State Regulators Disqualify Two-Thirds of Social Equity Cannabis License Applicants
The Office of Cannabis Management (OCM) has informed approximately two-thirds of the 1,817 social equity license applicants that they will not be included in the first license lottery, scheduled to take place the week of December 2. The rejected applicants failed to complete the complex application process, engaged in improper actions, or did not meet the required qualifications.
The OCM has identified four main reasons for disqualification: failure to meet the qualifying standards set forth in state law, failure to provide required documents, inconsistencies in ownership requirements and true-party-of-interest provisions, and suspected fraud and “zone flooding.”
Zone flooding refers to the practice of submitting multiple applications, often with identical business plans and projected profits, in an attempt to improve one’s chances in the lottery. The OCM discovered several instances of this, including applications with the same address, phone number, and domain name.
The agency also received a tip from a whistleblower about an out-of-state applicant who was recruiting people to submit applications and promised to pay them off if they won the lottery. This is in violation of state law, which prohibits the purchase of preapproval licenses and includes provisions to slow or prevent license transfers.
The OCM is evaluating its options, which may include blocking deceitful applicants from being licensed in the future. Depending on the breadth of the violations, the agency may also consider enforcement actions by other agencies.
The remaining one-third of applicants, approximately 640, will receive official notification of their acceptance into the lottery within two weeks. This group will have a better chance of securing one of the 280 preapproval licenses, which are intended to help social equity licensees prepare for the expected opening of the legal cannabis market in the spring.
The OCM’s interim director, Charlene Briner, emphasized that the agency wants to ensure that only fully qualified and vetted applicants are included in the lottery. “We’ve always known this is a highly complex regulated space, and we heard concerns about readiness,” she said. “The people who get into the lottery are qualified.”
