{"id":78716,"date":"2024-10-30T04:59:04","date_gmt":"2024-10-30T12:59:04","guid":{"rendered":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2024\/10\/30\/missouris-marijuana-regulators-concerned-about-predatory-practices-in-social-equity-licensing-program\/"},"modified":"2024-10-30T19:46:32","modified_gmt":"2024-10-31T03:46:32","slug":"missouris-marijuana-regulators-concerned-about-predatory-practices-in-social-equity-licensing-program","status":"publish","type":"post","link":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2024\/10\/30\/missouris-marijuana-regulators-concerned-about-predatory-practices-in-social-equity-licensing-program\/","title":{"rendered":"Missouri\u2019s Marijuana Regulators Concerned About \u2018Predatory Practices\u2019 In Social Equity Licensing Program"},"content":{"rendered":"<\/p>\n

\u201cWe put out quite a bit of education and warnings about predatory practices, because we know that is happening, and it\u2019s not just happening here in Missouri.\u201d<\/em><\/p>\n

By Rebecca Rivas, Missouri Independent<\/strong><\/p>\n

Cynara Velazquez became familiar with Michael Halow over the summer.<\/p>\n

Velazquez is an organizer with the California nonprofit called Cannabis Education Project that San Diego County hired in March to implement its social-equity cannabis program. The group largely helps people who were imprisoned for cannabis apply for a license to sell or grow marijuana.<\/p>\n

That\u2019s how her team met Halow.<\/p>\n

At one of the county\u2019s informational sessions, organizers saw Halow pass out business cards, she said, that led to an online form for potential applicants and looked identical to the application form used by the county.<\/p>\n

Halow or his brother Brandon would call the applicants, Velazquez later learned, and offer to help them navigate the system in exchange for 49 percent of the potential company\u2019s profits.<\/p>\n

\u201cWe called every single applicant,\u201d to warn them, Velazquez said in an interview with The Independent. But a few applicants, she said, had already \u201cfallen for the scheme.\u201d<\/p>\n

Then, she saw an article in The Independent last month about a Black disabled veteran who filled out an inquiry form to get a microbusiness license<\/a> in Missouri and ended up signing a contract with Halow. She claims she didn\u2019t realize the contract aimed to take full control and profits of the dispensary.<\/p>\n

\u201cWe said, \u2018Oh my God, these guys are even more insidious than we thought,\u2019\u201d Velazquez said.<\/p>\n

Since Missouri voters approved recreational marijuana in 2022, state regulators have used a lottery system to award 96 microbusiness licenses\u2014a program sold to voters as a way to help victims of the war on drugs get a toehold in the burgeoning cannabis industry.<\/p>\n

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.<\/p>\n

A majority of those 44 licenses 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.<\/p>\n

Halow, for example, is connected to more than 700 of the 3,600 applications submitted for Missouri\u2019s lottery since the program began. He\u2019s associated with 22 awarded licenses, but every one has been either revoked or was denied certification earlier this month by the Division of Cannabis Regulation.<\/p>\n

In all those October notices of pending revocation connected to Halow, the division stated the licensee entered into an agreement that would result in someone besides the eligible applicant \u201cbecoming an owner of this and 15 other microbusiness licenses.\u201d<\/p>\n

In total, groups flooding the lottery have made up about 1,400 of the 3,600 applications submitted since the program began, meaning they\u2019ve represented about 40 percent of what\u2019s gone into the lottery and come away with nearly 40 percent of the licenses.<\/p>\n

NAACP leaders in Missouri are calling it a \u201cpredatory attack\u201d on the state\u2019s social-equity cannabis program, which voters intended to allow marginalized or under-represented individuals to participate in the legal marijuana market.<\/p>\n

\u201cIf a Black license owner is not making the most money off the operation, then they\u2019re being robbed of the opportunity to create generational wealth,\u201d said Adolphus Pruitt, president of the St. Louis City NAACP. \u201cThat\u2019s what the microbusiness program is about. And that\u2019s what\u2019s being robbed.\u201d<\/p>\n

