Efforts to combat exploitative practices in Missouri’s cannabis industry have sparked a debate between state regulators and the Missouri Cannabis Trade Association (MoCann). While both sides agree on curbing predatory business arrangements, their approaches diverge significantly.
Proposed Rules Targeting Exploitation
Missouri’s Division of Cannabis Regulation recently proposed a set of rules to address what they describe as “predatory” financial practices within the state’s microbusiness program. These rules aim to safeguard the program’s core intent: to empower disadvantaged business owners, including disabled veterans, individuals with low incomes, and those with prior non-violent marijuana offenses.
Central to the proposed rules is the requirement that license holders maintain majority ownership and control over their businesses. Agreements that effectively strip them of this control, even if unexecuted, would be grounds for license revocation.
Andrew Mullins, president of MoCann, expressed support for curbing exploitation but raised concerns about the proposed guidelines’ implementation.
Industry Pushback on Licensing Measures
In a letter to regulators, Mullins argued that the proposed rules may overreach. He particularly criticized the revocation of licenses based on unexecuted agreements, stating, “If a contract is unexecuted, it is not an agreement at all.”
MoCann also highlighted ambiguities in terms like “exploitive exit fee” and “majority owned and operated,” urging regulators to provide clearer definitions.
A contentious suggestion from MoCann was to allow license holders to sell majority ownership immediately after issuance rather than waiting for their business to become operational. According to Mullins, this change would help microbusiness owners avoid financial pitfalls.
“Protecting microbusiness owners from their own decisions will only stifle the entrepreneurial energy this program was designed to foster,” Mullins warned.
Widespread Revocations and Investigations
The program’s challenges extend beyond regulatory proposals. Of the 96 microbusiness licenses awarded since the program’s launch, 41 have been revoked or are at risk of revocation. Three additional licenses are under investigation.
State regulators say many of the revoked licenses involved applicants recruited by third parties who flooded the lottery system. These applicants, often unaware of the terms they were agreeing to, were offered contracts that significantly limited their control and profits.
One example involves Michael Halow, a cannabis investor linked to more than 1,000 of the 3,600 applications submitted. Halow’s connections secured 22 licenses, all of which were either revoked or denied certification.
A Closer Look at Controversial Agreements
An investigation into one revoked license revealed troubling details. A Black disabled veteran claimed she unknowingly signed a contract giving Halow full ownership of her cannabis business. This case highlights the risks that the proposed rules aim to address but also underscores the challenges of balancing oversight with entrepreneurial freedom.
Striking a Balance
MoCann’s criticism of the proposed rules has added complexity to the debate. While regulators strive to protect disadvantaged business owners, the trade association argues that overly restrictive rules could inadvertently harm the very entrepreneurs the program was created to support.
Sami Jo Freeman, spokesperson for the Division of Cannabis Regulation, stated that the division is reviewing feedback from MoCann and other stakeholders before finalizing the rules.
The outcome of this debate will shape the future of Missouri’s cannabis industry, influencing whether the microbusiness program fulfills its promise or becomes mired in unintended consequences.