Scott H. Moskol and Jason S. Luter —
Welcome to our latest blog post where we delve into the intricacies of Employee Stock Ownership Plans (“ESOPs”). Scott H. Moskol, a partner and co-chair of the Cannabis practice at Blank Rome, and Jason S. Luter, a partner, chair of the firm’s ESOP practice, and co-chair of the firm’s Dallas office answer frequently asked questions about the benefits and mechanisms of ESOPs, particularly within the context of the cannabis sector.
How long have ESOPs been around?
The first ESOP was established in 1956 by Louis Kelso for Peninsula Newspapers. The concept was formalized in federal law by the Employee Retirement Income Security Act of 1974 (“ERISA”).
Are ESOPs used for any other businesses or just cannabis?
Yes, according to the National Center for Employee Ownership, as of the beginning of 2025, 6,358 ESOP companies exist, collectively employing approximately 10.8 million employees, representing almost 8 percent of the private sector workforce in the United States. Over 50 percent of private ESOP companies are in one of three industry categories: Manufacturing (21 percent), Professional/Sci/Tech Services (19 percent), and Construction (15 percent).
For what size cannabis company does an ESOP make sense?
While around $20 million in minimum gross revenues and a minimum of 15 to 20 employees across a cannabis company’s operations is probably ideal, in certain instances an ESOP for a cannabis company with minimum gross revenues of $5–$10 million can be feasible.