Division of Cannabis Regulation Director Amy Moore said her team shares the concern about predatory practices, and that\u2019s why the division previously issued warnings<\/a> to applicants.<\/p>\n

\u201cWe put out quite a bit of education and warnings about predatory practices,\u201d she said, \u201cbecause we know that is happening, and it\u2019s not just happening here in Missouri.\u201d<\/p>\n

By the time applications get to state regulators, \u201ca lot of agreements have been signed,\u201d Moore said. \u201cFinancial transactions have happened. So, I really appreciate that there are other voices also speaking up, so that some of that damage perhaps could be prevented and mitigated before we get to applications being submitted to a government agency.\u201d<\/p>\n

In an email to The Independent, Halow denied that his actions are predatory and says he\u2019s transparent with applicants he\u2019s worked with in \u201ca number of states.\u201d<\/p>\n

\u201cApplicants engage me for the same reason people hire tax preparers,\u201d Halow said. \u201cNavigating through government paperwork can be a daunting task in any situation. I am very proud of the resources and expertise I provide across the country\u2026\u201d<\/p>\n

Halow said the intake form on his website for San Diego was a \u201cmarketing tool,\u201d and \u201cit was not meant to mimic the county\u2019s official process.\u201d<\/p>\n

\u201cAs for the criticism regarding \u2018flooding the lottery,\u2019 it\u2019s important to recognize that more applicants is actually a sign of greater participation in a government program,\u201d he said, \u201cwhich is a positive outcome.\u201d<\/p>\n

By law, the state must award a total of 144 licenses to disadvantaged business owners. But there\u2019s not a definitive deadline to meet that goal, Moore said.<\/p>\n

Pruitt believes the division needs to re-evaluate the rules around the application process to \u201cfix the problem,\u201d even if it means a delay in issuing the next round of licenses. A short pause, he said, could also give the NAACP and other community leaders an opportunity to try to create pathways to business capital so business owners aren\u2019t as vulnerable to predatory practices.<\/p>\n

\u201cIt\u2019s a very simple question with a simple answer for me,\u201d Pruitt said. \u201cOr would you rather continue to try to catch everybody who\u2019s speeding?\u201d<\/p>\n

More than half not certified<\/strong><\/p>\n

The state issued its first round of 48 microbusiness licenses last year.<\/p>\n

These applicants were picked out of a lottery of 1,600 submissions, and then the division verified they met the basic qualifications\u2014which includes having a low income, a nonviolent marijuana charge on their record, being a disabled veteran or living in a low-income ZIP code.<\/p>\n

But getting the license is actually just the beginning of the verification process.<\/p>\n

The licensees must then pass through a rigorous 60-day investigation into all financial and operating agreements to make sure the license will continue to be majority owned and operated by an eligible person, as the state constitution requires.<\/p>\n

After the investigations last year, the division ended up issuing 11 notices of pending revocation.<\/p>\n

The licensees had a few months to respond to the division\u2019s concerns, but ultimately all six licenses connected to Halow were revoked\u2014along with two connected to a Michigan-based group\u2014because they couldn\u2019t prove the business would be run by an eligible person.<\/p>\n

The revocations were the division\u2019s attempt to prevent what some legal experts have called \u201cfronts,\u201d or arrangements where the profits and ownership weren\u2019t going to people that regulators had certified were eligible.<\/p>\n

\u201cMost people\u2019s reactions to our revocations was that it was a very strong move and was very clear why we did it,\u201d Moore said. \u201cSo it seems that that did not have as much of an impact as we hoped.\u201d<\/p>\n

In July, the division awarded another 57 microbusiness licenses. But after the 60-day investigation that ended earlier this month, regulators sent out 32 notices of pending revocation.<\/p>\n

Half of the 32 pending revocation letters went to licensees connected to Halow.<\/p>\n

