Getting your foot in the door as an owner of a licensed cannabis facility in Missouri is a lengthy process: the requirements, regulations, qualifications, and overall extensivity is unlike starting any other business.
There are already many well-known facilities around the state that have been standing since medical marijuana was legalized. But the the structure of the Missouri cannabis market allows a slim number of individuals each year to take their shot at owning and operating a certified facility through microbusiness licenses.
According to the Department of Health and Senior Services (DHSS) website, “the intent of a microbusiness license as a cannabis business that will operate on a smaller scale than medical or comprehensive licenses and that the majority owner(s) must meet certain and specific qualifications to be eligible. In addition, a microbusiness license is designed to provide a path to facility ownership for individuals who might not otherwise easily access that opportunity.”
So how does one get said microbusiness license? Well, applicants are selected through a random lottery draw, conducted by The Missouri Lottery. Once a year, the DHSS reviews the randomly selected lottery winners, declaring 48 microbusiness holders across the eight state districts—six licenses in each district.
In October 2023, the state awarded the first 48 winners, and this past June, another 57 individuals were granted access, with an additional nine included due to revocations from the previous round.
There are two separate microbusiness licenses that people can apply for—dispensary and wholesale. The major differences between the two certifications are that wholesale license holders have access to cultivate and manufacture cannabis, allowing them to sell and deliver the product to other microbusiness dispensaries, other wholesales, and testing facilities, while dispensary license holders may acquire products and sell them to consumers or testing facilities.
While the lottery winners are selected at random, there are eligibility requirements that must be met, which the DHSS reviews after winners are selected. If a winner does not meet the requirements, the department will move on to the next randomly selected individual.
The DHSS’ website outlines that the business must be majority-owned by an individual or individuals who meet at least one of their five requirements. These requirements consist of being considered low-income, having veteran status, having been affected by the war on drugs, residing in a low-income ZIP code, or having graduated from an unaccredited school district.
Simply looking at the pen and paper, these requirements seem like a great way to ensure that oppressed individuals have the ability to receive a microbusiness license. However, there are loopholes within the system that ultimately cause more harm than good to people who already have it rough.
Individuals must pay a $1,500 application fee to apply for the microbusiness—a steep charge for most who meet the eligibility requirements. With around 2,000 applicants in the 2024 lottery, asking someone to shed $1,500 for a slight chance (about 2%) at being randomly chosen to obtain the license is likely not an option. Do the math, and the state has made millions of dollars off of applications alone.
With the pricey application fee and simply just a lack of education in terms of the process to receive the license, applicants could use a partner who will help take care of some of the early groundwork to help get the business on its feet. That is where outside investors come in.
Whether in-state or out, the most recent round of lottery winners shows that the majority of applicants and winners have licenses tied to a few major players in the Missouri industry. One name that has appeared on over 300 applications—winning a total of 6 licenses—is John Payne, founder of consulting group Amendment 2 Consultants.
Payne has also been a member of multiple boards for MoCannTrade since 2018, helping spearhead the structure for recreational marijuana in the state. Now, he has been attempting to claim a stake in the industry through partnering with applicants.
Payne tells The Pitch that he and members of MoCann were part of the drafting committee for the structure of recreational marijuana in the state, having the power to set the number of new licenses being awarded each round, while the state and DHSS establish the regulations and overall structure.
“We set the number of licenses in the drafting process, what they can do, and then the qualifications for who can apply,” Payne says. “That’s really the kind of foundational stuff that’s in the amendment. And then, from there, exactly how the application works, exactly how they’re issued, all that stuff is kind of up to the regulator in terms of how those are structured.
Payne tells The Pitch that he and his consulting agency proposed three different styles of contracts to individuals who may be interested in starting a business in the field—a micro service agreement, an option agreement, and a sponsored applicant agreement.
He says over 200 of the 300 or so applications where his name appears are merely him acting as the point of contact for applicants, allowing them to focus on other things while he manages calls in a timely fashion.
“You pay me to be the point of contact, or to put the application together and be the point of contact listed with the department. Because whoever’s listed as the point of contact for these things, they will get deluged with calls from people trying to sell them grow lights or whatever. And I’m not saying some of those can’t be good, but, a lot of it’s spammy. A lot of it’s not good. So, it’s good to have a filter for that and also just be the point of contact for DCR (DHSS Division of Cannabis Regulation); someone whose job is to pay attention to those emails coming in, or phone calls coming in, and respond within the timeframe that is allowed, so that person, the licensee, does not have to pay attention to that at all times, and has someone that kind of filter those things.”
