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Missouri Cannabis Regulators Introduce New Rules to Combat Predatory Practices in Microbusiness Licensing

Missouri’s Division of Cannabis Regulation is taking decisive steps to address ongoing concerns over predatory practices within its marijuana microbusiness licensing program. On December 23, 2024, the division unveiled proposed rule changes aimed at safeguarding the integrity of the program and ensuring it benefits those it was originally intended to help—victims of the War on Drugs.

Fighting Back Against Exploitative Contracts

The new rules come in response to a troubling trend where ineligible entities, including large operators and consultants, have been taking advantage of the microbusiness program. Under the current lottery system, 96 microbusiness licenses have been awarded since Missouri voters approved recreational marijuana in 2022. The program was designed as a social equity initiative to give marginalized communities, particularly those affected by drug convictions, an opportunity to enter the cannabis industry.

However, many of the 96 licenses granted have been linked to exploitative contracts that violate the program’s intent. These contracts often involve consultants or companies that recruit eligible individuals to apply for licenses, only to offer them deals that severely limit their control and profit share in the business. As a result, over 40 of the licenses have already been revoked or are at risk of revocation.

In response, the division is proposing several changes to prevent these predatory arrangements. These changes aim to ensure that licenses are granted to truly eligible individuals, without interference from ineligible parties seeking to exploit the system for financial gain.

Missouri cannabis industry

Key Changes to Licensing Process

The new proposed rules, which will be reviewed by the public before being submitted to the Secretary of State’s office in early January, include several key adjustments to the licensing process. A major change would be to redefine the ownership and operational control required for an individual to qualify for a microbusiness license.

  • Clear Ownership Requirements: The division’s revised rules would ensure that applicants have “majority ownership and operational control” over the business. This means eligible individuals must have the authority to make decisions on behalf of the business, including entering into agreements and directing the management of the license.
  • Designated Contacts: Another significant change would require the designated contact for any microbusiness applicant to be an eligible individual with majority ownership. Any business tied to a revoked license due to ownership violations would be ineligible to apply for future licenses.
  • Training on Predatory Practices: To further safeguard against exploitation, applicants will be required to take an online course addressing predatory practices. This course will ensure that they fully understand the rules and the consequences of entering into unfair contracts.

These changes are designed to ensure that the microbusiness licenses go to individuals who can genuinely benefit from them, without the interference of outside parties who may seek to use the program as a stepping stone to profit without contributing to the growth of the business.

The Growing Need for Change

The new regulations come after months of scrutiny over the fairness of Missouri’s marijuana microbusiness program. Investigations into the lottery process have uncovered several disturbing trends, including the prevalence of contracts that effectively rob eligible individuals of their rightful share in the businesses they are supposed to help run.

A report from June 2024, authored by four legal experts, found that a particular contract circulating within the industry was overwhelmingly unfair to the eligible applicants. All experts agreed that state regulators should reject any license tied to such a contract because it violated the state’s constitutional requirement for applicants to have majority ownership and operational control.

The changes proposed by the Division of Cannabis Regulation are seen as a necessary step to restore trust in the program and ensure that the cannabis industry does not become another avenue for exploitation.

Looking Ahead

While these changes are significant, the process is far from complete. Missouri regulators will continue to accept public comments on the proposed rules, with a final version expected to be submitted in early January. As the state moves forward with its cannabis regulations, these new rules are just one part of an ongoing effort to make sure the marijuana market remains equitable and accessible to those who have long been excluded.

As the cannabis industry grows, so too will the scrutiny of how it is regulated. Missouri’s regulators are taking a firm stand against the exploitation of their microbusiness program, but time will tell if these new rules will be enough to prevent further abuses in the future.

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