Based on our conversations with the Liquor Control Board and our review of the applicable regulations, we have concluded that it is possible to purchase a stake, even a large stake, in an I-502 retail lottery winner’s business. Possible, but tricky.
Basically, here is what you need to know:
- Lottery winners can add new owners and/or financiers to their existing license application before their initial interview with an LCB investigator. But once someone is on the application, they cannot be removed or changed without incurring a penalty, which for producers and processors is a six-month application processing delay.
- There is no penalty for a pre-interview addition.
- You CANNOT remove an original applicant before your cannabis business has received its license, but you can do so after that, provided that the LCB has approved of any new business owners.
This means that if you are interested in buying into the I-502 retail marketplace you should proceed with caution. You will need to coordinate your purchase with the existing lottery winners to negotiate ownership percentages and you will also need to revise and re-submit all relevant documentation to the Secretary of State so as to avoid any LCB licensing delays. You will also want to be sure to have all shareholder/investment and operating agreement documents revised and ready to go for your initial interview phone call.
These details are extremely important. If you try to buy into a retail lotto winner’s business incorrectly, you risk torpedoing the licensing process for the business you are trying to join, and you do not want to do that.