He claims that most of the applicants that he has connections to in this recent lottery used the microservice agreement to help individuals apply for the license at prices ranging from $500 to $3,000. Payne says that the option agreement is intended for individuals who do not want to pay any costs upfront, but are willing to take on primary responsibility of financing and operating the business. In turn, Payne and his business partner take ownership of 19.8% of the license. These two agreements do not seem to raise eyes for concern, but the sponsored applicant agreement has what some professionals in the space claim as “predatory practices.”
In July, The Missouri Independent gained access to one of Payne’s sponsored applicant contracts, where they had multiple legal experts review the information. There is a consensus among the legal experts that this specific template of Payne’s sponsored applicant agreement—which he claims was drafted out-of-house—is an attempt to prey upon already marginalized individuals and ultimately enrich him and his business partners.
As stated in the contract, the applicant would receive 9.1% of the business from the get-go, and would ultimately have responsibility to pay Payne and his partners $1 million if the contract was ever breached.
Payne refutes claims of his contracts being predatory, telling The Pitch that the other 90.1% is “basically reserved for raising money.” He also says that the 9.1% is a minimum granted to the applicant, with the ability to have upward mobility in owning the business.
“That’s the minimum,” he says. “If you want to do the bare minimum required by rule and contract, that’s what you would get under that agreement. But, if you want to be more actively involved, take on more of the sweat equity roles, if you want to bring money to the table, that can go up. This is consistent with what most businesses of this type give to their CEOs for leading the company.”
Payne claims that many of the applicants that he has partnered with are close friends or have mutual relationships.
“My rule was that I wouldn’t go more than one degree of separation from someone I really trust,” he says. “If a good friend of mine said they knew someone who would be interested and vouched for them, I was good with that. I trust my friends with my life—and vice versa—so if a friend speaks for someone, I go with it. But, we weren’t trying to get random people. I don’t want to be in business with someone that I don’t have a decent foundation for trust with.”
One of these friends that Payne decided to partner with is Ryan Heuiser—a childhood friend who owns an overhead door company in Poplar Bluff. Heusier says that he and Payne agreed on a sponsored applicant contract. Heusier is eligible for a microbusiness license due to a prior conviction for possession of marijuana.
“As far as the individual percentages, I’m not real savvy,” Heuiser says. “My wife, John, and I all sat down, and I’m not great with numbers in that regard, nor is my memory really great. One thing that I do remember is the contract is negotiable. As far as if you were awarded a license, you know that really nothing set in stone.”
Heuiser believes that Payne’s partnerships in the cannabis space are ultimately to help uplift the line of work as a whole in the state.
“I do trust that he is invested in the business to begin with, just in that industry, but also in a sort of symbiosis, something that is not only good for him, but something that benefits the people who were previously affected adversely to sort of help them access the restitution that is due to them. A lot of times, you might have people, like myself, while I have knowledge of what’s going on with legality and everything with legalization, I still don’t have the funds to be able to do that,” he says.
Heuiser says that he had and still has full faith in Payne in his future cannabis endeavors and believes that “anyone in the state of Missouri” looking to get involved in the industry should do so through partnering with Payne.
“I trust John Payne deeply. I’ve known him for a very long time, and I know him to be a good moral character. He’s just a good guy. He’s somebody who I trusted to be able to negotiate those business dealings and license red tape and things like that, without me really having to fully understand it. In most instances, I would have my attorney involved in all of that. And with John Payne, I really didn’t find that necessary,” Heuiser says.
“Anybody that I knew here locally in our hometown who was in any way interested in that industry, I actually actively worked to try to partner them with John Payne, because I believe in his ability that much,” he says.
Payne says that although he does not have any ill intentions, he thinks that there are malicious practices taking place within the Missouri cannabis industry, stating that other outside investors are already attempting to turn a profit by selling out on their Missouri cannabis microbusiness license that was obtained in the most recent lottery.
“There are people who go into this without any intention of operating the business, and that is contrary to the intent of the amendment.,” he says. “And I’m not talking about someone who applies, wants to operate, and then runs into real challenges in doing so, or their circumstances change to make it impossible. That happens, and you can’t blame people for that. But, if the whole goal is to just acquire licenses and flip them, I strongly believe the rules should be tightened to more proactively prevent those practices.”
