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Missouri cannabis consultant John Payne appeared on 329 social-equity license applications last year as the designated contact — the person who handles all communications with state regulators.
Amanda Kilroe, an attorney with the Michigan-based group CannaZoned, was listed on another 94.
Arizona-based cannabis investor Michael Halow is associated with at least a dozen designated contacts that were listed on about 600 applications last year.
The designated-contact role was envisioned as a way to ensure clear communication between the state and licensees.
Instead, state regulators believe many designated contacts have kept the actual eligible applicants in the dark about business and license dealings. Applicants get locked into agreements that limit their voting power and profits in the business, calling into question who actually stands to reap the rewards of the booming industry.
The Division of Cannabis Regulation labeled these arrangements “predatory” and set out to root them out of the program. Among its main weapons is a set of proposed new rules around who can be listed as a designated contact.
“These revisions are intended to ensure microbusiness licenses are issued to eligible individuals… and to address the trend of predatory arrangements in microbusiness licensing,” the division said in a press release announcing the proposed changes. “Specifically, these draft rule revisions should mitigate the ongoing efforts of ineligible entities to acquire licenses by taking advantage of eligible individuals.”
(Department of Health and Senior Services)
According to the state’s annual report on the microbusiness program released last month, 68 designated contacts appeared on multiple applications, making up 74% of the 2,083 applications received in April.
Applicants must provide a designated contact, and currently it’s not required to be an individual in the ownership structure. It could be an attorney, consultant or any other “responsible” person.
The state wants to change that.
Among the new proposed cannabis rules include a requirement that the designated contact for a microbusiness applicant be an eligible individual contributing to the majority ownership of the microbusiness license.
Additionally, any entity who was the designated contact for a license that was previously revoked for failure to comply with the ownership and operation requirements will no longer be allowed to be involved in any capacity in a future microbusiness application.
Payne did not respond to The Independent’s request for comment.
Jeffrey Yatooma, president of CannaZonedMLS, said the proposed changes reflect a “fundamental misunderstanding” of the support that some social-equity applicants need.
“The assertion that these partnerships are somehow ‘predatory’ mischaracterizes the reality of the situation,” Yatooma said in an email to The Independent last week.
Halow said that he provides assistance to applicants who need it most because he has the resources, knowledge and expertise to do so.
“These are often people without generational wealth or experience as an entrepreneur,” he said, in an email to The Independent last week. “They open businesses in neighborhoods in need of jobs and economic opportunity. They have the drive. We have the resources to provide a path to prosperity. These aren’t the acts of a predator.”
Ever Eco LLC
When Destiny Brown won a microbusiness license in 2023, she initially didn’t have any contact at all with Missouri’s cannabis regulators.
Phoenix-based cannabis consultant Maxime Kot did — a woman Brown says she never met nor spoke with.
That’s what Brown told cannabis regulators in a March interview, right before they revoked her license.
Brown learned about Missouri’s microbusiness program from a website organized by Halow, where she stated she’d like to run a dispensary to help veterans like herself.
She told regulators that Halow’s brother responded by calling and requesting documents, including her driver’s license and veterans disability paperwork. He asked her to sign several agreements that she thought were outlining how the business would be run and that she would be paid $200,000 to do it.
She didn’t realize that the documents would give away ownership of the company to Halow after the license was issued.
She also didn’t know about Ever Eco LLC, which is the business the microbusiness application was filed under.
According to the state’s response to Brown’s appeal in April of the license revocation, Ever Eco is an Arizona limited liability company formed on July 23, 2023. At the time of filing, Halow was listed as the sole member and manager of Ever Eco.
A month later, and after the application was submitted, Ever Eco’s articles of organization were amended to remove Halow as the sole owner and operator, replacing him with Brown.
Kot was listed as the designated contact for the license, as she was for more than 400 other microbusiness applications that year and that are associated with Halow.
Five licenses were awarded last year, and each was eventually revoked.
According to documents filed in these license appeal cases, the state found the purported owners — who met the program’s eligibility requirements — “had limited to no knowledge or understanding of details within the agreements or operations of the license.”
“While owning and operating a license may include contracting for management services or consulting services, the lack of knowledge, control, agency, or decision-making demonstrated by the individual used to meet eligibility does not meet even the most liberal understanding of owning and operating a business,” according to the state’s responses in the five licenses’ appeals.
These revoked licenses — Potluck THC, Joke Smoke SE LLC, Herbal Home LLC, High Aroma LLC and Cannarooted LLC — are making their way through the Administrative Hearing Commission’s appeal process. A hearing is expected later this year.
Ever Eco’s appeal was dismissed in October because Brown wasn’t able to obtain a Missouri attorney to represent her.
The state is scheduled to question representatives from the five licenses connected to Halow under oath on Feb. 7 regarding nearly 20 topics of the business arrangements and ownership structure.
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“}]] New rules target the middlemen in the Missouri microbusiness cannabis industry, which regulators believe engage in predatory behavior. Read More
