Throughout the year, Missouri’s cannabis microbusiness license program has been scrutinized for allowing outside investors to use predatory practices against Missourians looking to own a business within the market. The state and Department of Health and Senior Services (DHSS) Division of Cannabis (DCR) have taken the matter seriously.
Days before Christmas, the DCR announced that, after reviewing the recent round of licenses granted (48), the future of the microbusiness program will look a bit different—and asked the public for feedback before finalizing the change.
96 microbusiness licenses have been awarded to residents across the state; 41 of which have been or are on the verge of being revoked, and three are under current investigation. State law requires the microbusiness to be majority-owned by an individual who meets the DHSS’ qualifications listed on its website. But as contracts have been made public and word has spread, concerns have risen throughout the industry.
The department’s initial draft recognizes some of the discrepancies that may be causing the issues and would implement new rules where necessary.
For the first two rounds of microbusiness license distributions, the DCR has conducted a post-licensure confirmation process where they investigate each individual license to ensure that requirements are met and no foul play takes place. If the changes in this recent draft are approved, it would expedite an investigative process to be held before any license is granted while still conducting the post-licensure confirmation that Article 14 intends.
“Our rule revisions are essentially moving that investigative process that we were doing post-licensure into the application period,” Division of Cannabis Director Amy Moore says. “And the major benefit of doing that, if we are going to file these rules eventually, is that we will be doing that investigation before licensure, which means we may have some application denials, but by the time we issue licenses, we’ll be able to issue a full slate of compliant licenses and this market can be fully occupied and proceed with developing and getting operational.”
Moore believes that, in turn, this change would lead to more application denials and fewer revocations; However, this does not put an end to predatory investors targeting individuals across the state.
“All of those conversations and negotiations, we don’t know about until something gets filed,” Moore says. “So, I think, unfortunately, those things will probably continue, and that has impact on those individuals. But, from our perspective, what will be different is that hopefully we will be able to identify those non-compliant arrangements during the application period, likely have more denials than we have had in the past, but we should have fewer revocations.”
If this draft were finalized, another change would involve excluding any individuals tied to a revoked license from applying for future licenses.
“Under the draft, we do have a provision in there that is designed to keep out any bad actors,” she says. “If we as an agency make a determination that a particular individual is involved in one of these relationships, then they would not be eligible for a license after that.”
Additionally, the business must be majority-owned by someone who meets the requirements for receiving the license, meaning that they have full control over operations. This individual would be responsible for being in contact with the state, rather than a third-party consultant, which has been the case for many of the previous applications. On top of that, the department is requiring applicants to take an online course that would educate them on predatory practices within the space.
Moore and the department posit that this revised protocol for the Missouri microbusiness license program will help uplift the Show-Me State market.
“We think that improving this process and ensuring that, as the constitution directs us to do, these licenses are really going to eligible individuals that will allow this market with the people who are intended to benefit from this to finally get off the ground,” she says. “A market relies on the other members of the market. They need those other licenses. And so, it will benefit all of the eligible categories of folks that Article 14 clearly intended to benefit for us to get this process working the way it should, fill out that market, and let them start developing their businesses.”
Amendment 2 Consultants Founder John Payne is an outside consultant who would be affected by the rule changes. He currently has ties to six licenses that are at risk of being revoked and three that are under investigation. He believes the changes the department is attempting to implement will make the market even tougher to navigate.
“I agree with some of the intent, at least, what I perceive to be the intent of things in here,” Payne says. “But, if it were to go into effect as drafted, I think it would basically make the system unworkable.”
He looks back at how the marijuana market got up and running after medicinal cannabis was legalized, and he believes that the language used in the most recent draft is vague and counteractive.
“I know a lot of the medical licenses probably never would have been stood up if they did not have the capability to sell,” Payne says. “Basically, the position is there is no ability to sell it, and there is a very limited way in which they can raise money. I think, basically, the only people that would be able to put these things up would be people who are already quite wealthy, which is kind of ironic.”
Payne believes that the inability to sell the business would hinder the Missouri cannabis industry’s efforts to create jobs.
“Do you really have something if you can’t sell it?” Payne asks. “That is a part of what it means to own a thing, is that you have some ability to sell it. There’s always been rules and regulations around the selling of one of these licenses, whether medical or comprehensive, but the path existed, and to take that out would be a pretty dramatic and damaging thing for the people that it’s meant to help. If you can’t sell it, then, effectively, the monetary value of that license is zero.”
Payne thinks that if the current draft were to go into effect, what Missourians know about the microbusiness license program would be lost.
“If as written, I don’t know that the microbusiness system can work,” he says. “Maybe you could get some of the licenses open, but I would say you’re talking maybe 15 percent, maybe 20 that could open under these circumstances.”
He also says that he has seen a standstill among other eligible licensees getting underway and conducting operations because they have asked the DCR for guidance on what could potentially put their license at risk, and have yet to get a response.
“They get radio silence back for months,” Payne says. “They are specifically asking for guidance on how to do this compliantly, and no one appears to know. These new rules, as drafted, would make that problem worse. That said, this is only the first iteration of these proposed rules, so I’m hopeful that the division will work through a few rounds of feedback and get to a place where they can weed out the straw applicants without imposing an undue burden on everyone else. I absolutely agree that the applicants need to be true owners and actively involved with the businesses, but if there is not a clear and simple way for people outside the original ownership to invest and participate post-licensure, these licenses are going to languish.”
As far as his ties to possible revoked licenses and licenses under investigation, he says that he is merely the point of contact with no ownership stake.
“I do some compliance work with them on an hourly basis, but I have no ownership and nothing of that nature,” Payne says. “So the idea that I’m pulling the strings on any of these things is pretty silly to me.”
Moore says that the department is committed to reviewing the public feedback in a timely fashion in order to file the changes or release an updated draft before finalizing and filing.
Click below to read the February 2025 Issue of The Pitch Magazine:
The DHSS Division of Cannabis recently released a revision of rules for the microbusiness license program. Read More