When asked if his approach to partnering with applicants was a way to help save individuals from encountering these predatory practices, Payne says, “That’s correct.” He looks back at when he helped applicants secure licenses during medical marijuana processes, which were merit-based, claiming that he and his partners were fully onboard with helping get the business on its feet and operating.
“Every single one at the time, they got open, they got operational, we helped them with that. We did not partner with people that did not intend to operate. It’s just not something that we were interested in doing,” he says.
Payne thinks that the values of the program structure are in the right place, focused on helping oppressed communities get their foot in the door. But he believes that there are discrepancies within the structure that limit potential license holders.
“What I don’t think is helpful to the people that win these licenses is permanently, basically limiting the market of who they could sell the business to, because if you can’t sell your business, it’s not really worth anything. I mean, it’s worth the revenue that you’re getting off of it, but people want to be able to exit a business at some point. And if the only way you can do that is to sell somebody who meets one of those criteria, well, you’re probably excluding 70 or 80 percent of your potential buyers, perhaps more,” he says.
He thinks that the state should instead make the eligibility requirement last for the first few years of beginning the business before anyone can step in to buy them out.
“The way this works in some other states, and the way I thought the department would interpret this, or should have interpreted this, is that it should have been okay for the first two or three years. You have to maintain that structure, and then after that, you could sell it to whomever you want. I think that would be reasonable,” Payne says.
The Missouri Independent has remained steadfast on the topic of these issues within the industry, naming other key players as possible threats to the system.
Since the news broke, investigations by the DHSS have been underway, in which multiple licenses are at risk of being revoked.
Three of the six winning licenses that Payne’s name is tied to are currently under investigation.
“The strongest action currently available to us by Constitution and rule is to revoke any licenses that are not owned and operated by eligible applicants,” DHSS Division of Cannabis Regulation Director Amy Moore said via email. “We have taken that action in both rounds of microbusiness licenses. In addition to this, we have issued press releases and guidance and offered education to applicants regarding how to recognize predatory practices that can be a risk to the applicant and to the license. Finally, in the most recent round of applications, we instituted new processes to try to confirm that an eligible applicant was actively involved in the application period. While we do not have direct access to potential applicants who may be solicited even from other states, we are using every avenue of communication to alert potential applicants to the law, rules, and expectations of this program.”
“A lot of different applicants who have used different consultants and attorneys with a great deal of experience working in the Missouri industry are being told that agreements that have been standard practice for medical and comprehensive licensees are not allowed for micros, and DCR isn’t telling anyone what they consider to be a compliant way for people to actually buy into these businesses, Payne says.
“The problem with that is that if there are people who want to operate, they do want to partner with the people that applied, and they bring money to the table—which you need money. If there is not money brought to these, they’re worthless. They are absolutely worthless. You probably need at least half a million, maybe closer to a million, to get a dispensary. Cultivation, to do it really well, you’re probably looking at more like two to three million.”
Payne believes that the current model for obtaining the micro business license is failing, and must be reevaluated with more transparency by the department.
“There has to be a way for people to invest in these businesses, and, right now, I don’t think anyone knows what will actually pass muster with DCR. It’s really perplexing because the biggest hurdle all these groups face is access to capital, and if prospective investors have to worry that any agreement they make with a licensee can form the basis of revoking the license, they will move on to other opportunities, he says.
“This is already a niche within a niche when it comes to raising capital and providing expertise. Right now, it seems like there is a concerted effort by people who have no idea what it takes to run these businesses to prevent anyone who does from working with these licensees. That’s an absolute recipe for disaster for this whole program, so I certainly hope DCR clarifies what they want applicants and licensees to do, because it’s about as clear as mud at the moment.”
Outside of revoking possibly predatory licenses and spreading awareness of the issues, the department says that there is no other way to help assist those who already may have ties under legal binding.
“Other than revocations, which may prevent additional harm in predatory relationships, we do not have authority applicable to the impacts of these actions. This is why we are investing resources in education and other resources to warn potential applicants of the danger,” Moore said via email.
Moore says that she is unable to speak on specific investigations, such as John Payne’s contracts.
“Of course, I am also aware Mr. Payne was involved in passing the constitutional amendments related to cannabis and that he is connected to some of the microbusiness licensees subject to ongoing investigation or pending revocation,” she said via email. “I would not be able to discuss the details of any of those ongoing investigations, including the individuals involved.”
The investigation process for Payne’s and other possibly “predatory” investors’ contracts will most likely be ongoing for several months. Remain up to date with the latest developments by the department on their website.
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