Missouri Cannabis Leader Faces Allegations Of Using Predatory Contracts To Exploit Social-Equity Licensees

In Missouri, a high-stakes controversy is unfolding as state regulators investigate John Payne, a prominent figure in the state's cannabis industry, for his involvement in potentially exploitative contracts under a social equity program. The focus is on whether the business arrangements violate constitutional mandates by disproportionately benefiting Payne and his associates at the expense of intended beneficiaries.

Payne’s Controversial Contracts Spark Legal Probe

Payne, who led the 2022 campaign to legalize adult-use cannabis in Missouri, faces allegations of using a 47-page contract to secure dominant control over new dispensary licenses intended to empower minority communities historically harmed by cannabis prohibition. According to documents and interviews revealed by The Missouri Independent, Payne’s contracts are designed in such a way that although minority partners nominally hold majority ownership, they experience significant limitations in operational control and financial benefits.

These contracts require minority owners to handle extensive regulatory scrutiny and impose severe financial penalties for contract termination, amounting nearly to $1 million. The controversy escalated with revelations that Payne’s contractual arrangements were not isolated incidents but involved multiple license applications. The Missouri Independent notes Payne is linked to over 300 applications for the latest round of microbusiness licenses, securing six of the 24 dispensary licenses awarded, raising serious concerns about systemic issues within Missouri’s cannabis licensing framework.

Consequently, the Missouri Division of Cannabis Regulation has launched an investigation into the legality of the licenses granted under these contracts.

Criticism Over Unfair Profit-Sharing Strategy

The contractual details exposed highlight a strategy where Payne and his business partners potentially retain up to 90.1% of the profits from operations nominally owned by social equity applicants. This arrangement has sparked widespread criticism from legal experts and community leaders, who denounce the contracts as fundamentally unfair and potentially illegal.

Nimrod Chapel, an attorney and president of the Missouri National Association for the Advancement of Colored People (NAACP), expressed profound frustration regarding the licensing issues. "I find it incredibly disappointing that this section of licensees is getting monopolized by John Payne—the very person who was in the middle of the campaign for cannabis legalization and used this as a way to gain minority buy-in."

A Defiant Payne Defends His Position

Despite the backlash, Payne defends his contracts as necessary mechanisms to facilitate entry into the industry for those lacking capital. He argues that the agreements were structured to reflect a long-term partnership, not exploitation. However, his critics, including Adolphus Pruitt of the St. Louis NAACP, liken the contracts to “indentured servitude,” pointing to the deep disparities in control and financial gain stipulated by the agreements.

Missouri’s Social Equity Program Faces Multiple Challenges

Furthermore, this controversy is not an isolated incident within Missouri’s social-equity program. State regulators have faced numerous challenges, including investigations on schemes where equity license applicants are misled into signing away control and profits and the revocation of nine social-equity cannabis licenses in April due to eligibility issues and alleged predatory practices. The integrity of the program is under scrutiny, with accusations that it is being exploited by out-of-state entities and consultants.

Read more at The Missouri Independent.

Read Next:

• Human Trafficking At Cannabis Farms: The Hidden Plight Of Immigrant Workers Abused In Oklahoma

---

Cannabis rescheduling seems to be right around the corner. Want to understand what this means for the future of the industry? Hear directly for top executives, investors and policymakers at the 19th Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9. Get your tickets now before prices surge by following this link.