But Halow\u2019s strategy is not unique. Neither are the results.<\/p>\n

Last year, The Independent revealed a Michigan-based company called Canna Zoned was recruiting people on Craigslist to enter Missouri\u2019s social equity license lottery<\/a> using contracts forcing them to eventually relinquish all control\u2014and profits.<\/p>\n

The company landed two dispensary licenses last October, and both were revoked earlier this year, though the company is appealing that decision.<\/p>\n

Despite those revocations, Canna Zoned was awarded another license through the July lottery, and once again received a notice of pending revocation this month.<\/p>\n

John Payne also received six notices of pending revocation this month for licenses where he serves as the designated contact. Payne led the campaign to legalize recreational cannabis in 2022 and is connected to nearly 500 applications and 12 licenses since the program\u2019s inception.<\/p>\n

But Payne has come under fire in recent months after The Independent revealed that for some applicants he\u2019d recruited eligible Missourians and had them sign a 47-page contract<\/a> that would ultimately give him and his partners 90.1 percent of profits and majority control of the business.<\/p>\n

Despite only owning a fraction of the business, under state law the applicants would bear the lion\u2019s share of the regulatory scrutiny. If they ever want to walk away from the deal, they would be required to pay a nearly $1 million fee.<\/p>\n

In addition to the six notices of pending revocation this month, three current licenses connected to Payne are under investigation by state regulators. According to case documents<\/a> for these three<\/a> cases<\/a>, the division questioned whether the eligible person who submitted the application will continue to be the majority owner and operator of the business.<\/p>\n

\u201cIt\u2019s certainly not in the best interest of individuals or in the interest of the program or the implementation of the law to be issuing licenses every round and doing notices of pending revocation for more than half,\u201d Moore said. \u201cSo yes, we are considering what changes we need to make.\u201d<\/p>\n

Notices tripled from last year<\/strong><\/p>\n

Roz McCarthy, CEO and founder of the national organization Minorities for Medical Marijuana, said it\u2019s troubling that the number of pending revocation notices the division issued has tripled from the first round of licenses a year ago to the second round this year.<\/p>\n

The division or a legislative committee, she said, should hold a public meeting to get feedback from residents and social-equity experts about how to address the issue.<\/p>\n

Missouri regulators are looking into several solutions, Moore told The Independent. However, many of them would require a change in the state\u2019s administrative rules\u2014and that would require a public hearing before a legislative committee for approval. It would also delay a third round of licenses, she said.<\/p>\n

Having applicants take an online training course that addresses predatory practices is among the possible new requirements, Moore said.<\/p>\n

\u201cThose kinds of front-end educational efforts, they\u2019re very good for individuals who are interested in them,\u201d Moore said. \u201cIt just probably would have to be one factor of a bundle of actions.\u201d<\/p>\n

Velazquez said San Diego County will now likely require eligible individuals to submit the application themselves, and not through a consultant in order to curtain predatory practices.<\/p>\n

Velazquez says she doesn\u2019t want California to follow in the footsteps of Arizona\u2019s social equity program\u2014where Halow\u2019s actions have also been criticized. Arizona Senate Majority Leader Sonny Borrelli, a Republican, spoke about Halow and other investors\u2019 impact on the state\u2019s program during a legislative committee hearing in February.<\/p>\n

\u201cWe now have here in Arizona,\u201d he said, \u201ca situation where 24 of the 26 of these social equity licenses are now fully controlled by companies or people who do not belong in these special groups to get this license.\u201d<\/p>\n

Borrelli proposed legislation to return these licenses to their original owners<\/a>, alleging private investors and cannabis corporations used predatory tactics to seize control of them. It passed the Arizona Senate but didn\u2019t make to a House vote.<\/p>\n

Social-equity cannabis programs nationwide, McCarthy said, largely aim to provide business opportunities for people who reside in highly-policed areas where cannabis has been criminalized.<\/p>\n

A contract where an applicant only gets 9 percent or no profits of the business is \u201cso unfair,\u201d she said.<\/p>\n

