A St. Louis lawmaker is demanding that Missouri regulators investigate what she called an “egregious exploitation” of social cannabis equity licenses, following a report by The Independent last week about a company that recruited out-of-state license applicants on Craigslist.

State Sen. Karla May, a St. Louis Democrat, sent a letter on Thursday to the state’s Division of Cannabis Regulation and Missouri Attorney General Andrew Bailey demanding action.

Voters approved the microbusiness program last November, as a provision in the constitutional amendment that legalized recreational marijuana. May wrote that the program was intended to “rectify past injustices” of marijuana criminalization.

“I condemn these actions as an affront to the principles that guided the citizens’ initiative,” May stated. “The people of Missouri spoke loud and clear in their support for a fair, inclusive cannabis industry that addresses historical disparities. It is disheartening to see bad actors attempt to exploit the system for personal gain, undermining the very opportunities we sought to create.”

May’s letter was sent hours after The Independent published a story revealing that a Michigan real estate group, Canna Zoned MLS, offered to pay eligible people to enter lotteries awarding social equity licenses in Illinois and Missouri.

But two applicants told The Independent that they didn’t realize the company’s contracts forced them to relinquish all control and profits of the business, according to an agreement they said they signed.

On Oct. 2, the state issued 48 licenses to the winners of a lottery that determined who gets to participate in Missouri’s microbusiness program. Of the 16 dispensary licenses awarded, the Michigan group obtained two of them — one in Columbia and the other in Arnold.

“The schemes orchestrated by these applicants potentially involve fraudulent activities,” May said, “gaming the system to secure licenses through the exploitation of legacy advantages that the ballot language aimed to mitigate.”

Jeffrey Yatooma, the designated contact on licenses associated with the Michigan group, told The Independent last week that the group rejects “any allegations that we have defrauded the state.” Any final agreements with partners in Missouri, he said, “will absolutely comply with all state laws and regulations.”

In response to May’s letter, Yatooma told The Independent he stands by his previous statements.

Division of Cannabis Regulation Director Amy Moore responded to May in a letter Friday morning.

Moore said the division shares the senator’s desire that the program be “implemented exactly as designed and that no unscrupulous actors be allowed to subvert the law.”

“In fact, the law itself anticipated the need to investigate whether microbusiness licenses were awarded to eligible applicants post licensure,” she said, “and we are currently conducting that mandated verification process.”

   

Moore said the division’s “post-licensure verification” for the 48 license winners will be completed in early December, followed by a public report of the results.

“If we determine that an application was false or misleading in any way, the license issued based on that application may be revoked,” Moore said.

The division has broad authority to conduct investigations.

Under a new rule that went into effect on July 30, the department now has the power to issue subpoenas directly to licensed marijuana businesses and third parties during an investigation to obtain records and information.

“Applicants and licensees must cooperate in any investigation conducted by the department,” the rules state.

In her letter, Moore said that if the division uncovers activity “that is of concern but outside our jurisdiction, we will refer that information to the appropriate authority.”

The attorney general’s office, which also received the letter, did not respond to a request for comment.

After reading The Independent’s article, state Rep. Ashley Bland-Manlove, a Kansas City Democrat, called the actions “predatory and criminal.”

“I encourage all states involved to revoke any licenses issued and reissue them to actual residents who qualify,” she said. “I’d like to see criminal charges for the lawyers who created the contacts and whomever created the Craigslist posts for fraud.”

Jack Cardetti, spokesman for the Missouri Cannabis Trade Association, said it’s up to the division’s verification process to make sure the laws and rules were followed.

“Article 14 of the Missouri Constitution entrusts the agency to run this voter-approved program effectively,” he said, “and we hope they live up to that.”

Missouri Independent is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Missouri Independent maintains editorial independence.