Jason Smith and his partners believe outsiders are teaming up to set up separate LLCs and apply for licenses for the exact same properties.
LOUISVILLE, Ky. — About 50 medical marijuana dispensary licenses are up for grabs in Kentucky.
The Department of Health and Family Services (CHFS) said 45 applications had already been received as of Monday.
Many more pharmacy applications are likely to be submitted when the application portal closes on Aug. 31.
This means that the winners of the licenses will be selected by lottery.
“The lottery is the best way to ensure that everyone has a fair opportunity and a fair chance,” Sam Flynn, executive director of the Kentucky Medical Marijuana Program, said April 18.
But some small business owners interested in opening stores that sell medical marijuana question whether the lottery gives everyone the same chance of winning.
“One of my partners owns a property, and he was actually contacted by a major company asking if they could buy the property or lease it conditionally and put in a bunch of offers,” said Jason Smith of Bluegrass Buyers Club LLC. “They didn’t know that we were also submitting offers in the process.”
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Smith and a few college friends formed a small company, filing an application to open a pharmacy in Lexington with plans to open pharmacies in other designated areas.
“Oh man, this is clearly not a level playing field,” Smith said.
He said he and his partners believe outsiders are working together to set up separate LLCs and apply for licenses for the exact same properties.
“They’re saying, oh, I have one retail location, but I’m going to submit 20 different applications for the same address,” Smith says, thus increasing their odds of winning the lottery. “With application stacking, for every egg I submit in one area, they could have 20 or 30 eggs in their basket, so it’s obviously unfair.”
Smith emailed the Kentucky Medical Marijuana Program with the following questions: It appears that multiple out of state companies are using one retail property to submit 10+ dispensary license applications on one property with conditional leases. This is happening in every area. Is this allowed? The company contacted us and said they want to pay a fee to stack their applications on these properties. It looks like they will be disqualified. Can you tell me if this is allowed?
He said this is the program’s response: There is nothing in the regulations that would disqualify an applicant if they submit a cannabis business application with the same address as another cannabis business applicant.
Meanwhile, CHFS, which oversees the program, told FOCUS that applicants must disclose whether they are under a parent company.
The Cabinet also said it was not aware of LLCs being set up under parent companies to stack multiple applications for the same location, which it said was “prohibited.”
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The Bluegrass Buyers Club doesn’t believe everyone applying from outside Kentucky is following the rules.
The group wants the state to be transparent about who has applied and give them and the public a way to actually track the paperwork.
They complained that they were already disadvantaged by the deep pockets of big, out-of-state corporations.
All pharmacy applications are subject to a non-refundable $5,000 processing fee, and all applications must separately demonstrate access to $150,000 in capital.
That puts a much bigger burden on small businesses.
“We don’t know how many out-of-state businesses are going to apply, how many applications we’re going to get in one place, or how much money they’re going to put into it,” Smith said, “but we know we’re going to have to fight for it.”
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