Delaware cannabis regulators have rejected “at least” 19 applicants for a marijuana social-equity business permit after determining they were connected to a “predatory” consulting firm accused of hijacking social-equity programs in other states.
It appears to be the latest example of a longstanding nationwide trend: well-meaning state programs meant to create cannabis industry opportunities for low-income people or those harmed by the drug war, subverted by deep-pocketed investors.
What’s happening to marijuana social-equity permits?
According to Philadelphia-based NPR affiliate WHYY, the Delaware Office of the Marijuana Commissioner (OMC) identified 19 cannabis social-equity license applications connected to Arizona-based Cannabis Business Advisors.
Cannabis Business Advisors is run by an investor named Michael Halow, who reportedly mailed postcards to qualified applicants, promising them a partnership.
In exchange for “cannabis social-equity assistance,” such as help with complex license applications and expensive fees, Cannabis Business Advisors had applicants like Jacqueline Lacy sign agreements “she didn’t really understand,” WHYY reported.
According to OMC, Cannabis Business Advisors charged “unreasonably excessive” fees and arranged the relationship in such a way that Halow taking over the permit “is inevitable,” WHYY reported.
The fees included:
- A $10,000 a month fee from the time the license is issued to the first sale
- A $50,000 a month fee for the first six months of operations, at which point it rises to $75,000
- A $1 million break-up fee to end the relationship
Halow did not comment to WHYY. In an interview with the station, OMC Commissioner Josh Sanderlin called the practice “reprehensible.”
Are outside investors seizing cannabis social equity permits?
It’s allegedly the same trick Halow reportedly used to convince social-equity-eligible applicants to work with him in Arizona.
In that state, according to lawsuits and lawmakers, applicants later learned they were on the losing end of predatory deals that saw them lose their valuable permits to their so-called “partners.”
Halow also deployed the same method in Missouri, according to WHYY. Missouri regulators also revoked social-equity permits after an initial lottery.
Delaware adult-use cannabis sales launched last August after the state legalized in 2023.
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How are outside investors subverting cannabis social-equity programs?
The only retailers were existing medical cannabis operators that paid six-figure conversion fees.
That was after state cannabis regulators were flooded with more than 1,200 applications for 125 available social-equity licenses, MJBizDaily reported at the time.
It was unclear how many of these were connected to out-of-state operations like Halow’s, which allegedly canvassed eligible neighborhoods looking for potential partners, WHYY reported.
In an interview with WHYY, James Brobyn, a former president of the Delaware Cannabis Industry Association, called the situation “the worst form of predatory stuff you could think of.”
The rejected applicants have the opportunity to appeal. It’s not yet clear how Delaware cannabis regulators will attempt to proceed.
