The promise of Missouri’s cannabis microbusiness program was clear: create genuine opportunities for those most harmed by the war on drugs. State regulators designed the program to be a pathway to ownership and wealth for social equity applicants. Instead, they found that well-connected investors have been using complex contracts to siphon control away from the very people the program intended to help.
Now, after revoking dozens of licenses tied to these questionable agreements, the Missouri Division of Cannabis Regulation (DCR) is fighting back with new, stricter rules aimed at protecting the integrity of the social equity program.
Wolves in Sheep’s Clothing
When Missouri voters legalized recreational marijuana in 2022, the constitutional amendment included a specific provision for “microbusiness” licenses. These were intended for disabled veterans, low-income individuals, and those with past marijuana convictions.
However, investigations by the Missouri Independent over the last two years revealed a troubling pattern. Wealthy investors and consulting groups flooded the application lottery by recruiting eligible social equity applicants. Once a license was won, these applicants were often presented with operating agreements that looked more like traps than partnerships.
Regulators have flagged these contracts as “predatory,” noting that they often strip the license holder of meaningful control. In many cases, lenders locked applicants into high-interest loans—sometimes up to $2 million—while imposing “break-up fees” as high as $2.5 million for exiting the deal. The state argues that these financial terms pressure applicants to surrender ownership to investors, bypassing the constitutional requirement for the license to be majority-owned and operated by the eligible individual.
So far, the state has revoked 35 of the 105 issued microbusiness licenses. Notably, 22 of those revoked licenses involved contracts drafted by the same St. Louis-based law firm, Armstrong Teasdale.
New Rules to Protect Ownership
To address this trend, the Division of Cannabis Regulation has proposed new rules aimed at preventing these schemes before issuing a license. The public comment period for these rules runs through January 14, 2025.
Here is how the state plans to close the loopholes:
Front-Loaded Contract Review
Currently, regulators often discover questionable contracts only after issuing a license, which leads to messy revocation battles. The new rules propose shifting this review process. Regulators would examine operating agreements and financial contracts before granting the final license, ensuring compliance from day one.
Redefining “Majority Owned and Operated”
The state is tightening the definition of ownership. It will no longer be enough to simply list a social equity applicant as a majority owner on paper. Under the new rules, the eligible individual must have actual operational control. This means they must have the power to:
- Direct management and policies.
- Enter into binding agreements.
- Make high-level business decisions without needing permission from minority investors or “consultants.”
Eliminating the “Middleman”
Regulators discovered that “designated contacts”—often consultants acting as intermediaries—were keeping eligible applicants in the dark about their own businesses. The new rules would require the designated contact for any application to be a majority owner of the license, ensuring direct communication between the state and the actual licensee.
Mandatory Education
To prevent applicants from signing bad deals out of ignorance, the state will require applicants to complete an online training course. This curriculum will specifically cover predatory practices and legitimate funding opportunities.
Transparency in Lending
Regulators will now explicitly demand to see all business agreements that affect control or financial interest. This includes loans, consulting agreements, and any contract where an outside entity stands to gain financially from the microbusiness.
Why This Matters for Social Equity
The distinction between “investor” and “predator” is crucial for the survival of the microbusiness program.
These microbusinesses weren’t created just to add more products to the shelf—they were built as a form of restorative justice. When outside groups use predatory tactics to purchase these licenses through back-door contracts, they actively break the rules and undermine the will of voters. This behavior continues a legacy of exploitation against the very communities this program aims to uplift.
Missouri is enforcing stricter standards to ensure the industry’s profits and opportunities benefit the people who were promised a seat at the table.
The Division of Cannabis Regulation expects to file the final version of these rules in early 2026, just in time for the third round of microbusiness licensing.
For current and future applicants, the message is clear: ownership must be real, control must be genuine, and the state is no longer willing to look the other way on contracts that say otherwise.
