Missouri cannabis business owners who have had their license revoked for violating state rules could be prohibited from getting another license under proposed rules announced by state regulators last week.
The Missouri Division of Cannabis Regulation released the draft of a massive overhaul of cannabis rules giving regulators more authority to address a range of issues, including predatory practices in the state’s social-equity cannabis licenses, product recalls involving hemp-derived THC and non-compliant owners obtaining other licenses.
“We have found over the years that there’s really not a lot of structure or authority in rule… for us to address individuals in ownership or potential ownership who have been found to be either violating regulations themselves or responsible for those who are violating rules,” Amy Moore, director of the division, told The Independent Friday. “We have found that that is a gap.”
Among the rule revisions, Moore said, is a requirement for businesses to have mechanisms in place to remove owners who are responsible for violating state regulations.
The changes cover so much ground, Moore said, because the division hasn’t made any rule alterations since the recreational marijuana constitutional amendment passed in 2022.
“It’s the things that we’ve learned over time,” she said, “and found it needed improvement or needed to be fixed. Hopefully we’re not missing anything.”
Aside from revisions, a brand new rule released Thursday would establish an unlimited number of research licenses to study cannabis in Missouri.
The public can submit the feedback on the division’s website until Aug. 21, and regulators will then review them and decide if they want to formally submit the rules to the Secretary of State’s Office.
Moore said if her team decides to move forward, they would like to do it “quickly.”
“If I thought, ‘Okay, we’ve solved everybody’s concern’…we could have it done in a couple weeks,” she said, “but we want to be sure that we are open to all the feedback and that we really consider it all.”
Delta Extraction case
Nearly a year after the state stripped Robertsville-based Delta Extraction of its license in November 2023, regulators approved one of the company’s co-owners — AJO LLC — to take over a cultivation and manufacturing facility in Waynesville in May 2024. It’s a far bigger operation than Delta Extraction, and it also involves several dispensaries as well.
Lisa Cox, spokeswoman for the division, told The Independent in May that the rules currently do not prohibit individuals who have had a license revoked from acquiring another license.
Moore said Friday that the new rules would give the division “a much better standing” to deny an application for a license for an owner who’s been noncompliant previously.
She hopes it gives licensees “fair warning” when choosing future business partners.
“That’s part of why these new rules are so important,” she said. “This rule gives them a big heads up that that’s not going to work out for them, and they shouldn’t make that investment and get themselves tied up with individuals who have had previous non compliance.”
It also establishes an annual review of ownership for every license.
In February, Delta lost its appeal to get its license back, with Missouri’s administrative hearing commission concluding it had a “corporate culture of lax compliance with regulatory requirements.”
The scathing 137-page ruling, issued by Commissioner Carole Iles, informed the revisions released Thursday, Moore said.
Iles agreed with the division that the company’s practice of bringing in hemp-derived THC concentrate from other states and adding it to Missouri-grown marijuana products was a violation of state law.
“What this is doing is clarifying what we believe has always been in our rules and I think the Delta Extraction order from AHC confirms that that is what our rules mean…” Moore said, “that all the THC and THCA and those types of compounds need to originate from cannabis grown in our licensed facilities.”
Microbusiness ‘fronts’
The microbusiness program, which was written into the Missouri 2022 constitutional amendment that legalized marijuana, was designed for the licenses to end up in the hands of disadvantaged business owners. The eligibility criteria includes disabled veterans, those with lower incomes and people with non-violent marijuana offenses.
Since the program began in 2023, the division has struggled to prevent what some legal experts have called “fronts,” or arrangements where the profits and ownership weren’t going to people that regulators had certified were eligible.
Of the 96 microbusiness licenses issued so far, regulators have revoked 34.
For the last two years, The Independent has documented the pattern of well-connected groups and individuals flooding the microbusiness lottery by recruiting people to submit applications and then offering them contracts that limited their profit and control of the business. A majority of the revoked licenses followed this pattern.
These kinds of agreements violate the constitutional requirement that the license be “majority owned and operated” by eligible individuals, Moore explained at a division town hall meeting in February.
“It is not sustainable to keep going through rounds of license issuance and then having to do rounds of revocations,” she said in February. “We’re never going to get this market fully built out.”
The division first released rule changes for microbusiness licenses in December. The draft released Thursday includes some of the feedback the division received this winter, Moore said, but retained the core elements.
The designated contact for a microbusiness applicant must still be an eligible individual contributing to the majority ownership of the microbusiness license. And any entity who was the designated contact for a license that was previously revoked for failure to comply with the ownership and operation requirements may not be allowed to be involved in any capacity in a future microbusiness application.
In order to prevent numerous revocations, the division is proposing to adjust when its extensive application-review period occurs.
“Those adjustments really clarify what we are actually accomplishing here, which is ensuring that these licenses are held by eligible individuals,” Moore said. “And I think everyone really should agree that that’s the goal. I think the language that they have now is better focused on doing that.”
