RETAIL CANNABIS LOTTERY ENCOURAGES SPECULATION

Proposed selection process needs work, Trevor Fencott and Harvey Shapiro say.

Edmonton is about to make an important decision on how recreational cannabis will be sold in the city.

Get it right and it will build on the good work already done to ensure that entrepreneurs and companies of all sizes can take part in the market. Get it wrong and it risks undercutting that market before it even begins and allowing speculators and possibly even criminal elements into the process.

The decision involves a simple issue: the process for determining who will get a permit from the city to operate a cannabis retail store. City of Edmonton administration says its proposed system, a random selection process lottery where any entity could submit an expression of interest in obtaining a permit, would create a system of fairness.

Unfortunately, it would also create considerable uncertainty into the market that would prevent many cannabis retail businesses from investing in Edmonton and force the city to unnecessarily duplicate much of the work done by the Alberta Gaming, Liquor and Cannabis Commission (AGLC) to vet prospective retailers, including criminal background checks, security plans and compliant store design.

The problem with the lottery system as currently proposed is that the city would allow companies and individuals who have not undergone the AGLC’s rigorous Phase 1 due diligence to submit an expression of interest to obtain a permit to operate a cannabis retail store.

That means there is a very good chance at least some of those drawn first in the lottery would be able to secure one of the very limited number of city permits without actually being licensed by the province to sell cannabis.

This also means that the city would allow an entry point for speculators who have no intention of operating a cannabis retail operation in a particular location to try to secure a development permit for a store and then either sell it to a legitimate entrepreneur at a significant profit or sit on it so they can keep key competitors out of the best, high-traffic locations.

Creating an unregulated secondary market for development permits, which could allow criminal elements to become involved, is in nobody’s interest but the speculators and would have significant negative implications for the legitimate Edmonton retail cannabis market.

Alberta’s process to license recreational cannabis retailers requires applicants to make a significant investment and undergo a high level of scrutiny. By allowing other players into the market who have not gone through the AGLC’s compliance process, and by allowing those players to potentially block locations in the city or hold them for a hefty premium, Edmonton would put legitimate businesses who want to bring retail cannabis here at a considerable disadvantage. Many of those businesses will simply decide not to invest here and take their business elsewhere.

The city has said that it wants to deter speculation, but the current lottery system being proposed actually encourages that speculation. Fortunately, there’s an easy way to fix this.

When the urban planning committee takes up this issue on May 22, it should insist that the proposed random selection process lottery be amended to require all applicants for cannabis retailing development permits to have gone through the process of submitting a licence application to the AGLC.

This would ensure that only those organizations and individuals who intend to open a responsible cannabis store based on the AGLC’s regulations are allowed to obtain development permits, while at the same time encouraging a predictable, business-friendly environment that will allow for investment in Edmonton through construction and job creation.

If the City of Edmonton doesn’t close this speculation loophole, many keen local entrepreneurs who have shown their commitment, passion and aptitude to bring responsible cannabis retailing to Edmonton will lose out. So, too, will Edmontonians who expect their city to establish a system that is responsible and fair.

The City of Edmonton has an opportunity to create a successful retail cannabis market and be looked upon as a leader of Canadian municipalities. We just need to take the first step.