On Wednesday, Aug. 21, Canada’s province of Ontario announced the winners of their cannabis retailer lottery, deciding on 43 names out of just about five,000 entrants. Predictably, drama ensued.
1 of these fortunate 43 lottery selections is linked to an infamous illegal dispensary address. In truth, the lottery winner seems to be a component of the similar dispensary chain exactly where Toronto city crews recently place up enormous concrete barriers in front of 4 retailer places. If the address connection proves appropriate, then a “bad actor” (in the eyes of the government) is becoming awarded a coveted chance to apply for a dispensary license thanks to the sheer randomness of a lottery technique.
But so goes the planet of cannabis company permits. Here’s a rundown of the pros and cons of the two most typical processes — application processes and lottery systems — that folks are going via to develop, manufacture and sell marijuana on the legal marketplace. Then, we dive into the totally free-marketplace option that Oklahoma is experimenting with, and what it could imply for a easier permitting resolution.
The Rigorous Cannabis Permit Application Approach
We reached out to a single of the nation’s major authorities on cannabis licensing, Brian Vicente of Vicente Sederberg LLP, to clarify why the merit-primarily based application method is so prevalent in new cannabis markets. The law firm has helped folks in 28 states and other nations get permitted to take component in the cannabis business. Vicente leads the firm’s licensing division personally.
“I would say your most typical type of licensing is in all probability your merit-primarily based licensing,” Vicente told Cannabis Now. “We just saw it in Missouri. They got two,100 applicants on Monday for their restricted licenses.”
Vicente says a single of the primary pros of a merit-primarily based technique is you are going to finish up with properly-organized fantastic actors.
“You’re placing them via a extremely intensive screening to get these people via the door,” he mentioned.
The cons are that it is finding increasingly hard to win these contests. Vicente believes only actually deep-pocketed people have a shot any longer mainly because each and every component of the method is so intensive — and high-priced, from the charges most applicants have to spend to lawyers and consultants like him.
“You’re going to devote a couple hundred thousand dollars to make a winning application,” Vicente mentioned. “If you are not a wealthy particular person, specially if you are a particular person that is been disproportionately impacted by the war on marijuana, you generally do not have these sources.”
NCIA Media Relations Director Morgan Fox told Cannabis Now that merit-primarily based systems lead to accomplishment for larger organizations.
“The ranked choice technique can theoretically outcome in a greater-high quality regional marketplace, but tends to be weighted in favor of larger and a lot more established organizations, even even though they may well not be the finest match for the neighborhood,” Fox mentioned.
The Risky Cannabis Permit Lottery Technique
Vicente went on to say lottery systems are not as typical, however. He pointed to Arizona’s 2020 ballot language as proof lottery systems are on an upward trend. The lottery will be for new licenses just after current health-related facilities transition into the adult-use marketplace. Vicente says a single lottery technique pro is the applicant pool can be a lot more economically diverse.
“If you win the lottery, you win the lottery. It does not matter if you have $10 million or $100,” Vicente mentioned. “The other pro with the lottery technique is there is going to be much less lawsuits.”
Vicente says with the two,100 folks applying in Missouri, “believe me, some of these folks that do not win are going to sue. They’ll say that the merit technique was rigged or wasn’t fair. We’ve observed that.”
In just about each and every state that has made use of a statewide merit-primarily based technique, Vicente says he’s observed lawsuits from applicants who lost. These lawsuits can expense the state income, and potentially slow down general implementation.
“You just do not see that in litigation about lotteries mainly because there is not as a great deal subjectivity,” Vicente mentioned.
As for the cons, Vicente says with a lottery you can absolutely finish up with folks that are not going to be the finest company operators.
We asked how generally folks winning lotteries are a lot more most likely to pull a bait-and-switch, promoting the permits and cashing out?
“I believe it is a lot more typical for folks to then flip the lottery licenses,” Vicente replied, “although there hasn’t been a ton of lottery systems across the nation.”
Fox told Cannabis Now that neither the merit-primarily based application technique or lottery technique is terrific, mainly because each impose an artificial cap on the quantity of licenses provided out.
“The lottery technique is fair in that as extended as all applicants meet specific baseline specifications, they all have an equal shot at finding a license,” Fox mentioned, “but fantastic applicants who worked actually challenging to place collectively the finest probable submission may well get beaten by somebody else who submitted the bare minimum and will not necessarily be the finest operator.”
The Unrestricted “Check the Box” Technique
Vicente says the third sort of licensing technique is just the “check the box” license. He pointed to Oklahoma as an instance exactly where any individual with the charge, a clean record and a home could get a license. The marketplace will choose its winners.
“Those are the 3 primary sorts and it is however to be determined which is the finest. My rank preference would be ‘check the box’, then merit, then lottery. I believe there are pros and cons on all of them,” Vicente mentioned.
Kris Krane, who has been involved with cannabis reform for 20 years and now serves as president of multistate operator 4Front, says there are arguments to be created in favor of every technique.
“In basic, I believe there is an argument to be created no matter whether you want restricted licenses or limitless licenses and just let the marketplace choose,” Krane told Cannabis Now.
Krane thinks that is a lot more of a query for states than municipalities. He thinks states can set a fairly higher bar for competency. So he sees the argument that with the level of competency expected from every operator, there is not a have to have for limits on total permits.
Krane mentioned it is a lot more affordable for municipalities to set limits as to not be overrun with cannabis firms. He mentioned when you choose on no matter whether there is going to be a cap or not on the licenses, you can get into the merits of the processes to establish the winners.
The “Qualified Lottery” Answer?
Vicente, Fox and Krane all pointed to some sort of certified lottery as the resolution.
“I believe primarily based on what we’ve observed about the county, the finest technique is a heavily certified lottery,” Krane mentioned. “You do not want a lottery exactly where any individual can just fill out a type and potentially win a license.”
Krane says what takes place in these circumstances is you finish up finding unqualified folks winning licenses, folks undercapitalized finding licenses, “and so they get licenses but they do not finish up finding open.”
Krane says the dilemma with going in a a lot more restrictive merit-primarily based path is you finish up with the legal challenges cited by Vicente.
Fox agrees: “The best method would be to get rid of license caps altogether, grant licenses to each and every applicant who meets the criteria, and let the marketplace sort out the rest.”
Cody Bass — an NCIA board member and city council member in South Lake Tahoe, California — also weighed in on the debate. “Cities have to have to produce zoning for cannabis which will limit the quantity that can exist in a city,” he mentioned. “They can produce language about saturation as properly. Then the totally free marketplace decides who, exactly where, and when.”
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