Ontario Cannabis Licensing Stalls as Dispensaries Sue Over Lottery System

Ever since Ontario announced it would conduct a lottery for cannabis licensing, the backlash was swift and ongoing. By 2019, the Ontario Alcohol and Gaming Commission faced a class action lawsuit from eleven private dispensaries. These dispensaries had won the lottery and received a license, only to have it stripped away over a technicality. As a result, a judge in the Ontario Superior Court suspended all cannabis licensing until the lawsuit was settled.

Bounced Emails to Blame

The dispensaries claimed their licenses had been unduly rescinded, while the province pointed to the late submission of their standby letters of credit. The discrepancy traced back to an email that bounced for these eleven applicants. That email congratulated them on winning a license, but it also reminded them of a 5-day deadline that started the moment they received it.

The Ontario AGC learned of the situation and resent the email a few days later. However, it did not adjust the deadline accordingly, which led to the loss of the licenses. The affected plaintiffs then hired a lawyer who explained the case to Justice David Corbett of the Superior Court of Ontario. After hearing how the issue arose, Justice Corbett suspended all licensing from the Alcohol and Gaming Commission until the case was resolved.

Dispensaries Unlikely to Open in October

At the time, 25 private recreational dispensaries were already approved. This second lottery was set to license an additional 42 dispensaries in Ontario, including eight more on First Nations reserves. Now that the judge had halted all licensing, however, retailers could not open in October as originally anticipated.

Justice David Corbett was expected to make his final determination on September 25, but all licensing remained halted until further notice. He did consider restoring the disqualified applicants in the interim. Ultimately, though, he decided that doing so might cause more problems than simply pausing licensing for a couple of weeks.

Judge Freezes Cannabis Licensing

Attorney Peter Brauti, legal counsel for the 11 lottery winners, was encouraged by the decision to freeze the process pending a final ruling. In fact, he considered it a “huge win” and a “grand slam.” The plaintiffs would then wait anxiously over the next few days to see whether the judge would reinstate their dispensary licenses.

If the judge ruled for the dispensaries, the Ontario Alcohol and Gaming Commission would have to issue Retail Operator Licenses and Retail Store Authorizations so they could open. It would also mean licensing could resume for more lottery winners. Moreover, as more dispensaries opened, competition would likely increase and drive down the price of recreational marijuana products.