Amy Moore, (right) director of the Missouri Division of Cannabis Regulation, speaks at the National Cannabis Industry Association’s summit on March 28 in St. Louis. At left is Mitch Meyers, partner at BeLeaf Medical marijuana company (Rebecca Rivas/Missouri Independent).
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, the head of the state’s marijuana division said Wednesday at a town hall meeting.
That’s why new rules must be put in place to root out these practices and ensure the program lives up to its promise, said Amy Moore, director of the Missouri Division of Cannabis Regulation.
“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.”
The division hosted the virtual town hall meeting Wednesday for the people connected to more than 90 microbusiness licenses issued since 2023.
Owners of microbusiness licenses must meet certain criteria, including having a low income, a nonviolent marijuana charge on their record, being a disabled veteran or living in a low-income ZIP code.
But of the 96 licenses issued so far, 41 have been either revoked or are currently at risk of being revoked. Another three are under investigation.
A majority of those 44 licenses facing revocation are connected to groups or individuals who flooded the lottery by recruiting people to submit applications and then offering them contracts that limited their profit and control of the business.
These kinds of agreements violate the constitutional requirement that the license be “majority owned and operated” by eligible individuals, Moore explained Wednesday.
By law, the licenses are issued through three rounds of lotteries, and Missouri has already held two lotteries.
In December, the division announced that it is proposing new rules regarding the application process to ensure microbusiness licenses are issued to eligible individuals and “to address the trend of predatory arrangements in microbusiness licensing.”
A big part of those revisions are defining what it means to be majority owned and operated.
“Owners really should be owners in the most usual form of the word,” Moore said. “If you’re seeing or hearing any opinions that our interpretation of that owned and operated phrase is creating an unreasonable standard, I would just ask you to really think about how you would interpret that extra requirement.”
Moore explained that the division is seeing “a lot of variation” on ownership structures among the microbusiness licenses.
“From our seat, we see situations where someone who is listed as the owner of the license tells us that they don’t own anything,” Moore said. “They never had any intention of owning anything. Maybe they were promised a certain amount of money to use their name, or they were promised a job once the license landed with someone else.”
On the other hand, she said they’re also seeing “great situations,” where owners are partnering with friends who have invested within the ownership limit.
“They’re gathering their family and friends around them to build their business, without committing to agreements that will automatically strip them of all benefit from the license in the future,” she said.
Moore fielded several questions from people who received one of the 32 notices of pending revocation in October, asking her why it’s taking the division so long to investigate these cases.
Moore explained that there were more than four times as many notices that went out after the first lottery in 2023.
One of the attendees, Kimberly Vincent, said she was excited to have the opportunity to land a microbusiness license, as a qualifying social equity applicant. But she’s had to pay an attorney about $3,000 to address the state’s concerns cited in the notice of pending revocation.
“So my question is, if DCR is trying to protect me from a predatory practice, please explain in detail how is this protecting me and my micro license?” she said.
Moore said protecting people from a predatory relationship is “a valuable thing to do,” but it is not their “primary driver.”
“Here at DCR, we have to follow the law,” she said. “So for anyone who has received a notice of pending revocation, that is because we identified something in what had been submitted so far that raised concerns that we would not be following the law if we did not look into that further.”
Moore also addressed a question by cannabis investor David Brodsky.
In October, the division sent notices of pending revocation to four of the seven licensees connected to Brodsky, stating 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.
Notices of investigation were issued involving the other three licenses connected to Brodsky in July, stating regulators wanted to ensure the businesses continue “to be majority owned and operated by eligible individuals.”
Brodsky said in Wednesday’s town hall that the notices he received this year from the state aren’t clearly stating what he can do to “cure” or fix the problems.
“It’s kind of misleading,” he said, “and we have a lot of folks who have offered to cure any issues many, many times, and it’s met with silence.”
Moore responded that whether or not there’s “a path toward becoming compliant” depends on the circumstances, including the details of agreements and the applicants.
By law, the state must offer a reasonable time period for curing or responding to the notices, Moore added, but that doesn’t mean licensees have an absolute right to a second chance.
“It has to be circumstance specific,” she said, “and I believe that’s what we’ve been doing.”
She pointed to a decision issued Tuesday in the appeal of microbusiness manufacturer Delta Extraction’s license revocation, a company at the center of a massive cannabis product recall in 2023.
Delta argued it had the absolute right to cure the violations, regardless of the number, seriousness or the type of violations, according to the decision issued by Commissioner Carole Iles of the administrative hearing commission.
Iles concluded state law does not grant Delta an absolute right to cure regulatory violations.
She wrote that nothing in state law suggests that voters intended “to grant a second chance to a licensee who has shown by its past violations that it lacks the requisite good moral character to conduct its operations legally, reputably, and with concern for the safety of the public foremost in its actions.”
In the future, Moore said the division is available to review any contracts, if licensees aren’t sure if they’ll be compliant.
“I know that we have to earn your trust,” Moore said, “but what I would like is for you to give us a chance to get to know us — get to know our expectations directly from us.”