Jan 25, 2019
Ontario pot shop lottery winners pressed for details amid dealmaking
Ontario is seeking additional information from pot shop lottery winners about third-party agreements amid a flurry of deal-making among retailers and pot producers to partner with potential licence holders.
The Alcohol and Gaming Commission of Ontario (AGCO), tasked with regulating the province's retail cannabis outlets, submitted a supplementary questionnaire to the 25 lottery winners earlier this week seeking detailed information needed to have their licence awarded, according to documents obtained by BNN Bloomberg.
In light of reports about retailers and pot producers scrambling to link up with a lottery winner, the AGCO is now requesting 15 additional points of information about a potential licence holder's relationship with a third-party, including details about management services, revenue sharing, advice given, equity interests, and shareholder agreements.
"The AGCO requires detailed information, including copies of any agreements with another party, regarding the following matters with respect to another party's interest in the applicant or the operations or proposed operations of the applicant," the questionnaire states.
The AGCO conducted a lottery earlier this month to randomly select the 25 parties who would eligible to apply for a licence to open a cannabis store in the province. Those selected had until last Friday to submit their applications along with a $6,000 non-refundable fee and a $50,000 letter of credit.
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There were no big cannabis industry names among the 25 winners, with sole proprietorships making up the vast majority. Those lottery winners, most of which did not have any retail experience, demanded as much as $7 million to partner with a retailer or pot producer under a franchise arrangement.
Ray Kahnert, a spokesperson with the AGCO, said in an emailed statement to BNN Bloomberg that the questionnaire is a way for the regulator to identify "any outstanding materials or documentation we require for due diligence, eligibility and licensing assessments."
"Certainly we’re aware of what’s being discussed in the news about applicants entering into agreements with others," Kahnert said. "The lottery rules are very clear about application requirements and that those selected in the lottery must maintain control of the business."
Kahnert added the additional information sought by the AGCO shouldn't impede the launch of pot shops in Ontario on Apr. 1. However, if a licence holder fails to open on time, they could lose all of their deposit if they delay opening for a full month.
More than half of Ontario's eligible municipalities have opted to allow cannabis stores to operate in their jurisdictions, according to the AGCO. The 25 licences were divided regionally, with five going to the east of the province, seven in the west, two in the north, six in the Greater Toronto Area, and five in Toronto itself.
Once lottery winners submit supplemental information requested by the AGCO and obtain their licence, they will inform the regulator where they want their store to operate, which will be subject to a 15-day public comment period.
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