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At least 19 social equity applicants have had their conditional recreational marijuana licenses denied after falling victim to what Delaware’s Office of the Marijuana Commissioner calls “predatory” consulting contracts.

Georgetown resident Jacqueline Lacy thought the postcard she received in the mail in 2024 offering to help her qualify for a license to grow recreational cannabis was from the state of Delaware.

But “Cannabis Social Equity Assistance” was actually an Arizona consulting firm, Cannabis Business Advisors, headed by investor and entrepreneur Michael Halow. Now, Lacy and 18 other applicants’ dreams of starting a cannabis business — through a state social equity program that helps disadvantaged Delawareans — are in limbo.

OMC Commissioner Joshua Sanderlin said they had to deny the 23 conditional licenses to stop the contracts from taking effect.

“There wasn’t really a lot we could do to find a way to not throw the baby out with the bath water,” Sanderlin said. “But unfortunately, we were constrained in what we could actually do.”

Lacy said she was drowning in application deadlines, so she said yes when the consultants promised to pay for the application and licensing costs and help her set up her business. She signed three agreements, but she said she didn’t really understand them. It was only later that she had a lawyer friend review them.

“He basically told me ‘you’re screwed,’” Lacy said.

Sanderlin’s denial letter to Lacy describes the fees charged by the consultant as “unreasonably excessive,” putting her in debt to the extent that “the consultant taking a controlling ownership interest in the license is inevitable.”

Investors connected to Cannabis Business Advisors and Halow have reportedly targeted social equity applicants in at least two other states — Missouri and Arizona. Cannabis Business Advisors boasts on its website that it has secured over three dozen cannabis licenses in 16 state application processes.

Halow calls himself a pioneering figure in the entrepreneurial world dedicated to mentoring underrepresented entrepreneurs. Halow did not respond to a request for comment.

Delaware creates social equity program as part of new recreational marijuana industry

When state lawmakers approved legalizing recreational marijuana in April 2023, they also created a social equity program to help disadvantaged people start their own cannabis business.

Individuals with past marijuana convictions, their parents or children and residents in areas disproportionately impacted by the policing of pot-related offenses can qualify for a conditional license. Those who were selected for the social equity program paid discounted application and license fees.

State lawmakers created a lottery system for distributing all the licenses. The first one took place in October 2024, and a subsequent one was held in December, due to an overwhelming demand for retail licenses. Selected applicants then went through financial, tax and civil reviews, along with criminal background checks.

‘It’s a well-oiled machine’

When Sanderlin came into office in May 2025, he said he became aware of a consulting firm singling out social equity applicants.

“What was done was reprehensible, targeting a group which the state specifically cut out licenses to help counteract all the problems from the war on drugs that we still face today,” he said. “It’s just out of bounds.”

James Brobyn, former president of the Delaware Cannabis Industry Association, calls it a scam.

“These folks send out mass letters to people and offer to pay for their applications in exchange for 49% of the company and control into the future until they’re forced to sell it in three years, when the legislation allows them to acquire the license,” he said. “It is the worst form of predatory stuff you could think of. They pay for people’s applications and if they file enough of them, then they have a good chance of getting a better bunch of licenses.”

A February 2025 news release from OMC said a total of 1,271 applications were received for 125 licenses available across 11 categories. It’s unclear how many applications were submitted by Cannabis Business Advisors and related investors, a practice known as “flooding the lottery.”

Although the Delaware commissioner issued a warning in July 2024 to be aware of predatory practices, Peter Murphy, an attorney who represents Lacy and other social equity applicants, said there was a door-to-door campaign before the lottery in areas of the state where people were more likely to have a marijuana conviction to sign people up.

“This is not a small operation,” he said. “This is a pretty well-oiled machine.”

‘Predatory contracts’

Once Lacy signed with Cannabis Business Advisors in September 2024, she said the consultants put themselves as the contact for communicating with the state about her conditional licenses and left her in the dark.

Emails reviewed by WHYY News show Danielle Popov was the point of contact for OMC. According to CRB Monitor News, which follows the cannabis industry, Popov was listed on 66 social equity license applications in Missouri in 2024. She did not respond to a request for comment.

Lacy said the consultants also created a limited liability company, Sepia Koala, for her without her consent.

Because the conditional licenses were denied, the contracts have never gone into effect. But if they did, Lacy and others would face exorbitant fees for the firm’s services.

The consulting contract Lacy signed and reviewed by WHYY News includes a $1 million break-up fee she would have to pay to terminate the agreement.

From the date the license is issued until the business becomes operational, the firm would charge her a $10,000-a-month fee for its services, which rises to $50,000 a month for the first six months of operations and then goes to $75,000 after that, plus any reimbursement fee.

Lacy also signed an agreement with Cannabis Business Advisors that would potentially allow the firm to purchase the license from her. According to Delaware law, a social equity license can be transferred to someone who wouldn’t qualify for one after three years.

The license is the ultimate goal

Sanderlin said the conditional licenses are currently worth between $200,000 and $600,000 depending on the type of license. But it would dramatically increase in value as a business became operational.

Murphy said Cannabis Business Advisors doesn’t want to sell legal pot — it wants to flip the licenses.

“The actual business of selling legal weed is not easy. It’s actually pretty hard, partially because you’re still competing with a black market that is very sophisticated and doesn’t pay any taxes,” he said. “I can spend a half-million dollars and I can secure 10 licenses, and I can sell each one for $1 million. That’s a great turnaround of capital. That’s the business model. It’s flipping licenses. It’s not selling weed.”

Appealing her case

Sanderlin said all of the applicants who were denied for signing with Cannabis Business Advisors are appealing through the Marijuana Appeals Commission.

That includes Lacy, who notified OMC last month that she stopped responding to Cannabis Business Advisors in January and got her own attorney to handle the appeal. She said she also has moved to put the two conditional licenses put into her name.

Lacy said she made her case to save her two licenses at a March 23 Marijuana Appeals Commission meeting.

“The commissioner and the appeals commission, they all said that they’re sorry I’m going through this,” Lacy said. “I was like, ‘Well, thank you.’ That’s nice for your sympathy, but it doesn’t fix what’s wrong,” she said. “Something’s got to be done.”

Sanderlin said another lottery could be held after the appeals process wraps up.

“In a perfect world, we’d be able to get these folks out of the contracts, and a lot of them keep going,” he said. “But I don’t know what the future really holds at this point.”