Concerns arise as Ontario limits pot retail licenses to 25 in new lottery system

Last Thursday, Ontario’s Conservative government announced they would implement a phased approach to cannabis retail licensing. Despite promises to the contrary, pot shop retail licenses have now been capped at 25 beginning in April.

Blaming the ongoing cannabis supply shortage that has plagued Canada since the start of recreational sales in October, government officials said in a statement that they could not issue an unlimited number of licenses to prospective retailers.

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“This is a national issue that demands an immediate response from Justin Trudeau and the federal government,” read the official statement, which had no shortage of jabs at the federal government. “The Government of Ontario has brought this to the federal government's attention repeatedly.”

 

Previously, Liberals had planned to open 40 government-run retail, shops, but those plans changed following the election.

Frank Robinson, a franchise lawyer, and partner at the Toronto law firm of Cassels Brock & Blackwell LLP told PotNetwork that the sudden decision to limit licenses had put many potential industry entrants into a precarious position of uncertainty.

“When the Government of Ontario announced a limitless licensing scheme as part of its initial legislative agenda, many industry participants, including licensed producers, established retailers, as well as other emerging brands, planned for and invested in aggressive and immediate rollouts through direct development or partnerships with others,” Robinson told PotNetwork. “The government's decision to restrict cannabis retail licenses to an initial phase of 25 stores awarded through a lottery system to geographically scattered stores across the province has abruptly limited access for those who intended to be early entrants into the marketplace.”

Licenses will now be awarded through a lottery system, which will be overseen by a third party. Applicants can submit their names between January 7 and January 9, with the lottery itself conducted on January 11. Further details are to be available on the Alcohol and Gaming Commission of Ontario website.

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Robinson told PotNetwork that for those who already made investments based on the old system, it is a marked change.

“While some plans will proceed, the government's new tone and direction are markedly different, indicating a substantially slower and more structured process,” said Robinson. “While the delay might allow for production and supply to catch up to demand, the sudden change in course has left those who had made investments on the basis of the government’s initial approach with arrangements in flux, capital tied up for indefinite periods, and perhaps most significantly, uncertain about Ontario's retail future.”

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