Missouri's Cannabis Lottery, Licensing & An Investigation

The visionary idea of social equity is to create an opportunity of fairness, justice, and equality within the cannabis industry. In other words, social equity programs are subliminal “reparations” for the minority communities that suffered the damages from the failed War on Drugs.

But in practice, this ideal is almost never delivered. Most social equity programs work with people who have: prior convictions; have served time for consumption, possession, and/or distribution of cannabis; or may be a resident of a disproportionately impacted area. These initiatives usually highlight those who are African American, Hispanic/Latino, Asian, Pacific Islander, and other races to give them the chance to have their place inside the cannabis industry. Of course, each program varies by state.

The recurring issue, no matter the state, is that social equity doesn’t seem to be working. The state offers a multimillion dollar business to a single social equity applicant who, almost always, does not have the finances or business acumen to actually run the operation.

For example, when Missouri legalized cannabis in November 2022, their plan to ensure an equitable industry through a microbusiness-licensing program seemed promising. However, like other states, the same issue arose – they expected to deal with social equity individuals directly, not realizing that these folks would only be able to apply with the support and backing of companies that had both the experience in cannabis and the financial means to deliver an operational storefront. Both of these are critically required – not just generally, but right now, for the microbusiness program in Missouri to be successful.

An active issue is the revocation of cannabis licenses awarded to social equity applicants in Missouri, a decision impacting two individuals who had been working with the Michigan cannabis retail firm Canna Zoned MLS during the lottery process, creating a significant stir. The social equity lottery winners, including Aric Rybacki and Curtis Floyd, have shared their personal experiences and the implications of this decision on their lives and aspirations below.

While this article briefly discusses microbusiness/social equity eligibility, an overview of the lottery and process, insight into the winners, and some broad insight into investigation in Missouri; its purpose is to offer some background and get readers familiar with the program. This is not a piece covering the investigation. Instead, readers may gain insight into the challenges that two licensees face as a result of the allegations of the investigation, and the possibility of losing their licenses.

This piece in no way defends either side of the investigation. Its purpose and goal is to offer the licensees an opportunity to share their story.

The Old Court House in St. Louis, MO (C) City of St. Louis

What Is Missouri’s Cannabis Microbusiness License Program?

There isn’t a program titled “social equity” in Missouri; instead they call it their “microbusiness license program.” According to a report by the Missouri Independent, the program is defined as:

“An equity measure that Amendment 3 supporters boast to be the first of its kind in the nation; a microlicense program designed to boost opportunities in the industry for businesses in disadvantaged communities.”

In that same article, Adolphus Pruitt, president of the St. Louis City chapter of the NAACP and one of the drafters of the microbusiness provision in the legalization amendment, said:

“The word ‘equity’ doesn’t need to be in the constitution’s definition of the microbusiness program. When you look at the categories and the qualifications, there’s no doubt that overwhelmingly the qualifications are geared up for people who were impacted by the unjust enforcement of marijuana laws. No one would dispute that that population, in most cases, are African Americans.”

How Does Missouri’s Constitution Define Microbusinesses?

The Missouri Constitution provides that microbusinesses must be majority owned by individuals who meet at least one of the eligibility criteria set forth in Article XIV, Section 2.

An overview of the requirements that can be found in the very detailed rules listed in the eligibility criteria are:

(a) Have a net worth of less than $250,000 and have had an income below two hundred and fifty percent of the federal poverty level, or successor level, as set forth in the applicable calendar year's federal poverty income guidelines published by the U.S. Department of Health and Human Services or its successor agency, for at least three of the ten calendar years prior to applying for a marijuana microbusiness facility license; or
(b) Have a valid service-connected disability card issued by the United States Department of Veterans Affairs, or successor agency; or
(c) Be a person who has been, or a person whose parent, guardian or spouse has been arrested for, prosecuted for, or convicted of a non-violent marijuana offense, except for a conviction involving provision of marijuana to a minor, or a conviction of driving under the influence of marijuana. The arrest, charge, or conviction must have occurred at least one year prior to the effective date of this section; or
(d) Reside in a ZIP code or census track area where:

a. Thirty percent or more of the population lives below the federal poverty level; or

b. The rate of unemployment is fifty percent higher than the state average rate of unemployment; or

c. The historic rate of incarceration for marijuana-related offenses is fifty percent higher than the rate for the entire state; or

(e) Graduated from a school district that was unaccredited, or had a similar successor designation, at the time of graduation, or has lived in a zip code containing an unaccredited school district, or similar successor designation, for three of the past five years.

The Missouri Microbusiness License Lottery

The Missouri Microbusiness Licensing Program was part of a lottery process – all individuals who thought they qualified as a social equity applicant entered their name into the pool – but it was more than that. Each individual had to prove they qualified, but also had to pay $5,000 and show they had legal right to the property on which they were planning to operate.

The lottery process is outlined as follows:

All timely applications submitted with an application fee will be entered into the lottery drawing. Untimely applications or applications without a fee will be denied. After the application time window closes, applicants will be sorted by congressional districts and license type (wholesale or dispensary), and assigned a sequential applicant identifier within those groups. The designated contact provided in the application will receive an email containing the applicant identifier prior to the drawing.
All applicants entered into the drawing will be listed in an order drawn within their congressional district. Prior to awarding licenses, the Department of Health and Senior Services will review the applications in the order drawn. In the case that an application is denied or an applicant does not accept an awarded license, the next eligible applicant in that congressional district will be awarded the license.
Random drawing results will be posted to the department’s website as soon as they are available. Once the subsequent review period is complete, winners of licenses will be notified by email using the designated contact provided in the application.

