Who’s Who in Your Local Cannabis Industry? That May Be a Secret

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Faced with a pile up of seven lawsuits, all challenging the second batch of cannabis licenses approved by state officials last December, a Nevada judge this week invited all the attorneys involved to participate in the same hearing, as a way to try to avoid conflicting rulings.

The plaintiffs, now awaiting a May 24 hearing, seek to stop the state from granting the licenses, which, they say, were doled out unfairly. And, perhaps more to the point, in secret. So that no one can tell who won the licenses or how the applicants were scored.

These and other cases speak to underlying conflicts in the emerging industry: Who gets to partake in it? Who decides, and how? And how can anyone weigh such decisions if they are not out in the open?

To date, a large swath of the United States has legalized some form of cannabis, either for adult or medical use. As a result, people across the country are building businesses and making millions.  

Yet, depending on where the businesses are located, publicly available information on who’s selling legal cannabis in your city can be scarce, as is information about how they were approved to operate.  

Should this growing industry be more transparent? Proponents of access to information—including applicants who’ve been denied licenses, cannabis policy reform advocates, some members of the media, and some interested citizens—maintain that the public should know who’s profiting from this highly regulated industry. Disclosing who’s been approved for licensing and why, they argue, is a necessary safeguard against corruption, one that could help regulators ensure that companies are not controlling more entities than allowed under state laws.

Social justice concerns are also at stake. Given that prosecution under prohibition disproportionately targets communities of color, advocates hold that those very communities should now get a slice of new economic gains, and such concerns may require a mechanism for seeing who gets an opportunity to be in the industry.

On the other hand, because cannabis is still federally illegal, some stakeholders—including license recipients, their attorneys, and certain government regulators—affirm that confidentiality is needed to shield the industry from prosecution. For this reason, some states, like Arizona, don’t even supply the locations of dispensaries or the names of physicians willing to write medical cannabis recommendations. Moreover, just as some on the pro-transparency side argue that openness around the licensing process can curtail corruption, some government officials contend that withholding information about those who make licensing decisions may prevent efforts to influence the process.

“There’s a real policy tension here,” Andrew Freedman, a cannabis legalization expert who served as Colorado’s first Director of Marijuana Coordination, told Cannabis Wire. “For the most part, people want to know how big the industry is, where it’s concentrated, for this information to be part of public dialogue.”

However, he noted, because cannabis remains federally prohibited, there are also real privacy and safety concerns for those in the industry. “We ran into that conflict head on in Colorado,” Freedman added, underscoring that “a lot of times it’s still a cash-only industry.”

To gauge the current level of transparency, Cannabis Wire set out to understand which states publicly release information—and how much—on license holders, as well as on the licensure process itself.

And we found a very mixed bag. Due to patchwork cannabis legislation across the country, there is a high degree of variance. Overall, though, the public has limited access to information on who stands to gain from this booming, billion dollar industry.

Pennsylvania: Redacting Their Own Names

In states that have regulated cannabis sales, the availability of licenses falls on a spectrum. Some states have no predetermined amount (though this can be subject to local ordinances, like in California). In other places, like New York, there is a limited number of licenses available.

For instance, when Pennsylvania issued its first round of medical cannabis permits back in 2017, the state chose twelve cultivation sites and twenty-seven  permits for dispensaries among more than 400 applicants. Then, before making them public, the state’s Department of Health instructed candidates to redact their own applications, giving them a chance to protect proprietary information. The Department then proceeded to add its own redactions, blacking out Social Security numbers, bank routing numbers, and details about the applicants’ security plans.

Redacting such sensitive information made sense. Yet ultimately, these practices yielded significant disparities among materials disclosed to the public. Some applicants were straightforward and even disclosed what they paid for land or leased property. Other companies, however, went so far as to redact their own names. Further, Pennsylvania’s Department of Health also withheld the names of the panelists who scored the applications.

In response, PennLive filed a Right to Know request for both sets of information, and the state’s Office of Open Records ordered the Department to republish the applications with fewer redactions. The Department was also ordered to release the names of those who vetted the applicants—a decision it appealed, arguing that maintaining the panelists’ anonymity served to safeguard them from lobbyists. The legal tug-of-war went on for months. More than a year later, the Commonwealth Court upheld the initial ruling, and the Department was forced to reveal the panelists’ identities.

