Missouri strips marijuana licenses connected to company accused of predatory behavior
Missouri’s health department on Wednesday stripped two coveted marijuana micro-licenses tied to an out-of-state company that had been accused of predatory practices and had listed the licenses for resale.
The two micro-licenses, awarded to Seashore Rhythm, LLC in Arnold near St. Louis and Frankenstein Enemy, LLC in Columbia, were among nine licenses the state agency revoked for not being eligible for a program aimed at helping small and minority-owned businesses break into the lucrative marijuana market.
The Missouri Department of Health and Senior Services announced Wednesday that it had revoked nine of the 48 licenses it had awarded in October after previously questioning the owners’ eligibility for the program in December.
Questions regarding predatory behavior in the program designed to help marginalized communities have cast a cloud over the state’s marijuana industry for months.
One license was stripped earlier this month because the owner had a felony offense that disqualified the owner from the program. The state revoked the remaining eight licenses due to numerous violations, including providing false or misleading information to the state.
Throughout the application process, the purported owners of those eight revoked licenses had “limited to no knowledge” of agreements they had signed onto for the licenses and in some cases did not know the person who applied for the license on their behalf, the state agency said in a news release.
Canna Zoned MLS, a Michigan-based marijuana real estate company, had listed two of the now-stripped micro-licenses for sale in October, The Star previously reported. Jeffrey Yatooma, the company’s owner, is listed as the main contact for 104 of the more than 1,000 marijuana micro-license applications submitted to the state, records show.
Yatooma’s company had come under fire for offering to pay eligible people to enter lotteries awarding licenses for underserved groups in Missouri, Illinois and Maryland, The Star, Missouri Independent and the Chicago Sun-Times previously reported.
The company’s tactics, as well as its attempt to sell two licenses in Missouri, had sparked outrage from some state lawmakers, including from Sen. Karla May, a St. Louis Democrat and candidate for U.S. Senate, who in an October letter to DHSS demanded an investigation.
Amy Moore, the director of the agency’s division of cannabis regulation, in a statement appeared to confirm that some of the licenses were stripped due to predatory practices.
“While owning and operating a license may include contracting for management services or consulting services, the lack of knowledge, control, agency or decision-making demonstrated by the individuals whose information was used to meet eligibility does not meet even the most generous interpretation of owning and operating a business,” Moore said in the statement.
Amanda Kilroe, an attorney for Canna Zoned MLS, forwarded The Star an emailed statement that she said was from the legal representative for the LLC that won a license to operate in Columbia.
The statement called the decision a “drastic and unjustified penalty.” The company complied with all regulatory rules and recently went to an “invitation-only” meeting with the state health department in Jefferson City last week, the statement said.
“We have not been provided with specific reasons or justifications for the revocation, leaving us in a position where we must take appropriate action,” the statement said. “The lack of transparency and the apparent predisposition to revoke our license prior to affording us a fair hearing not only impacts our license but also sets a concerning precedent for the microbusiness program and its intended beneficiaries as a whole.”
The company urged the state to reconsider its decision.
On top of the two connected to Canna Zoned MLS, the remaining licenses that were stripped were tied to Cannabis Business Advisors, an Arizona-based consulting firm. Maxime Kot, the president and part owner of the company, is listed as the main contact for six of the nine revoked licenses.
One of the licenses connected to Cannabis Business Advisors, Potluck THC LLC, applied to start a marijuana dispensary in Kansas City but was not registered as a business in Missouri, The Star previously reported. The company registered with the state 12 days after The Star’s report, listing its home state as Arizona, records show.
Sara Gullickson, the firm’s CEO, criticized the decision in an email, saying that stripping the licenses was “severely unjust” and penalized the people who were awarded the social equity licenses.
“We remained fully compliant with all regulatory guidelines throughout the application process and fully intend to challenge the decision that goes against the law’s intent, and our company’s intent, to help small and minority-owned businesses break into the cannabis industry in the state of Missouri,” Gullickson said.
The final micro-license that the department revoked was awarded to Higher Love KC, LLC, which applied to start a marijuana wholesale — or cultivation — facility in Kansas City.
James Ryan San Juan, the owner of the license, said in an interview that he thinks the state made the decision because he had a past non-violent felony charge in Kansas for marijuana distribution. San Juan said the state sent him an email saying that he was ineligible because the felony happened in Kansas and not Missouri.
“The fact that they want to revoke a cannabis license because of a cannabis felony is just blowing my mind,” he said. People with past marijuana-related arrests are supposed to be eligible for the program.
San Juan said his company is filing a complaint with the state to appeal the decision. He will also try to offer changing the owner of the license to someone in his company who would meet the criteria.
“I have emails from them earlier last year saying that they wanted to work with us to get us into compliance and not revoke our license,” he said. “And then we find out two, three weeks ago that they want to revoke our license.”
The state in December had initially questioned the eligibility of 11 licenses, but said on Wednesday that two of those license-holders had demonstrated that they were owned by people who met the criteria for the program.
Missouri in October awarded 48 marijuana micro-licenses divided across the state’s eight congressional districts after the agency conducted a random lottery.
One of the rules for the program required applicants to apply for and obtain only one micro-license to operate a marijuana facility. A Joplin man was denied a refund on his $1,500 application fee for violating this rule.
The program was designed to help lower income individuals and minority groups break into the market, which has been dominated by large companies. Applicants had to meet one of several requirements, including having a net worth less than $250,000 or having a prior marijuana-related charge.
This story was originally published March 27, 2024 at 3:53 PM.
