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License caps similarly befell Missouri’s medical marijuana program earlier this year after regulators decided to cap the number of licenses to the minimum required under the law. The limited licenses and perceived scoring disparities led to more than 800 administrative appeals, law enforcement and legislative investigations, and a lawsuit challenging the license cap.
Even if there wasn’t outright corruption, state Sen. Peter Merideth told POLITICO earlier this year that even the appearance of corruption was problematic. A legislative report penned by a lawyer for the state Democratic caucus cited “credible allegations” of executive branch interference with the corruption investigation. But the Republican-led investigation fizzled out, and it’s unclear whether the Special Committee on Government Oversight will pick it up next session.
“Where there’s money, there’s people in powerful positions able to steer contracts or granting of licenses in one direction,” Kenneth Warren, a political science professor at Saint Louis University, said of the conflict-of-interest allegations. He cited an “endless” list of groups involved in the medical marijuana program that are connected to the Parson administration.
While Arkansas’ marijuana regulators scored the applications themselves, Missouri regulators hired a third party. In both cases, detractors pointed to scoring irregularities and questioned how “blind” the process really was.
A major sticking point in Missouri’s licensing process was the late addition of “bonus points” for locating businesses in certain zip codes after many applicants had already secured real estate for their businesses.
During a trial over the state’s medical marijuana program, the top cannabis regulator testified under oath that the FBI subpoenaed the agency for information involving four medical marijuana license applicants. The subpoena was likely tied to an FBI investigation into utility contracts in Independence, the Missouri Independent reported. The judge in the trial ultimately tossed the case.
“Because the state is delegating exactly who is in control, who is doing the review process of the licenses, who approves them, who creates the applications, etc. it’s a breeding ground for corruption,” said Nourafchan.
The cannabis industry is “particularly vulnerable to lacking a set of safeguards or regularity that might hedge against corruption in other areas,” said Berman. Even with other vice industries like alcohol or gambling, policymakers have been working on regulating those industries for decades. “In the cannabis space, we’re almost literally making it up as we go. No history, no background, no norms,” he said.
States that have largely avoided corruption controversies either do not have license caps — like Colorado or Oklahoma — or dole out a limited number of licenses through a lottery rather than scoring the applicants by merit — like Arizona. Many entrepreneurs, particularly those who lost out on license applications, believe the government shouldn’t be in the business of picking winners and losers and should just let the free market do its job.
“It was far more political than I had ever anticipated,” said Barnes Griggs of her application experience. “People were encouraged to apply, but you didn’t stand a chance. It was already rigged.”