More than 40% of the owners listed on applications for state’s social-equity marijuana licenses issued in October were from outside Missouri, according to an annual report released by the Division of Cannabis Regulation Wednesday.
About half of those owners came from California, Michigan, Louisiana and Arizona collectively.
The microbusiness license program is meant to boost opportunities in the industry for businesses in disadvantaged communities, and it was part of the constitutional amendment to legalize recreational marijuana that voters passed in November 2022.
A total of 1,625 applications were submitted for 48 microbusiness licenses — 16 for dispensaries and 32 for wholesale facilities. Nearly 1,900 owners were listed on the applications.
A central focus of the annual report is why the Division of Cannabis Regulation may be revoking 11 of the 48 social-equity cannabis licenses issued in October, after finding they didn’t meet eligibility requirements.
Those applicants were issued notices of pending revocation of their licenses on Dec. 15, and they have until Jan. 15 to respond with additional information that could reverse the department’s decision.
Among those who could face license revocation is Canna Zoned, a Michigan company that secured two of the 16 dispensary cannabis licenses — in Columbia and Arnold.
Both of Canna Zoned’s licenses have been deemed ineligible, according to information the state provided to The Independent in December.
State records show Canna Zoned was connected to 104 out of the 1,048 applications that were entered into a lottery selection for the dispensary licenses. An investigation by The Independent in October found applicants thought they were partnering with the Michigan investor but in reality signed agreements requiring them to relinquish all control and profits of the business.
Some applicants were recruited through Craigslist ads from around the country.
Another company that used the strategy of flooding Missouri’s lottery with applications was an Arizona-based consulting firm called Cannabis Business Advisors. It was connected to more than 400 dispensary applicants, including six winners.
The state couldn’t certify the eligibility for all six of the licenses connected to the firm’s clients.
A Missouri firm, Amendment 2 Consultants, is connected to more than 150 applicants, winning two dispensary licenses and two wholesale licenses. One of the group’s dispensary applicants was deemed ineligible.
Abigail Vivas, who oversees the microbusiness program as chief equity officer within the division, is constitutionally mandated to produce an annual report for the public and state legislators by the end of the year.
In an interview with The Independent Wednesday, Vivas said the fact that a fourth of the licensees are pending revocation shows the division is doing its “due diligence.”
“It doesn’t matter how you applied — whether you’re part of a group of multiple applications or a single application,” Vivas said, “we are going to look at all the information to ensure that these are going to truly eligible individuals.”
Flooding strategy
A big question that Vivas received after the division released the winners of the microbusiness licenses was why numerous applications had the same designated contact person and proposed locations. Did that mean that one person was submitting more than one application, which is against the rules?
Vivas said she understood the concern but hopes the report clarifies that a designated contact could be an attorney or someone outside the business who represents more than one owner. It doesn’t have to be an owner.
There were three designated contacts who submitted 43% of the applications. And while the report doesn’t state this, the numbers match those of Michigan-based Canna Zoned, Arizona-based Cannabis Business Advisors and Missouri-based Amendment 2 Consultants.
In some cases, numerous people who believed they were eligible came together to submit separate applications for one business, and Vivas said this isn’t against the rules.
“There’s nothing that prohibits a group of five people that all meet an eligibility requirement individually, applying separately to increase their odds of winning in the lottery,” Vivas told The Independent. “There’s nothing that says that they can’t do that.”
If one person wins and the group wants to change ownership later, they can do that with department approval, she said.
The applications with the same designated contact often had the same proposed location as well. And that’s not against the rules either, she said.
The strategy of flooding the lottery with applications to increase the odds was used mainly among the applications for dispensary licenses— and those licenses also drew the most out-of-state interest.
When the results first appeared, there was some rumbling within the cannabis industry that the strategy was successful — since those three designated contacts on multiple applications landed 9 of the 16 dispensary licenses statewide.
However, now all nine of those licenses are pending revocation.
When asked if it was related that the licensees with duplicate locations and designated contacts were all deemed ineligible, she said “no.”
“I wouldn’t say it’s related to them having a designated contact and then duplicate facilities,” she said. “We had people that were determined ineligible for several reasons.”
The report states that the ineligibility issues included “failure to provide documentation that the facility would be operated by eligible individuals.”
Other cited reasons included failure to provide adequate documentation to verify the majority owner met the eligibility criteria and for a disqualifying felony offense.
Overall, Vivas said she’s learned a lot through input from applicants about what resources the division can provide in the second round – which begins in March – to help applicants through the process.
She said her “to-do list” includes offering educational sessions on potential predatory lending or business agreements. It also includes trying to explore opportunities to create a grant-funding program for the licensees, which some other states have done to help licensees obtain capital without feeling the need to enter into unhealthy business arrangements.
“It’s been a fast and furious timeline of things that we had to do,” she said. “So we’re trying to take that time now to build some of those other things into our program.”
This story was originally published by the Missouri Independent, part of the States Newsroom.