Missouri Vs. Ohio

Other states are also embroiled in battles over information. The Missouri Department of Health and Senior Services, for example, has received a total of 481 pre-filed application forms accompanied by $3,470,000 in fees, including 260 forms for dispensary facilities.

The applicants’ identities, however, remain unknown. Local news organizations, including the News-Leader and the St. Louis Post-Dispatch, have requested copies of the submitted forms, but the state has refused to make this information public. The Post-Dispatch, in fact, went on to sue the Department, asking a judge to order the release of copies of submitted applications.

Out in Ohio, things are a bit different. There, the state’s Medical Marijuana Control Program provides a list of Provisional Dispensary Licensees, which also indicates if the applicant is “economic[ally] disadvantaged”—language used by the state to track whether at least 15 percent of licenses were awarded to businesses mostly owned by “Blacks or African Americans, American Indians, Hispanics or Latinos, and Asians.” (In contrast to other states’ social equity programs, which determine eligibility by, for example, identifying geographic areas with disproportionately high rates of cannabis-related arrests and incarceration, this race-based approach in Ohio was deemed unconstitutional last November.)  From this page, anyone can view submitted applications, which include applicant names, by clicking on their respective links. Ohio also enables the public to view application scores, calculated by the state’s Board of Pharmacy, as well as which dispensary applications were rejected.

Shining a Light in Nevada

Even in jurisdictions where, at the state level, the number of available licenses is not capped, transparency about who runs the businesses is inconsistent. California, for instance, enables the public to access up-to-date information on retailers, including their license numbers, license status, contact information, and the names of business owners.

Recently, California lawmakers made a move to take transparency in the cannabis industry a step further. Late last month, State Senator Anna Caballero introduced a bill that would require licensing authorities to post certain information regarding applicants or licensees on their websites, including specified disciplinary actions taken against them. The bill would also authorize licensing authorities to disclose this information by supplying links to original documents.

In contrast, other jurisdictions that have legalized adult use and have a functioning program in place, such as Nevada, make no mention of the business owners.

In fact, this is why in March, the aforementioned group of cannabis business owners sued Nevada’s Department of Taxation over secrecy around licenses. Notably, all seven plaintiffs are owners of medical cannabis dispensaries who applied for recreational licenses, but were turned down. The suit, which seeks an injunction to stop the state from issuing a second batch of conditional adult use licenses, alleges that the department “has arbitrarily and capriciously refused to permit un-approved applicants to review the scoring for their conditional license application until after the time to appeal the licensing determination has expired” and “will not provide them with any explanation as to how their score . .  . was determined.” The plaintiffs’ attorneys, who are also calling for the department to “disclose all applications and scoring information pertaining to each and every applicant for conditional licensure,” argue that in “refusing to reveal the information necessary to audit the process under the guise of ‘privacy concerns,’ [the Department of Taxation] has cavalierly taken the position of ‘just trust us,’” a system that is “ripe for the potential of corruption.”

But that could soon change. Earlier this year, Governor Steve Sisolak issued an executive order calling for the creation of a Cannabis Compliance Board, which will “work to regulate and grow” Nevada’s cannabis industry.  Then, in late March, Sisolak and the Department of Taxation introduced a bill to amend to Nevada law, which, if implemented, would make information about applicants for licenses and the approval process (including the methodology used to score applicants, along with the final rankings) subject to disclosure.

In early April, Nevada’s Senate passed the measure, which then made its way to the State Assembly.  During a recent hearing, J. Brin Gibson, who serves as General Counsel to Governor Sisolak and will be part of the Cannabis Compliance Board, confirmed that the impetus for the bill is the “number of lawsuits out there” and asserted that current Nevada policy is “impossible to defend because there is no insight into how it happened.”

“There is a lot of distrust that surrounds this latest award of certificates,” Gibson added. “And we’re not going to be able to legitimize that process—we just can’t—if we don’t have more information.”

Then, when the Assembly’s Taxation Committee questioned him about concerns regarding potential backlash at the federal level, he added: “I don’t think you can have it both ways. I think that if we’re going to . . . argue states’ rights . . . we have to act like that. And I think that requires that we not invoke a cloak of confidentiality to protect people and their names from whatever their fear is, while at the same time making the argument that this is a legitimate operation.”

In an email to Cannabis Wire, Governor Sisolak said he understood the frustrations of cannabis license applicants with the state’s current licensing process. “And my administration is committed to enacting meaningful reforms to increase transparency.”

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