The cannabis license lottery ticket

In many states, cannabis licensing is said to be a corrupt and unfair process, Kittery, Maine just found out.

Kittery, Maine, did their best to come up with a fair cannabis licensing plan.

They met with lawyers, did a live drawing, they even made sure that the ping pong balls used in the lottery were all from the same manufacturer and were of exactly the same weight.

Except that the drawing was tampered with long before the ping pong balls were labeled with black magic markers and then placed in the orange Home Depot buckets.

(CLICK HERE TO SEE THE COMPLETE KITTERY MARIJUANA LOTTERY)

Kittery, Maine, one of the most desirable places on the East Coast to get a recreational cannabis license due to its border with New Hampshire and Massachusetts, plus tourist outlet malls and proximity to the ocean, had a live drawing on television for what turned out to be 3 leisure licenses pointed out, which should be awarded “as fair and just as possible”.

Based on the zoning that the voter voted on, Industrial Areas 1, 2, and 3 could have leisure shops, with a later decision to allow one shop in each zone. Everything went ahead with the usual processing standards in constitutional states. In that case, the state of Maine would receive $ 250 for each state-level application, and the city would charge $ 750 per application. The city put in place safeguards to “stay fair” like one filing per EIN or federal tax ID, and ownership of each “S” corporation ended up being unique and individual, so one person couldn’t get two licenses.

Little did Kittery’s select know that deep pocketed sharks circled and smelled blood in the water.

The first crack in the armor

The first hint of inappropriateness came around the middle of the planning process and only a week or two before the live application began. In their rush, the Kittery Selectman failed to ratify a wetland zoning formality created for gas stations and car washes so that these facilities would not be too close to wetlands in the event of an underground gas leak. While the statement said that “they just forgot to raise a hand and acknowledge that pharmacies are not covered by the wetland protection provision (since they pose no more of a wetland threat to wetlands than a shoe shop or pizzeria), is the most technically “was noticed by a law firm, and that firm decided to remove one of the qualified buildings near the wetlands from their list of eligible locations. Since the Selectmen were unable to ratify this tiny detail by hand or vote, all qualified buildings near wetlands had to be disqualified due to a procedural error at a Selectman meeting.

As the saying goes: “I smell a rat”. Someone wanted sites removed from the eligibility list to improve their chances, even though a pharmacy doesn’t have underground storage tanks or environmental concerns, it’s the same buildings that house steam and shoe stores today. Many locations were now deemed not to be eligible to apply as a location for a pharmacy.

Fast forward to application week and application deadlines, and the town of Kittery ended up receiving over 700 applications, bringing in over $ 530,000 in application fees for the town alone. Since each commercial zone 1, 2 and 3 would have its own unique draw, the numbers were skewed depending on the number of qualifying buildings that could be submitted as a location address on the application. For example, Industrial Zone 1 was the largest zoned area and contained most of the buildings that could be used for licensing and therefore had the most uses. Zone 2 was the second largest zone, followed by Zone 3.

But it wasn’t Kittery’s greatest sin to have some of the viable buildings and applications removed from most of the licensing agreements through a procedural vote. In most jurisdictions, if an applicant finds a landlord willing to allow a cannabis business to rent and the building is in the correct zone, they are essentially “married”, an applicant is location tied, and the application becomes submitted. This particular landlord didn’t like this situation and wanted to increase the likelihood that their building would get a tenant at a pharmacy, so she went to the selection man and had the rules changed so each landlord could take as many applications as they wanted. Applicants # 1, # 2, # 3, etc. could all use “1 Main St” as their location if they win a license. This was a godsend for the landlords as they can now hang a “For Sale” sign on their doorstep saying they accept all applicants for cannabis dispensaries, for a fee, of course. The fees for simply using an address for application ranged from $ 2,500 to $ 5,000, according to our research. The landlords then charged the applicants a “processing fee” regardless of whether the applicant won the lottery, it was pure “pay-to-play” by the landlord who billed the applicants, and the landlords made some nice profits when they let people give their address on their request regardless of the lottery result.

