Almost 50% of Missouri’s Social Equity Cannabis License Applicants Originated from Out-of-State

Three distinct companies, originating from varied geographic locations, have emerged as significant players in the recent application process. One of these companies hails from Michigan, another from Arizona, and the third is based in Missouri itself. Intriguingly, these entities, despite their diverse origins, are collectively linked to a substantial portion of the total applications submitted. They appear to be connected to a remarkable 43% of all the applications received.

This notable involvement of these companies underscores a trend of cross-state participation and influence in the cannabis industry. The Michigan-based company brings its experience from a state that has a well-established cannabis market, while the Arizona company’s involvement reflects the expanding interest of businesses from newer cannabis markets. The Missouri-based company, on the other hand, represents local interest and knowledge in the application process.

Their significant share of the applications suggests a strategic approach to entering or expanding their presence in Missouri’s cannabis market. It demonstrates their recognition of the state’s potential as an emerging market in the cannabis industry and indicates their readiness to invest resources and expertise into securing a foothold in the region.

This pattern of applications also points to a broader trend in the cannabis industry where companies are looking beyond their state borders to explore opportunities in new markets. It signifies a maturing industry where geographical boundaries are becoming less of a barrier to business operations. Additionally, the involvement of companies from states with differing cannabis regulations and market maturities could bring a variety of experiences and business models to Missouri’s cannabis landscape.

Furthermore, the connection of these companies to such a high percentage of applications raises questions about the diversity and competitiveness of the market. It suggests a scenario where a few entities could hold significant sway over the market, influencing its direction and dynamics. This concentration of applications among a few companies could have implications for the variety of products and services offered, pricing strategies, and the overall health of the cannabis market in Missouri.

In summary, the connection of three companies from Michigan, Arizona, and Missouri to 43% of the applications in Missouri’s cannabis market is indicative of the growing interest and strategic movements of businesses within the U.S. cannabis industry. It highlights the cross-state nature of the industry, the blending of different market experiences, and the potential implications for market diversity and competition in Missouri.

Out-of-State Ownership in Missouri’s Cannabis Social Equity Program

In an intriguing development revealed by the annual report issued by the Division of Cannabis Regulation on Wednesday, it has come to light that a significant portion of the ownership behind applications for Missouri’s social-equity cannabis licenses, issued in October, originates from outside the state. Specifically, the report indicates that over 40% of the listed owners on these applications are not Missouri residents, highlighting a substantial out-of-state interest in Missouri’s burgeoning cannabis market.

The report provides a more detailed breakdown of this statistic, revealing that approximately half of these out-of-state owners hail from a collective of four states: California, Michigan, Louisiana, and Arizona. This distribution is particularly noteworthy, as it reflects the diverse geographic backgrounds of the investors and entrepreneurs seeking to enter the Missouri cannabis market under its social-equity program.

California’s representation is not entirely surprising, given the state’s long-standing history with cannabis legalization and its status as a pioneer in the cannabis industry. Michigan and Arizona, both with their unique cannabis markets, contribute further to this mix of out-of-state interest. Louisiana’s presence among these states is especially interesting, suggesting a growing interest in cannabis business ventures beyond traditional strongholds.

The surge in out-of-state ownership seen in Missouri’s social-equity cannabis license applications can be ascribed to several contributing factors. It may reflect the attractiveness of Missouri’s cannabis market to national and regional players in the industry, indicating a perception of untapped potential or favorable business conditions. Additionally, the expertise and capital from these out-of-state owners could bring valuable resources and knowledge to Missouri’s cannabis sector, potentially accelerating its growth and development.

Nonetheless, this trend also prompts inquiries regarding its effects on local businesses and entrepreneurs in Missouri. The significant presence of out-of-state interests might pose challenges for local applicants, potentially affecting the competitive landscape. It also brings into focus the objectives of the social equity program, which aims to ensure fair and equitable access to the cannabis industry for local communities, particularly those historically impacted by cannabis prohibition.

