Ontario cannabis retail regulator warns stores against selling to illicit operators

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The cannabis retail regulator in Ontario, Canada, is warning licensed retailers against selling their inventory to “unlicensed third parties upon the closure of the store.”

The Alcohol and Gaming Commission of Ontario (AGCO) warning came in response to an offer from a company called Leafythings Canada to buy struggling stores’ cannabis inventory.

Leafythings describes itself as a “web platform, mobile application, and advertising medium” involved in events, advertising and “grassroots marketing.”

The company’s website showcases what appear to be illicit cannabis businesses and products, including illegal mail-order services, delivery services and brands.

Leafythings announced last month that it was launching what it called a “retailer support program,” in light of Ontario’s challenging cannabis retail market.

The company “will begin its retail cannabis store support program by buying all available inventory from stores who wish to wind down in a timely fashion,” Jeffrey Neil, Leafythings’ director of community engagement, said in a September news release.

“Store owners we have spoken to have literally cried and were so thankful that we could help them in this way.”

However, Leafythings’ program operates “outside of the regulated market,” according to an AGCO email sent Thursday to licensed cannabis retailers and obtained by MJBizDaily.

“It is the AGCO’s understanding that this program involves the solicitation of cannabis retailers for the purpose of purchasing cannabis in bulk by unlicensed third parties upon the closure of the store,” the regulator noted.

Licensed retailers must comply with the law “to ensure there is no diversion of legal cannabis product to the illicit market,” the AGCO continued.

“Failure to properly dispose of inventory before you close may result in compliance activity by the AGCO or action from other law enforcement agencies.”

To date, the AGCO has authorized more than 1,600 cannabis stores to open in Ontario, with more than 300 more in the application queue.

In some Ontario cities, pockets saturated with cannabis retailers have led to concern that significant numbers of stores might not survive.