The sharks attacked

This one void created out of greed and opportunism gave the big players like MSOs the opening they need in the “fair” lottery. Basically, if you can’t guarantee that your ping pong ball has been pulled out of the drum, make sure all ping pong balls are yours, right? It’s like the card trick where someone says they’re going to pull out the 8 of clubs, they do, but if you check the deck, every card in the deck is the 8 of clubs.

As it turns out, of the 736 ping pong balls in the entire lottery, more than half, or nearly half, were bought and paid for by Theory Wellness, a deep pocket MSO.

As Seacostonline.com reported:

The winners were Mitchell Delaney, who plans to open a store on 181 State Road; Brandon Pollock, planning to open a store at 41 Route 236; and Nick Friedman, whose proposed location is 8 Dexter Lane, Unit 4.

Brandon Pollock and Nick Friedman, who bought hundreds of lottery tickets for about a quarter of a million dollars, are listed as co-founders of Theory Wellness, which operates many marijuana businesses in Massachusetts and Maine.

All three winners will receive the first dibs for Kittery’s three coveted marijuana licenses, though their proposals must be approved by the city. The remaining lots will be placed on a waiting list in the order in which they were drawn.

Pollock and Delany publicly admitted spending over $ 250,000 on applications to create essentially hundreds of suburban businesses in Maine, filing over 350 of the 736 applications, and ensuring the lottery was strong in their favor depending on the business park . If you were the little guy, local guy, or company that wanted to submit a single application and apply in good faith and abide by the moral and ethical rules that were put in place, you never stood a chance.

As it turned out, Theory Wellness won not just one of the three recreational licenses, but two of them, or 66% of the total licenses available. Theory Wellness had already opened a store in Portland, Maine, on Maine Mall Road, about 30 minutes north of Kittery.

Is Kittery unique or special when it’s overrun by smarter sharks with deep pockets? No, the Illinois licensing stories are even worse. Green Thumb Industries is being investigated in Illinois for its “pay-to-play practice”.

The Chicago Tribune, in an article on Filings for 2021, noted that:

Out of 937 companies that submitted 4,518 applications in the past year, only 21 applicants achieved perfect results in their applications to qualify for a first lottery. Losers protested and filed lawsuits, claiming that the KPMG advisor’s rating had given different ratings for identical application information, among other things.

The problems in Illinois are so great that the state government is now running “correction lotteries” for those who were treated unfairly in the first rounds of marijuana licensing. Maybe Kittery, Maine should do the same.

Well-known cannabis attorney Thomas Howard called the Illinois lottery system “total junk” with the likelihood of one team winning 6 licenses as “1 in 212,000,000,000 event”.

Nevada is notorious for cannabis licensing scams and payouts as the FBI is now investigating the licensing process and, in some cases, the winners in Nevada.

JT Burnette, the husband of Kim Rivers, CEO of MSO, Trulieve, is on charges of federal bribery and corruption charges after bragging about paying people to get Trulieve some of their marijuana retail licenses.

The little guy, the honest small business owner, the early citizen who sticks to the rules literally has no chance of a recreational license in many areas of competition. There is just too much money and greed at stake for “the guy who can spend a million dollars” applying not to leave and to win most of the time.

The karmic end of the story is that the landlord who opened the loophole that destroyed the small business and single application company didn’t end up getting a lottery winner. Your building remains unchanged with the current list of tenants and food trucks, no pharmacy, no future sale of the building to a cash-rich pharmacy.

Time will tell if Kittery is considering a corrective lottery or perhaps a refund of the application fee to the 300 or so applicants who were not part of the Theory Wellness group.

Many people may hate theory wellness, but as the saying goes, “hate the game, not the player”. Has Theory Wellness violated any rules outlined in the Kittery licensing mandate? No. Did they have deeper pockets than most applicants and put them where they were basically 50% of the ping pong balls in the bucket? You bet.

Kittery, you never stood a chance when the big boys came into town.

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