In summary, the annual report by the Division of Cannabis Regulation reveals that over 40% of the ownership behind Missouri’s social-equity cannabis license applications is from outside the state, with significant representation from California, Michigan, Louisiana, and Arizona. This trend underscores the growing appeal of Missouri’s cannabis market to out-of-state investors and raises important considerations about the balance between external investment and local participation in the state’s evolving cannabis industry.

The microbusiness license program, a critical component of the constitutional amendment to legalize recreational cannabis approved by voters in November 2022, was designed to enhance opportunities within the cannabis industry for businesses located in disadvantaged communities. This initiative embodies a focused endeavor to create a fair and balanced environment, encouraging equal participation in the rapidly growing cannabis industry.

In total, an overwhelming number of 1,625 applications were submitted for a limited number of 48 microbusiness licenses. This included 16 licenses earmarked for dispensaries and a further 32 designated for wholesale facilities. The sheer volume of applications underscores the high level of interest and anticipated potential within the industry. Intriguingly, the applications listed nearly 1,900 owners, indicating a broad spectrum of individuals and entities vying for a foothold in the market.

A key aspect of the annual report delves into the actions of the Division of Cannabis Regulation, particularly its decision to potentially revoke 11 of the 48 social-equity cannabis licenses issued in October. This decision came after the Division identified that these applicants failed to meet the established eligibility requirements. This scrutiny and potential revocation underline the rigorous standards and oversight being applied in the licensing process, ensuring that the program’s objectives are met effectively.

Notices of potential license revocation were sent to the concerned applicants on December 15th, giving them until January 15th to submit supplementary information that might sway the Division’s decision and prevent their licenses from being revoked. This procedure underscores the criticality of adherence and precision in the application process, as well as the rigorous protocols established to maintain the integrity of the licensing system.

Among the entities affected by this potential revocation is Canna Zoned, a Michigan-based company that was initially successful in securing two of the sixteen dispensary cannabis licenses. These licenses, located in Columbia and Arnold, are now under scrutiny. According to information provided to The Independent in December by the state, both of Canna Zoned’s licenses have been deemed ineligible under the current evaluation.

This situation with Canna Zoned and other applicants reflects the complexities and challenges inherent in navigating the regulatory landscape of the cannabis industry. It also underscores the commitment of state authorities to enforce the regulations governing the social equity program, ensuring that the benefits of legalization are extended appropriately and justly, particularly to those in disadvantaged communities.

In conclusion, the microbusiness license program, as part of the broader move to legalize recreational cannabis, has generated significant interest and participation. The stringent oversight by the Division of Cannabis Regulation, especially in ensuring eligibility criteria are met, demonstrates the seriousness with which the state is approaching the equitable distribution of these opportunities. The current circumstances surrounding the possible revocation of licenses serve as a stark reminder of the necessity to comply with regulatory norms and the dedication to ensuring fairness in the rapidly evolving cannabis market.

Scrutiny of Dispensary License Applications and Oversight in Missouri’s Cannabis Market

State records have disclosed a significant involvement of Canna Zoned, a Michigan-based entity, in the application process for dispensary licenses in Missouri. Remarkably, Canna Zoned was linked to 104 out of the 1,048 applications that were submitted into a lottery system designed for the selection of dispensary licenses. An investigative report by The Independent in October unveiled a concerning scenario where applicants, under the impression of forming a partnership with the Michigan investor, ended up signing agreements that effectively required them to surrender complete control and profits of their businesses.

The recruitment process for these applicants was notably broad, with some being sourced through Craigslist advertisements from various locations across the country. This method of recruitment raises questions about the transparency and fairness of the application process.

Furthermore, another entity, the Arizona-based consulting firm Cannabis Business Advisors, employed a similar strategy of inundating Missouri’s lottery system with applications. This firm was linked to an astounding number of more than 400 dispensary applicants, which included six who were initially declared as winners. Later, however, the state determined that it was unable to confirm the eligibility for all six of the licenses associated with the clients of Cannabis Business Advisors.

