Department defends rule changes to vet microbusiness ownership earlier after widespread revocations

The Joint Committee on Administrative Rules reviewed proposed amendments to Missouri marijuana microbusiness rules (19 CSR 100-1.060 and 19 CSR 100-1.190) on concerns the rules must better ensure eligible individuals actually own and operate licenses.

Amy Morgan, speaking for the department, said the changes respond to the constitution requirement for microbusiness licenses and the practical experience of prior licensing rounds. She told the committee, "we are required to take the first 60 days after licensure to verify that every micro business license was awarded to and is being operated by eligible people," and said the department wants to move that verification into the application period so noncompliance is caught earlier rather than by repeated revocations.

The department described an extensive stakeholder process, including draft rules, town halls and public comment, and said its draft definition of "owned and operated" aims to strike a balance between clarity and burden. Morgan said the proposed definition includes an objective element : ownership with at least 50% of voting power and majority authority to direct license decisions, while acknowledging reviewers will still look at the bundle of agreements and circumstances in contested cases.

Members pressed the department on how far the rules should reach. Representative Keithley said she was concerned the draft reads like predicting "noncompliance down the road" rather than limiting review to current ownership circumstances; she asked whether the agency should instead catch transfers during the constitutionally required later preapproval transfer process. The department replied that transfers do require later preapproval but that the constitution also requires a contemporaneous check at licensure, which motivates the proposed application-stage documentation and forms.

Public testimony highlighted legal and practical objections. David Brodsky, a cannabis consultant, argued the proposed lifetime ownership ban for those previously denied or revoked could be unlawful and resemble an ex post facto penalty, saying the department claimed, "Here, DCR is attempting to say that anyone who allegedly violated ownership and operational rules in the past now has a new penalty other than the penalties in place when the act was committed." Brodsky urged the committee to scrutinize the rule for statutory authority and arbitrary or capricious effects.

Denise McCracken, a cannabis attorney, told the committee the department said the draft majority-owned-and-operated language, as she read it, risks stripping ordinary LLC governance protections and could deter investors, noting that most current microbusinesses are organized as Missouri LLCs.

A social-equity applicant who testified said she signed an agreement seeking help from a friend and an advisor and later had her license revoked; she told the committee she had acted in good faith and feared the proposed consequence would bar her from a constitutionally available license. Other public commenters described practical barriers to entry, including limited access to banking and the challenges of funding startups in this market.

Committee members repeatedly asked the department to narrow language that would permanently bar applicants or holders and to ensure rules target intentional or egregious constitutional violations rather than routine paperwork issues. The department said some draft rules and a separate set of informal-feedback rules are intended to address intentional, egregious violations and that the broader package includes mechanisms to lift restrictions where the eligible individual was unaware of noncompliance.

No formal vote on the rules occurred. With several members absent, the committee adjourned and scheduled follow-up work and reconvening Thursday at 8 a.m.