Lesley Turek is planning for a busy June, traveling the state to educate people about the final lottery for 77 microbusiness marijuana licenses.

Turek, the chief equity officer for the Missouri Division of Cannabis Regulation, will hold education sessions in Kansas City, Jefferson City and St. Louis, along with five webinars to outline application requirements and answer questions.

The application window will open sometime in midsummer, she said.

A large part of what she’ll be covering is new rules that will go into effect at the end of May — rules cannabis regulators proposed in 2024 after they revoked numerous licenses due to unconstitutional ownership deals.

“Generally, the changes needed to happen,” Turek said, in an interview with The Independent, “so that we could bring the focus back to the intention of the program.”

The purpose of the program, she said, is to provide “a small business opportunity for those people who wouldn’t otherwise have the chance to be a part of the cannabis industry to have an opportunity for facility ownership.”

The microbusiness program was established through the 2022 constitutional amendment voters approved to legalize recreational marijuana. It was “designed to expand opportunities for marginalized or under-represented individuals to participate in the state’s regulated marijuana industry,” according to a press release the division issued Tuesday.

It’s been a rocky road since Missouri held its first lottery for microbusiness licenses in 2023.

For nearly three years, The Independent has documented a pattern of well-connected groups and individuals flooding the microbusiness lottery by recruiting people to submit applications and then offering them contracts that limit their profit and control of the business.

Of the 106 microbusiness licenses issued so far, 38 have been revoked and one has been surrendered.

“There’s really no question in many cases,” Amy Moore, the division’s director, said during a hearing with the Joint Committee on Administrative Rules in March. “Third parties used eligible individuals, names and circumstances to attempt to acquire licenses for themselves.”

When the program first began, Turek said cannabis regulators implemented a similar application review that was used with comprehensive medical marijuana licenses.

“But we had no idea there would be problems to the extent that we saw,” Turek said.

The new rules, she said, allow regulators to complete an extensive review before the licenses are issued, rather than afterwards. They also provide a deeper explanation of what it means to “majority own and operate” a license, which is a requirement in the constitutional amendment. They mandate that regulators communicate directly with majority owners and that applicants take a course on compliance before applying and after receiving the license.

“It’s a positive step forward for the program,” Turek said.

‘A clear understanding’

In Missouri, there are seven categories where people could qualify for a microbusiness license, ranging from a lower income level or living in an area considered impoverished to having past arrests or incarcerations related to marijuana offenses.

Applicants pay a $1,500 application fee that’s refundable if they don’t get picked. The Missouri Lottery will pick 77 applicants for licenses to open up either dispensaries or cultivation facilities. The goal is to bring the total number of microbusiness licenses up to the constitutional minimum of 144 microbusiness licenses.

Turek said the learning sessions will give participants access to division staff, who can answer their questions about the application.

She believes the application is pretty straightforward and something people can complete on their own, unlike the much more complicated application for comprehensive licenses.

“We have lots of tutorials, and we have a step-by-step guide that we provide as well,” she said. “Anybody could sit down and do the application. I don’t think it’s challenging.”

The part that most people don’t often understand is everything that comes with being a marijuana facility owner.

“It’s very expensive, it’s very regulated, and so it’s challenging,” she said. “I want to make sure people have a clear understanding beforehand, so that they can make a good decision about whether or not they want to apply to this program.”

A big part of her presentation will be focused on the fact that the licenses must be majority-owned and operated by eligible individuals, she said. They have to hold more than 50% of ownership and more than 50% of the power to direct the decisions that are made with the license.

“It’s more than just ownership percentage,” she said. “It is really about being able to have that control of it.”

She’ll also talk about the designated contact and why, in the new rule, regulators will require the designated contact to be the applicant or an eligible person who holds majority ownership.

“The simple reason is we have to get a hold of people,” she said, “We’ve discovered during our verification processes that sometimes if there’s a third party involved, it’s just really hard to get information.”

Turek said she doesn’t want people to lose out on the opportunity because “someone didn’t share information with somebody else. We know that that happens.”

The designated-contact role was envisioned as a way to ensure clear communication between the state and licensees.

Instead, state regulators discovered 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.

That’s also why the state is now requiring a pre-application training, which will be a three-hour online course to ensure that applicants have an understanding of “potential predatory practices,” regulators stated in responses to public comments in the rulemaking process.

Extensive review

One major shift that Turek believes will help prevent so many revocations is changing when regulators conduct their extensive application review.

The state issued its first round of 48 microbusiness licenses in 2023.

These applicants were picked out of a lottery of 1,600 submissions, and then the division verified they met the basic qualifications, which include having a low income, a nonviolent marijuana charge on their record, being a disabled veteran or living in a low-income ZIP code.

But getting the license is currently just the beginning of the verification process.

The licensees must then pass through a rigorous 60-day investigation into all financial and operating agreements to make sure the license will continue to be majority owned and operated by an eligible person, as the state constitution requires.

After the investigations in 2023, the division ended up issuing 11 notices of pending revocation.

The licensees had a few months to respond to the division’s concerns, but ultimately all six licenses connected to cannabis investor Michael Halow were revoked — along with two connected to a Michigan-based group — because they couldn’t prove the business would be run by an eligible person.

The revocations were the division’s attempt to prevent what some legal experts have called “fronts,” or arrangements where the profits and ownership weren’t going to people that regulators had certified were eligible.

In July 2024, the division awarded another 57 microbusiness licenses. But after the 60-day investigation, regulators sent out 32 notices of pending revocation.

The state ended up revoking 25 licenses, 16 of which were connected to Halow. And nearly all of the 25 cited ownership issues.

By law, the state must award a total of 144 licenses to disadvantaged business owners over the course of three lotteries. The state has already conducted two lotteries.

With the final lottery, the extensive review process will come before the license is issued, the new rules mandate, to prevent the revocation process as much as possible, Turek said.

“Do I think that will help? Yes,” she said. “Will it prevent all of it? Probably not. I’m sure that we will still run into some issues, but I do think it’s a good approach, so that we don’t end up having 30-plus revocations.”

Turek said it will be exciting to welcome in “a whole new crop of licenses.” Last fall, several microbusiness facilities became operational, and she’s seeing more movement in that direction.

“I really feel strongly that the microbusiness licensees are a community of people, first and foremost, that support each other,” she said. “They’re the ones that are making this program move forward, so I’m looking forward to meeting some new people and sharing as much as I can about the program. It’s a great program.”

Microbusiness education outreach events

In-person forums:

• June 8 – 6 to 8 p.m. – Jefferson City
• June 15 – 6 to 8 p.m. – St. Louis
• June 22 – 6 to 8 p.m. – Kansas City

Webinars:

• June 5 – 6 to 8 p.m.
• June 11 – 6 to 8 p.m.
• June 16 – 6 to 8 p.m.
• June 24 – 11 a.m. to 1 p.m.
• June 29 – 6 to 8 p.m.

Registration is required for all in-person and virtual sessions. Interested participants may register at Microbusiness Education. Additional information about the microbusiness program is available at cannabis.mo.gov.