Doubts raised over Ontario’s pot lottery after High Life wins big

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High Life Cannabis Co. has hit the jackpot.

Locations associated with the Ontario cannabis firm won six out of 42 opportunities to apply to open retail stores in the province’s second licence lottery, raising questions about the fairness of the system.

Before the results of the lottery had been announced, High Life’s website listed 15 addresses under the heading “More locations coming soon.” Six of these addresses were drawn in the lottery, including locations in Toronto, Guelph and Barrie as well as an address in Oshawa that was listed on two winning applications.

High Life itself is not named on any of the winning entries, which were submitted by private individuals. The company, which operates a licensed store in Sudbury, has since removed the list of pending stores from its website.

Winners in the lottery, run by Alcohol and Gaming Commission of Ontario (AGCO), now have the right to apply for cannabis retail licenses in five regions in the province. Applicants, either companies or individuals, were allowed to submit only one entry for each location to the lottery. However, the number of applicants who could submit for each location was not limited.

The results of the draw were announced on Wednesday, and produced several clusters of winners across the province. Two winners in Oshawa listed the same address. Three of the seven winners in the Eastern Ontario group are next to one another on a rural road in Innisfil, a small town south of Barrie.

Publicly available lottery data show that large numbers of individuals entered the lottery for the same addresses, increasing the odds that these sites would be selected.

More than 600 applications listing addresses that were listed on High Life’s website were submitted to the lottery. One of those, 20 Simcoe St. in Oshawa, was named on 169 different applications. Another winning location, 65 Collier St. in Barrie, was listed on 91 applications.

High Life did not respond to requests for comment.

Addresses related to High Life were not the only ones to appear on multiple applications.

On average, every winning address was associated with 25 applications, lottery data show. Thirty of the 42 retail locations drawn were on more than 10 separate applications. Only seven winning addresses were on a single application.

According to a lawyer who worked closely with several cannabis companies that entered the lottery, the majority of the 42 winners submitted entries as part of a group. Because the AGCO required applicants to have a letter from a bank saying that they had access to $250,000, individuals and firms who wanted to obtain licences ended up lending money to people who entered the lottery on their behalf, the lawyer said. The Globe and Mail is keeping the lawyer’s name confidential because they work with AGCO on behalf of clients and fear retribution.

One unsuccessful applicant said the practice of submitting multiple applications skewed the odds against his company.

“When the actual winners were announced, I was shocked," said Uday Krishnan, president of Flowertown Cannabis, which applied for a store in Brampton.

“During this whole process, we were talking to other people, including other dispensary owners, and many of them outright said they were applying on behalf of [others],” Mr. Krishnan said. “They would say things like we probably got close to 100 applications in on behalf of [another person], but we are all applying as private individuals, so there are no direct ties.”

Three of Eastern Ontario’s seven licenses went to premises in the small rural town of Innisfil. Motorsport stores are on two of the properties, while a model home is on the third.

The three properties are contiguous and owned by two numbered companies associated with the same family. The three addresses were listed on a total of 124 applications.

Nothing in the lottery rules prevented a single property from being subject of multiple entries, AGCO spokesperson Ray Kahnert said via e-mail.

However, the application that winners must submit for review by Aug. 28 if they want to go ahead with the process requires them to include a “formally executed legal instrument [that] demonstrates their right to possession of that retail space,” Mr. Kahnert said. “They can be disqualified if they don’t.”

The next round of stores, which could open as soon as October, is in addition to the 25 allocated in the first lottery and the eight licences recently distributed to First Nations on a first-come-first-serve basis, bringing the total to 75 stores expected to be open by the end of this year.