currently, the city has eight dispensaries with permits, and eight more are coming as the city expands its marijuana businesses. East Oakland is predominantly black, and is home to a half-dozen police beats with high numbers of marijuana arrests and imprisonments.

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“When you look around the country and see who is making millions and millions in the cannabis industry, it is primarily white men,” Brooks says. “The first people out of the box on this are the people that are likely to be successful, and when you look at cannabis and its transition to legalization, it’s like prohibition and alcohol. This is the setup for people to become millionaires.”

Brooks says one black man told her at a mixer that he was thankful someone was looking out for the community, but she notes that others who were being “propped up” to get to do what had been illegal for others are “quite upset.”

“A part of what had been the primarily white community has thrown up an obstacle. ‘What would these illiterate black folks with no expertise in cannabis and have no money be able to do?’” says Brooks. “But there are well-informed African-American men and women who can afford this. “

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Oakland’s permit program will stand whether or not California voters legalize recreational marijuana this fall.

Back in Maryland, Zulu, the black market dealer, says he’ll continue working under the radar, and he thinks there will always be a need for entrepreneurs like himself because not everyone will want to be registered with the government as using or selling marijuana.

“People who still can’t get what they need are still going to underground stores, and that’s why the underground market never goes away,” Zulu says. “People think, ‘My dealer will come to me, and I don’t have to register with the government’; there’s distrust. I don’t want to register with the government for something I’ve been doing all my life.”

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Also in the High Society series: “Where Recreational Weed Is Legal, Should Those in Prison Get a Puff, Puff, Pass?

Allison Keyes is an award-winning correspondent, host and author. She can be heard on CBS Radio News, among other outlets. Keyes, a former national desk reporter for NPR, has written extensively on race, culture, politics and the arts. Follow her on Twitter.