Missouri cannabis executives secure new license despite recall

In a significant development for the cannabis industry in Missouri, the co-owners of Delta Extraction, a company linked to a major cannabis product recall, have been granted a new license to operate a cultivation and manufacturing facility. This decision follows the state’s revocation of Delta’s business license in November 2023 due to serious regulatory violations.

The Missouri Division of Cannabis Regulation moved quickly after a 137-page ruling from the Administrative Hearing Commission in February 2024, which denied Delta’s appeal of its revoked license. The commission found that Delta had a “corporate culture of lax compliance with regulatory requirements,” leading to numerous rule violations and a widespread recall of cannabis products.

Despite these issues, one of Delta’s co-owners, AJO LLC, received approval to take over a larger facility in Waynesville in May 2024, which includes several dispensaries. AJO claims it was merely a passive investor in Delta, owning 50% of the company, and asserts that it has been operating the Waynesville facility since 2022 while waiting for the license transfer.

The approval of AJO’s new license has sparked controversy. A group of shareholders connected to Delta is currently embroiled in a lawsuit seeking to reclaim the Waynesville facility, arguing that the state should not have permitted an ownership change given AJO’s previous association with the revoked Delta Extraction.

Lisa Cox, spokeswoman for the Missouri cannabis regulators, stated that while the constitution allows for ownership changes to be denied based on prior revocations, the total circumstances at the time of AJO’s approval did not warrant denial. The ongoing appeal of Delta’s license revocation was still under consideration at the time of AJO’s license approval.

Cox mentioned that the state’s administrative rules do not prevent individuals with revoked licenses from acquiring new ones. However, the division is reviewing its regulations to provide clearer guidelines on this issue.

Following the revocation of Delta’s license, several agent ID cards were revoked for individuals associated with the company. Josh Corson, a principal at AJO, received notice that his agent ID card was pending revocation due to 17 cited violations, including misleading the public about cannabis distillate content. Corson subsequently surrendered his agent ID, while other AJO owners allowed theirs to expire.

The controversy continued as evidence emerged indicating AJO’s deeper involvement in Delta’s operations, contradicting their claims of being passive investors. A St. Louis judge recently denied a motion for an emergency hearing in the ongoing lawsuit, although the legal battle over the ownership of the Waynesville facility persists.

The case illustrates the complexities within the Missouri cannabis industry, particularly regarding compliance and the consequences of regulatory infractions. As the legal proceedings unfold, the outcome may shape future regulatory practices and ownership determinations within the emerging cannabis market.