In Missouri, a local firm, Amendment 2 Consultants, also played a significant role in the application process. This firm was associated with more than 150 applicants, securing two dispensary licenses and two wholesale licenses for its clients. However, one of the dispensary applicants connected to Amendment 2 Consultants was later deemed ineligible.

Abigail Vivas, who holds the position of chief equity officer within the division and is responsible for overseeing the microbusiness program, is tasked with the constitutional mandate to produce an annual report for the public and state legislators by year’s end.

In a recent interview with The Independent, Vivas spoke about the ongoing situation concerning the potential revocation of licenses. She emphasized that the fact that a quarter of the licensees are pending revocation is indicative of the division’s commitment to thorough vetting and due diligence. “It doesn’t matter how you applied — whether you’re part of a group of multiple applications or a single application,” Vivas asserted, “we are going to look at all the information to ensure that these are going to truly eligible individuals.”

The situation in Missouri highlights the complexities and challenges involved in the licensing process for cannabis businesses. It underscores the necessity for rigorous oversight and the commitment of state authorities to ensure fairness and integrity in the allocation of licenses, particularly in programs designed to benefit disadvantaged communities. The actions of these firms and the subsequent response of the state division reflect the ongoing efforts to uphold the principles of equity and justice in the burgeoning cannabis market.

Saturation Approach

Following the release of the winners of the microbusiness licenses, a significant question arose for Abigail Vivas, chief equity officer overseeing the division. Many stakeholders were curious about why numerous applications shared the same designated contact person and proposed locations. This raised concerns about the possibility of one person submitting multiple applications, which would be a violation of the rules.

In addressing these concerns, Vivas explained that the designated contact on an application could be a legal representative or another external party representing multiple owners, not necessarily the owners themselves. This clarification was essential in understanding the application process’s dynamics.

An intriguing pattern emerged from the data: three specific designated contacts were responsible for submitting 43% of the applications. The report doesn’t explicitly mention it, but these figures align closely with those associated with Michigan-based Canna Zoned, Arizona-based Cannabis Business Advisors, and Missouri-based Amendment 2 Consultants.

In certain instances, multiple eligible individuals collaborated to submit separate applications for a single business venture. Vivas clarified that this practice does not contravene the program’s 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,” she stated in an interview with The Independent. Moreover, she noted that post-winning, changes in ownership could be made with the department’s approval.

The report also noted that applications sharing the same designated contact often proposed the same location. This, too, was not in violation of the rules. This tactic of inundating the lottery with applications, primarily employed in dispensary license applications, was intended to enhance the chances of success. It’s noteworthy that these licenses also attracted the most out-of-state interest, especially after state law requiring Missouri or majority Missouri ownership was overturned by a federal judge in 2021.

Initially, there was speculation within the cannabis industry that this strategy proved successful, as the three entities linked to multiple applications secured 9 of the 16 dispensary licenses statewide. However, these licenses are now all pending revocation.

When queried about the commonality of duplicate locations and designated contacts among the licensees facing revocation, Vivas denied any direct correlation. “I wouldn’t say it’s related to them having a designated contact and then duplicate facilities,” she remarked. The reasons for ineligibility were diverse, including failure to provide necessary documentation that the facility would be operated by eligible individuals, insufficient evidence of majority ownership meeting eligibility criteria, and the presence of disqualifying felony offenses.

Reflecting on the experience, Vivas acknowledged that the division has gained valuable insights from applicant feedback, which will inform enhancements in the upcoming licensing round starting in March. Her agenda includes conducting educational sessions to address issues like predatory lending and business agreements. Additionally, there is a push to explore grant-funding programs for licensees, similar to initiatives in other states, aimed at providing capital without resorting to unfavorable business agreements.

Overall, the process has been a rapid learning curve, and the division is now focused on integrating these learnings into its program to better support applicants and uphold the integrity of the licensing process.