Marijuana Regulators In Missouri Revoke 25 More Microbusiness Licenses

“As for the criticism regarding ‘flooding the lottery,’ it’s important to recognize that more applicants is actually a sign of greater participation in a government program.”

By Rebecca Rivas, Missouri Independent

Missouri cannabis regulators on Monday officially revoked another 25 facility licenses in a program designed to benefit disadvantaged business owners but plagued by allegations of predatory practices.

Of the 96 microbusiness licenses issued by the state through a lottery since the program’s inception in 2023, regulators have revoked 34.

Two were revoked for having a disqualifying felony offense on the owners’ record. The rest were for failing to show that the microbusiness licenses would be majority owned and operated by eligible individuals, according to the Missouri Division of Cannabis Regulation.

For more than a year, The Independent has documented the pattern of well-connected groups and individuals flooding the microbusiness lottery by recruiting people to submit applications and then offering them contracts that limited their profit and control of the business. Nearly all of the 32 licenses that have been revoked for ownership issues followed this pattern.

In December, the division announced new proposed rules for the marijuana microbusiness program designed to combat predatory practices during the application process.

“These revisions are intended to ensure microbusiness licenses are issued to eligible individuals…and to address the trend of predatory arrangements in microbusiness licensing,” the division said in a December press release announcing the proposed changes. “Specifically, these draft rule revisions should mitigate the ongoing efforts of ineligible entities to acquire licenses by taking advantage of eligible individuals.”

The first nine revocations occurred last year, following the state’s first lottery for licenses in 2023.

The latest 25 revocations came on Monday, marking the end of a six-month investigation into some of the licenses that were selected out of the second lottery and awarded in July.

The revocations took effect on April 14.

Cannabis investor Michael Halow is connected to 22 awarded licenses the state has now revoked, including 16 revoked on Monday. In the 16 notices of revocation sent in October, the division stated the licensee entered into an agreement that would result in someone besides the eligible applicant “becoming an owner of this and 15 other microbusiness licenses.”

In an email to The Independent Monday, Halow said he “respectfully disagrees” with the division’s decision and he plans to appeal.

“We provide assistance to marijuana dispensary applicants who need it most,” Halow stated. “These are often people without generational wealth or experience as an entrepreneur. They open businesses in neighborhoods in need of jobs and economic opportunity.”

Halow is connected to more than 700 of the 3,600 applications submitted for Missouri’s lottery since the program began.

In total, groups flooding the lottery have made up about 1,400 of the 3,600 applications submitted since the program began, meaning they’ve represented about 40 percent of what’s gone into the lottery and come away with nearly 40 percent of the licenses.

“As for the criticism regarding ‘flooding the lottery,’ it’s important to recognize that more applicants is actually a sign of greater participation in a government program,” Halow told The Independent in October, “which is a positive outcome.”

Four licenses connected to cannabis investors and microbusiness mentors David Brodsky and Scott Wootton were also revoked Monday.

In the letters of pending revocation sent in October, the division stated that their agreements included “false or misleading information.”

“The licensee entered into an agreement that transfers ownership and operational control to another entity,” the letters stated.

Separately, notices of investigation were issued involving the group’s other three licenses back in July, stating regulators wanted to ensure the businesses continue “to be majority owned and operated by eligible individuals.” The division has not yet responded regarding The Independent’s questions on the status of these licenses.

Brodsky and Wootton declined to comment on the division’s Monday announcement.

Amy Moore, the division’s director, said in a town hall meeting in February that Missouri’s microbusiness cannabis program will never get off the ground if regulators are consistently forced to revoke licenses over concerns about unlawful predatory practices.

That’s why new rules must be put in place to root out these practices and ensure the program lives up to its promise, Moore said.

“It is not sustainable to keep going through rounds of license issuance and then having to do rounds of revocations,” Moore told the attendees. “We’re never going to get this market fully built out.”

She said her team is reviewing the public comments of the division’s draft rules posted this winter, before deciding if and when the division will submit new rules to the Missouri Secretary of State.

This story was first published by Missouri Independent.

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Photo courtesy of Mike Latimer.