Predatory Cannabis Contracts Allegedly Emerge In Missouri's Social Equity Program

Allegations of predatory contracts within Missouri's social equity cannabis program have surfaced, raising concerns about the integrity of the system.

A recent investigation by The Missouri Independent revealed a troubling case involving Destiny Brown, a Black woman who believed she was being offered ownership of a cannabis dispensary and significant financial backing to compete for a license in the state's social equity lottery.

However, Brown unknowingly signed a contract that granted control of the business to investor Michael Halow.

Halow, who was unable to qualify for a license himself due to a felony on his record, used Brown's qualifications to secure the license in her name.

Once Brown realized the exploitative nature of the agreement, she sought legal assistance and severed ties with Halow.

Missouri regulators, upon further investigation, revoked six licenses tied to Halow and revealed a pattern of similar contracts used by other applicants. These contracts have been under investigation at least since last year.

Exploitative Practices And Systematic Abuse

Brown’s case is not an isolated incident.

The investigation also uncovered multiple examples of out-of-state companies and cannabis industry insiders exploiting the social equity program by manipulating disadvantaged applicants.

A common tactic includes flooding the lottery with numerous applications under qualified applicants, only to secure contracts that transfer business control to investors once licenses are granted. In these predatory arrangements, the applicant receives little to no benefit while the investor maintains full control of the business.

• Get Benzinga's exclusive analysis and the top news about the cannabis industry and markets daily in your inbox for free. Subscribe to our newsletter here. If you're serious about the business, you can't afford to miss out.

Missouri’s microbusiness program was designed to help disadvantaged groups, including disabled veterans and those affected by non-violent drug offenses.

The Missouri Division of Cannabis Regulation continues to investigate these cases, and more revocations are expected as the scope of abuse becomes clearer.

Read Also: Yet Again, Massive Cannabis Product Recall Rocks Missouri Weed Industry: 135,000 Products Quarantined

Similar Practices Elsewhere

Missouri is not the only state grappling with the poor performance of its social equity programs.

Similar predatory practices have surfaced in New York and Arizona, where social equity cannabis programs are facing scrutiny for allowing private interests to exploit disadvantaged applicants.

In New York, a public-private fund intended to help those affected by discriminatory drug laws has been criticized for favoring private equity firms over qualified applicants. The fund’s restrictive loan terms and high interest rates have left many licensees struggling to maintain control of their businesses. Also, social equity in the state has faced severe bureaucratic constraints.

In Arizona, some have employed tactics similar to those found in Missouri, flooding the state's application process and using complex contracts to exploit social equity applicants.

Read Next:

• Cannabis Companies Have Missouri’s Governor Beat: Hemp-THC Products Sales Resume As Stricter Controls Replace Sweeping Ban
• Missouri Joins Crackdown On Unregulated Cannabis, Announces New Taskforce As National Hemp Debate Rages

Cover: AI generated image