“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’s cannabis regulators formally revoked an additional 25 licenses for facilities on Monday. The program was designed to assist disadvantaged small business owners, but it has been plagued with allegations of predatory practice.
Since the start of the microbusiness program in 2023 the regulators have taken back 34 out of the 96 licenses that were issued through the lottery.
Two licenses were revoked because the owner’s record contained a felony that would disqualify them. According to Missouri Division of Cannabis Regulation, the rest of the licenses were revoked because they failed to prove that microbusinesses will be owned by and operated by individuals who are eligible.
The Independent’s research has shown that well-connected individuals and groups have been flooding the lottery for microbusinesses by recruiting applicants and offering contracts which limit their profits and business control. The Independent has documented this pattern for more than a year. Well-connected groups and individuals flood the microbusiness lottery by recruiting people to submit applications, then offering them contracts that limit their profit and control of the business.
The Division announced in December that it would be introducing new rules to the program for marijuana microbusinesses, designed to prevent predatory tactics during the application procedure.
“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. These draft rule changes should reduce the efforts made by ineligible companies to obtain licenses through taking advantage of individuals.
Nine of the first ten licenses were revoked last year. The state will hold its first licensing lottery in 2023.
These 25 latest revocations took place on Monday. They marked the culmination of a six month investigation of certain licenses awarded to those selected in the July 2nd lottery.
On April 14, the revocations went into effect.
Michael Halow has been linked to at least 22 of the licenses revoked in recent days, 16 on Monday. In 16 of the notices of cancellation sent by the Division in October, it stated that the licensee signed an agreement which resulted someone else “becoming the owner” of 15 microbusiness licences.
Halow told The Independent in an email that he disagreed with their decision “respectfully”. He also said he would appeal.
Halow explained that “we provide support to marijuana dispensary applications who most need it.” They are usually people with no experience or wealth from previous generations. The businesses are located in communities that need jobs and economic growth.
Halow’s name appears on more than 700 out of 3,600 Missouri Lottery applications that have been submitted since the program was launched.
Since the start of the program, the groups who flood the lottery made up approximately 1,400 out of 3,600 applicants. This means that they have represented nearly 40% of those applications and received almost 40% of 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.”
David Brodsky, Scott Wootton and David Brodsky were all revoked of four licences.
In October’s letters stating that a revocation was imminent, the division said their contracts contained “false information or misleading statements.”
The letters state that “the licensee has entered into an arrangement which transfers ownership and control of operations to another entity.”
Separately in July, investigators began to investigate the three other licenses held by the group. The regulators stated they were looking into whether the business was “majority owned and operated” by qualified individuals. The Independent has yet to receive a response from the division regarding The Independent’s question about these licenses.
Brodsky and Wootton refused to make any comments on Monday’s announcement by the division.
Amy Moore said at a town-hall meeting held in February, that Missouri’s Microbusiness Cannabis Program will not get off the floor if regulatory agencies are forced to continually revoke licensing due to fears about illegal predatory practice.
Moore stated new rules were needed to eradicate these abusive practices. This will ensure that this program is able to deliver on its promises.
Moore explained to attendees that “it is not viable to have rounds and rounds of licenses issued, then rounds of cancellations.” We’ll never be able to build out this market.
She explained that the team has been reviewing public comments on draft rules of the Division posted in the winter months before deciding whether and when to send new rules to Missouri’s Secretary of State.
The original publication of this story is Missouri Independent.
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Mike Latimer is the photographer.