Missouri Proposes New Rules to Address Predatory Practices in Cannabis Microbusiness Program
Missouri’s Division of Cannabis Regulation has unveiled proposed rule changes aimed at curbing predatory practices in the state’s marijuana microbusiness program.
OG Article: here
View our Fair Use Policy: here
Watch the Commentary Here
The draft regulations, released Monday, are open for public comment before being submitted to the Secretary of State’s office on January 6.
“These revisions are intended to ensure microbusiness licenses are issued to eligible individuals and to address predatory arrangements in microbusiness licensing,” the division stated in its press release. “The proposed changes aim to prevent ineligible entities from exploiting eligible individuals to obtain licenses.”
Background on Missouri’s Microbusiness Program
Approved by voters in 2022, Missouri’s recreational marijuana law included a microbusiness licensing initiative designed to provide opportunities for individuals impacted by the War on Drugs. However, out of the 96 licenses awarded thus far, 41 have been revoked or are at risk of revocation, and three more are under investigation.
Many of these cases involve contracts where eligible applicants were recruited to apply but were later restricted from profits and decision-making authority. Legal experts have criticized such arrangements as unfair and inconsistent with the constitutional requirement that microbusinesses be “majority owned and operated” by eligible individuals.
Key Proposed Rule Changes
To combat predatory behavior and safeguard the program’s intent, the division is proposing several adjustments:
Ownership and Control Requirements:
The designated contact for each application must be an eligible individual with majority ownership and operational control of the business.
Eligible owners must have decision-making authority, including the ability to manage operations, enter contracts, and direct policies.
Application Restrictions:
Individuals connected to revoked licenses for violating ownership rules will be prohibited from participating in future applications.
Applications involving such individuals will be automatically denied.
Training and Direct Communication:
Applicants must complete an online training course on predatory practices.
Applications must be submitted directly by eligible individuals, eliminating intermediaries who may act as "designated contacts."
While these changes may slow the program’s rollout, supporters believe the safeguards are necessary. Adolphus Pruitt, president of the St. Louis NAACP, compared the changes to enforcing traffic laws, saying, “Would you rather prevent speeding or try to catch everyone after they’ve broken the law?”
Revocations Highlight Predatory Practices
Missouri has conducted two license lotteries, issuing 48 licenses in the first round and 57 in the second. Applicants had to meet criteria such as low income, prior nonviolent marijuana offenses, veteran status, or residence in low-income areas.
However, licenses are not finalized until applicants pass a 60-day review of their financial and operational agreements. Last year, 11 notices of pending revocation were issued, leading to the cancellation of six licenses linked to cannabis investor Michael Halow and two tied to a Michigan-based group. Another 32 revocation notices were issued following the second lottery, with half targeting Halow-related licenses.
The state plans to issue 144 licenses through three lotteries, with no set deadline for the final round.
Allegations of Exploitation
Reports of predatory contracts have further fueled scrutiny of the program. Michigan-based company Canna Zoned allegedly recruited applicants through Craigslist and used contracts stripping them of control and profits. Two of its licenses were revoked, and a third faces potential revocation.
John Payne, a cannabis consultant and advocate for legalization, is also under investigation. Payne reportedly recruited applicants and had them sign contracts awarding him and his partners 90.1% of profits and control. Despite these arrangements, applicants faced the bulk of regulatory scrutiny and penalties, including a nearly $1 million fee to exit agreements.
Payne has received six revocation notices, and three additional licenses tied to him are being investigated.
Community Concerns
Missouri NAACP leaders have condemned these practices, describing them as an attack on efforts to empower marginalized groups.
“If a Black license owner isn’t benefiting most from their business, they’re being robbed of the chance to build generational wealth,” said Pruitt. “That’s what the microbusiness program was designed to provide, and that opportunity is being stolen.”
Looking Ahead
As Missouri works to finalize its microbusiness licensing rules, public input will play a critical role in shaping policies to protect applicants and uphold the program’s original intent. State regulators remain committed to ensuring fairness and preventing exploitation as the cannabis industry continues to grow.
Comments