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3 Things About the Ontario Lottery

Last year, the Ford Government was widely lauded by the cannabis industry as moving forward with the smartest retail plan in the country.

Ford scrapped the Wynne Government’s LCBO-type model and moved ahead with a “free market” approach. They seemingly learned what other Provinces did well – and poorly. They were not going to cap the number of retail licenses approved and, more or less, they were going to let the free market decide how many cannabis stores were ideal for Canada’s largest Province.

Fast forward to now.

Ontario currently has a cap of 25 retail licenses for 2019. The opportunity to apply for these licenses were, ostensibly, drawn from a hat. Then, once pulled there is an incredibly aggressive timeline set by which the retail shops must be opened. Meanwhile, municipalities are still able to opt-out of retail cannabis in their communities. And so, the question becomes, “What could the Province have done better in this process?”

Here are three thoughts:

1. Opt-In/Opt-Out Timing

Before any lottery winners were pulled from the hat, municipalities should have declared their intent – ‘in’ or ‘out’ – of retail cannabis in their communities. This is no small issue. In California, one of the biggest impediments to a smooth adult-use roll out has been that cities in California have said no to retail. While the trend in Ontario seems to be on a more positive trajectory (Collingwood, Ajax, Cobourg and Port Hope this week alone) in terms of approving cannabis retail in their communities, having the lottery pre-date the opt-in/opt-out deadlines provided another potential roadblock and delay for lottery winners.

2. Pre-Qualifications for Lottery Participation

The only qualifications for entering the cannabis retail lottery from the Alcohol and Gaming Commission of Ontario (AGCO) was a $75 fee and access to the internet. That’s it. As a result, nearly 17,000 people and companies threw their hat in the ring. Now, the 25 golden tickets (and those on the waitlist) are scrambling to get licenses, locations, money, partnerships and everything else in order to for an April 1 open date. We don’t know how successful these 25 winners will be in this process – but it is clear, any type of pre-qualification would have helped ensure April 1 open dates. What type of pre-qualifications would have been best? Take your pick: a lease or option on a location, an application for an operators license, some sort of previous retail or cannabis-related experience, a line of credit. Nearly any type of pre-qualification would have raised the bar on applicants AND gone a long way to ensuring April 1 open dates – the clear goal of the AGCO lottery process.

3.  Farm-Gate Out of the Gate

The initial 25 retail licenses do not include farm-gate stores at Licensed Producers’ facilities. This is a mistake. The Province is rightly concerned with supply shortages – but wouldn’t LPs be most compelled to make sure that they had their own supply available at their own locations? Bottle shops don’t run out of their own beer. Wineries always have their onsite shelves stocked. Why not at least allow LPs to open their own stores, onsite, from the beginning? At the very least they are prepared and are the most likely to have supply.   

Don’t worry though – even though the 25 lottery winners may not be folks who will set the world on fire with their retail prowess, some of have found good helpers and thoughtful (and well-resources) partners. AND, even if none of the 25 open by April 1st, the world is not ending.

Legalization is a process – and while retail is an important part of it – a year from now, we’ll look back on this and it will all (hopefully) seem funny.

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