On August 28, 2023, the random lottery was held, and the results provided to the Department of Health and Senior Services, show Curtis Floyd and Aric Rybacki as winners.

Missouri Microbusiness License Lottery Winners

There were 1,625 applications submitted for 48 microbusiness licenses; 16 for dispensaries and 32 for wholesale facilities. Nearly 1,900 owners were listed on the applications. Six microbusiness licenses were set to be issued in each of the eight congressional districts, as drawn and effective from December 6, 2018. Of the six in each district, two are microbusiness dispensaries and four are microbusiness wholesale licenses.

An Investigation Into The Missouri Microbusiness License Lottery Winners

A report released by the state’s Division of Cannabis Regulation on January 4, 2024 shows that 40 percent of the microbusiness/social equity license applicants were from outside of Missouri. The report found that half of those owners are from California, Michigan, Louisiana, and Arizona.

The Division of Cannabis Regulation may be revoking 11 of the 48 social-equity cannabis licenses issued in October, after finding they didn’t meet eligibility requirements. Those that face revocation include Michigan-based Canna Zoned MLS, who secured 2 of the 16 dispensary licenses.

The investigation seems to have stemmed from a question that the Department of Health’s Chief Equity Officer, Abigail Vivas, received after the release of license winners: Why did numerous applications have the same designated contact person and proposed locations?

It has been confirmed by Vivas that there aren’t rules against one person or attorney/representative being the point of contact for multiple applicants, which is a highlight of the report that led to an investigation. There were three designated contacts who submitted 43 percent of the applications.

The Missouri Independent states that the report cites the ineligibility issues as “failure to provide documentation that the facility would be operated by eligible individuals.” They also stated that other cited reasons included “failure to provide adequate documentation to verify the majority owner met the eligibility criteria and for a disqualifying felony offense.” Cannabis Business Times reported that part of the investigation involves an out of state company offering to pay residents to apply and grant them an additional payment if they won the license.

State law originally required Missouri or majority Missouri ownership of marijuana licenses, but that was deemed unconstitutional by a federal judge in 2021. (Residency requirements in other states’ social equity programs have also been challenged on constitutionality in recent years, as shown by cases such as those in Maine and New York.)

Canna Zoned’s General Counsel Amanda Kilroe says:

“Our firm navigates the licensing and real estate process with both individuals and companies because regulations in each city and state are so different. The regulations are there to ensure that the cannabis industry is safe and fair. We’ve followed the state's rules and guidelines set forth for these lotteries. It is sad to see a regulation that the state sets be what is in question. Regulations are also in place to ensure that if a license is transferred, it is transferred to someone who qualifies under the same social equity standards. These candidates won the lottery, and were excited to be a part of this process. Now, all of that is in question regardless of the fact they they have done everything the state has asked.”

Aric Rybacki is a Missouri Lottery Winner and Social Equity Applicant collaborating with Canna Zoned from Illinois. He states that “the possibility of license revocation is a devastating blow.” Rybacki has overcome adversity and speaks of the lasting impact of his father's past marijuana possession charge and how it overshadowed their lives:

“The cannabis business was our chance for redemption and a breakthrough into an industry once inaccessible to me/us. We followed state guidelines and while navigating the complex application and approval process. The potential revocation of this license, after such painstaking efforts and financial investments, represents not just a personal setback but a dismantling of my dreams and aspirations.”

Curtis Floyd, from Colorado, is another Missouri Lottery Winner and Social Equity Applicant working with Canna Zoned. He is a veteran, and viewed the approval of his application as a beacon of hope and an opportunity for personal and professional transformation. The process involved strict adherence to state guidelines, facilitated by Canna Zoned's support. He shares:

“The threat of license revocation feels like a betrayal. It is a reversal of the state's commitment to uplift people like me through these initiatives. The lottery and the opportunity it represented were not just about my own growth, but also about contributing to an industry that could offer employment to more veterans and other individuals.”

What’s Next For The Missouri Microbusiness Licensing Program Applicants?

Learn more about what's happening in Missouri here. As it relates to the applicants, they were issued notices of pending revocation of their licenses on December 15, 2023 and they had until January 15, 2024 to respond with additional information that could reverse the department’s decision. We are currently awaiting further updates on the situation.

Written By:

Veronica Castillo is known as the Traveling Cannabis Writer. She was a nomadic writer on the road covering all things cannabis/ hemp/ and overall plant medicines and recently came back home to Florida, making it her homebase once again. Her body of work can be found in multiple industry publications both digital and print where she provides cannabis industry and community insights from her 5 year journey around the country. She is a collaborator, connector, always seeking to bring to light the hidden gems in the plant space. You can follow her journey on Instagram: @vee_travelingvegcannawriter and/or LinkedIn: @Traveling Cannabis Writer

@vee_travelingvegcannawriter (IG)

@Vcannavegwriter (Twitter)

Featured image: Missouri's Capitol Building in Jefferson City (C) KTrimble / Associated Press, courtesy of Wikimedia Commons

Why Aren’t Cannabis Social Equity Programs Working? The Case Of Missouri’s Microbusiness Licensing Program