\u201cPeople will take our community\u2019s pain and then turn it around and create a business around it,\u201d McCarthy said. \u201cThey do it under the guise of equity, but it\u2019s a lie.\u201d<\/p>\n

32 notices of pending revocation<\/strong><\/p>\n

Microbusiness wholesale<\/span><\/p>\n

    \n
  1. Drama Dunes LLC, MBW000035<\/a><\/li>\n
  2. Cut the Grass LLC, MBW000037<\/a><\/li>\n
  3. Verdant Sun Journey LLC, MBW000039<\/a><\/li>\n
  4. Fallout170, MBW000040<\/a><\/li>\n
  5. Cobalt Start Voyager, MBW000041<\/a><\/li>\n
  6. Infinite Luck LLC, MBW000046<\/a><\/li>\n
  7. Blue Meanies, MBW000048<\/a><\/li>\n
  8. Andrew Venne, MBW000052<\/a><\/li>\n
  9. Platinum Craft, MBW000053<\/a><\/li>\n
  10. Travis Dickens, MBW000057<\/a><\/li>\n
  11. MicroLegacy, MBW000058<\/a><\/li>\n
  12. Clifton Cannabis LLC, MBW000060<\/a><\/li>\n
  13. MB Doinks LLC, MBW000061<\/a><\/li>\n
  14. Individual, MBW000063<\/a><\/li>\n
  15. Individual, MBW000065<\/a><\/li>\n<\/ol>\n

    Microbusiness dispensary<\/span><\/p>\n

      \n
    1. Millenium Retail LLC, MBD000020<\/a><\/li>\n
    2. Idyll Zone LLC, MBD000022<\/a><\/li>\n
    3. Individual, MBD000023<\/a><\/li>\n
    4. Premium Pack LLC, MBD000024<\/a><\/li>\n
    5. Green Oasis LLC, MBD000026<\/a><\/li>\n
    6. Individual, MBD000027<\/a><\/li>\n
    7. Captured Crescents LLC, MBD000029<\/a><\/li>\n
    8. Farm Fantasies LLC, MBD000030<\/a><\/li>\n
    9. Virgo Vermilio, MBD000031<\/a><\/li>\n
    10. Individual, MBD000032<\/a><\/li>\n
    11. The Chronic Club LLC, MBD000033<\/a><\/li>\n
    12. Potent Pals LLC, MBD000034<\/a><\/li>\n
    13. Pure Leaf Labs LLC, MBD000037<\/a><\/li>\n
    14. Xylo Gleam LLC, MBD000038<\/a><\/li>\n
    15. Euphoria Group LLC, MBD000039<\/a><\/li>\n
    16. Individual, MBD000040<\/a><\/li>\n
    17. Divergent Dancers LLC, MBD000041<\/a><\/li>\n<\/ol>\n

      This story was first published by Missouri Independent.<\/em><\/a><\/p>\n

      \n

      DEA Begins Selecting Witnesses For Marijuana Rescheduling Hearing, Inviting Industry Stakeholders And Prohibitionists To Testify<\/a><\/p>\n<\/blockquote>\n

      \n

      Photo courtesy of Chris Wallis \/\/ Side Pocket Images.<\/em><\/p>\n

      The post Missouri\u2019s Marijuana Regulators Concerned About \u2018Predatory Practices\u2019 In Social Equity Licensing Program<\/a> appeared first on Marijuana Moment<\/a>.<\/p>\n


      \n
      \nRead More:       Missouri\u2019s Marijuana Regulators Concerned About \u2018Predatory Practices\u2019 In Social Equity Licensing Program<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

      \u201cWe put out quite a bit of education and warnings about predatory practices, because we know that is happening, and it\u2019s not just happening here in Missouri.\u201d By Rebecca Rivas, Missouri Independent Cynara Velazquez became familiar with Michael Halow over the summer. Velazquez is an organizer with the California nonprofitContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":457,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[81],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/78716"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/457"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=78716"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/78716\/revisions"}],"predecessor-version":[{"id":78717,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/78716\/revisions\/78717"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=78716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=78716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=78716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}