Missouri continues to face challenges in issuing new social equity licenses after the state’s Department of Health and Senior Services recently announced that 32 of the 57 microbusiness licenses awarded in July are possibly ineligible due to requirements surrounding residency and ownership.
The state’s Chief Equity Officer Abigail Vivas determined that the potentially ineligible applicants failed to provide adequate documentation to ensure ownership stakes, had a disqualifying felony, or failed to show that the proposed facility would be operated by an individual who is qualified for social equity status.
This lottery was the second of three proposed adult-use lotteries for social equity microbusinesses in the Show Me State. It was originally supposed to select at least 48 licensees split between the state’s eight congressional districts, with each district receiving two dispensaries and four wholesale businesses. The additional nine licenses were included to replace nine from the first lottery that were revoked following claims that out-of-state actors were improperly backing local social equity candidates.
Potentially predatory agreements from out-of-state investors continued to be a concern for the state in this second lottery, according to Lisa Cox, spokesperson for the Missouri Department of Health and Senior Services.
The applicants who were flagged as potentially ineligible have the opportunity to appeal that decision by providing more information to address any eligibility concerns, according to Cox.
“They have 30 days. But then we have to review and, in some cases, communicate back and forth to verify information provided,” she said.
Because of the amount of time that applicants will have to appeal or provide additional information, it will likely be a few more months before the state can announce their determinations on the 32 applicants in question, according to Cox.
Vetting continues after licenses awarded
The state awarded 57 licenses on July 24 to microbusiness applicants that had previously been selected in a June 4 lottery. After announcing the awarded licenses, the state then vetted the lottery winners to ensure that the majority stakes in these companies were held by individuals who were residents of the state and qualified for social equity status.
Eligibility for social equity status in Missouri includes an annual income of less than $250,000, disability status as a veteran, having or being related to someone with a previous cannabis-related conviction, or living in or having graduated from a census tract with high unemployment.
Within 60 days of license issuance, the chief equity officer is required to review and certify the winning applications. Following the review, only seven of 24 dispensaries and 18 of 33 wholesale licenses were deemed eligible, meaning that a majority of the 57 lottery winners may be disqualified, according to an Oct. 10 report.
In the first lottery, ownership and residency concerns frequently involved applicants who were possibly being taken advantage of by investors who were unable to qualify for social equity status themselves.
These concerns continue to persist, especially given the number of individuals who showed up on multiple applications, including those who won the lottery. According to state data:
- David Tucker was listed as the contact person for three different wholesale license winners. All three listed the same address, according to the CRB Monitor database. Tucker’s name is associated with at least 48 Missouri microbusiness applications, of which four were approved in this second round.
- It’s not clear if Sharena Tucker is connected to David Tucker, but she appeared on 45 applications.
- John Payne also made frequent appearances as the contact on a number of applications, including seven different businesses and many more unnamed individuals who also applied. He is associated with 10 licenses that were selected in the lottery.
- Danielle Popov appeared on 66 applications, of which two were selected. She was listed as senior manager.
- Michael Halow is associated with 57 applications, one of which was chosen in the lottery.
- Brandon Halow is associated with 92 applications, of which one was also selected in the second lottery. It is not clear if he is related to Michael Halow.
- Another dispensary license was issued to a company associated with Amanda Kilroe. She was associated with two of the licenses from the first lottery that were later revoked.
Regulators watching for ‘predatory practices’
Missouri held its first round of social equity microbusiness license lotteries last fall, with 48 winners selected. Of that total, nine were revoked four months after they were flagged. Eight of the revoked licenses were for dispensaries while the ninth was for wholesale.
At the time, Amy Moore, director of the Division of Cannabis Regulation within the state’s health department, warned about ownership agreements where it was not clear if the nominal applicant would actually retain control of their company after licensure.
“While owning and operating a license may include contracting for management services or consulting services, the lack of knowledge, control, agency or decision-making demonstrated by the individuals whose information was used to meet eligibility does not meet even the most generous interpretation of owning and operating a business,” she said in the March 27 statement.
When the Division of Cannabis Regulation began accepting applications for the second round in April, it warned applicants of “predatory practices.”
The state is planning to hold a third round of lotteries for microbusinesses but has not set a date for it. The number of available licenses will likely depend on how many are revoked from this second round.
