The Missouri Department of Health and Senior Services’ Division of Cannabis Enforcement has proposed new regulations for the state’s cannabis microbusiness sector aimed at addressing concerns of predatory middleman practices. Under the proposed rules, the designated contact for all cannabis microbusiness licenses would be required to be an owner or partial owner of the company, a change intended to ensure that individuals running cannabis operations have full control and transparency over their business dealings.
The regulations, still in the draft stage, were introduced in response to growing concerns about the misuse of the designated contact role. This role was originally created to improve communication between cannabis operators and state officials. However, the system has been exploited by some middlemen, creating a situation where individuals not directly involved with the business can intercept official communications, leaving operators unaware of key business or licensing updates.
Addressing Predatory Business Practices
According to the Division of Cannabis Enforcement, the proposed changes are designed to “prevent predatory arrangements” where ineligible entities, often acting as intermediaries, take advantage of eligible microbusiness operators. These entities register themselves as designated contacts, gaining access to critical business and licensing information and effectively controlling communication on behalf of the operators.
A statement from the division highlighted the importance of ensuring microbusiness licenses are issued to eligible individuals who are actively involved in the operations of their business. “These revisions are intended to ensure microbusiness licenses are issued to eligible individuals… and to address the trend of predatory arrangements in microbusiness licensing,” said a spokesperson for the division in a recent press release.
The regulation would specifically mitigate efforts by ineligible entities who manipulate the licensing system by using eligible individuals as a front while secretly controlling the business dealings. This could include consulting firms or legal professionals who are listed as designated contacts on multiple license applications, even though they have no actual ownership in the businesses they represent.
Current Designated Contact Issues
Currently, many designated contacts listed for Missouri cannabis businesses are not actual owners of the companies they represent. In fact, some individuals have been registered as the designated contact for numerous businesses, leading to concerns about transparency and accountability. One Missouri consultant, for example, appeared as the designated contact for 329 social equity license applications last year. Similarly, a Michigan-based attorney was listed as the contact on 94 other applications. According to reports, nearly three-quarters of all designated contacts registered with the state have appeared on multiple applications.
The state believes that by requiring designated contacts to be owners or partial owners, the proposed rules will enhance the legitimacy of the microbusiness licensing process. This change is expected to reduce the opportunities for middlemen to take advantage of the system, ensuring that businesses are owned and operated by those who are fully invested in their success and compliance with state regulations.
The Path Forward
If the proposed regulations are enacted, microbusinesses will need to reassess their current licensing structure and ensure that their designated contacts meet the new eligibility requirements. These changes are likely to have a significant impact on the cannabis microbusiness landscape, but they are seen as a necessary step to ensure fairness, transparency, and integrity in the state’s cannabis industry.
The proposal also aligns with broader efforts in Missouri to regulate the cannabis industry more effectively and protect both consumers and business owners from potential exploitation. By reducing the influence of ineligible or predatory actors, Missouri hopes to create a more sustainable and equitable market for cannabis operators and consumers alike.
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