Predatory Contracts in the Cannabis Industry
After signing with Cannabis Business Advisors in September 2024, Lacy reported that the consultants effectively took control of communications with the state regarding her conditional licenses, leaving her uninformed about critical developments.
Emails reviewed by WHYY News indicate that Danielle Popov served as the primary contact for the Office of Marijuana Control (OMC). Popov was reportedly involved in 66 social equity license applications in Missouri for 2024, as noted by CRB Monitor News, but did not respond to requests for comment.
Additionally, Lacy claims that the consultants formed a limited liability company, Sepia Koala, on her behalf without her authorization. Although the conditional licenses were ultimately denied, which rendered the contracts void, Lacy indicated that, had they been activated, she would have incurred exorbitant fees for the consultants’ services.
The consulting contract reviewed by WHYY News includes a staggering $1 million termination fee. Moreover, from the date the license is issued until the business becomes operational, the consulting firm would bill her $10,000 monthly, escalating to $50,000 per month for the first six months of operation, and subsequently increasing to $75,000 per month, plus any reimbursable expenses.
Lacy also entered into an agreement with Cannabis Business Advisors that could permit the firm to acquire her license. Under Delaware law, a social equity license can be transferred after three years to someone who would not normally qualify for one.
The Value of Licenses
Sanderlin noted that conditional licenses currently range from $200,000 to $600,000, depending on the type, but their value could significantly rise once businesses become operational. According to Murphy, Cannabis Business Advisors is not interested in directly selling legal cannabis; rather, their focus lies in flipping licenses.
“The actual business of selling legal weed is not easy,” Murphy stated. “There’s intense competition from a sophisticated black market that avoids taxes. I can invest half a million dollars to secure ten licenses and sell each for $1 million. This model emphasizes flipping licenses rather than cannabis sales.”