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HIGHLIGHTS
  1. The draw will not prioritize one region over another
  2. No lease is required to enter the lottery
  3. Winning the lottery does not guarantee receiving a license

Ontario’s cannabis retail lottery, which is being used to allocate licenses for the province’s first 25 legal dispensaries, is less than a week away. Between 12:01 a.m. on Monday and noon on Wednesday, companies and individuals will be able to submit expressions of interest, indicating the regions where they intend to set up shop. The province is divided into five regions, and would-be retailers can apply in all five regions. Each applicant, however, can only win one license in the draw; if they’re selected for one region, their expressions of interest for other regions will be removed from the lottery.

The lottery will happen this coming Friday. The winners will be announced by the Alcohol and Gaming Commission of Ontario within 24 hours of the draw.

On Friday the AGCO hosted a webinar explaining the details of the lottery process. Here are some of the key takeaways to keep in mind if you’re preparing an application.

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No early submission advantage

There is no advantage to submitting an application through the AGCO’s online portal early. All applications will be placed in a pool. The AGCO’s lottery software will draw at random from the pool.

One application, multiple expressions of interest

A company should only submit one application. Each application, however, can indicate up to five expressions of interest, one for each region. Each expression of interest will be drawn separately. If someone puts in more than one application, they will be disqualified.

No geographical order to the draw

The draw will not prioritize one region over another. The lottery software will randomly select from the pool of applications, matching expressions of interest in a given region with any available spots in that region. The North region, for example, has two licenses available. The first two expressions of interest in the North that are drawn from the pool will be invited to apply for those two licenses. Every other Northern expression of interest will be placed on a wait list in the order it’s drawn.

No lease needed

Applicants don’t need to have property leases signed to enter the draw. That said, the AGCO made it clear that only companies realistically able to open a store on April 1 should apply. As an incentive to act quickly, lottery winners will have to submit a $50,000 letter of credit which will be rapidly drawn down if they’re unable to open in April.

Flexibility on letter of credit

The AGCO had said that lottery winners need to submit the $50,000 letter of credit within five business days of the winners being announced. During the webinar, however, an AGCO spokesperson said they’d heard concerns that banks can take longer than five days to supply letters of credit. The AGCO will be flexible on the five-day timeline, “if [applicants] demonstrate best efforts to acquire [a letter],” the spokesperson said.

Winning the lottery does not guarantee a license

The AGCO is using the lottery to narrow down the number of people applying for only 25 licenses. Winning the lottery does not, however, guarantee that a company will receive a license. The lottery winner still needs to go through the Retail Operator Licence and Retail Store Authorization application process, including background checks and municipal consultation.

No ownership change allowed

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To prevent lottery winners being bought out by other companies, the AGCO has stated that successful companies “Are not permitted to change their applicant type, ownership and/or corporate structure in such a way that would result in a change of control of the Expression of Interest Applicant or licensee during the Lottery Process.” The “lottery process” runs until Dec. 13, 2019, but the government can change the rules before then and issue more licenses.

OCS wholesale clarification

Representatives from the Ontario Cannabis Store also spoke during the webinar, clarifying several points about how the OCS plans to manage wholesale transactions with the first 25 licensed stores. The OCS will be wholesaling both cannabis and accessories to bricks-and-mortar establishments, although retailers can also source accessories from elsewhere.

Pricing

The OCS will have no say over retail pricing in private stores. There will be no volume discount if one store buys more product from the OCS than another.

Ordering from the OCS

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The first 25 retailers are expected to begin ordering cannabis from the OCS in March. The OCS has a pay-first policy, meaning retailers must pay immediately after placing an order; the OCS won’t ship until the product is paid for. The OCS will be in charge of transporting the product to the retailers, and will charge a cost recovery fee for transportation. Despite shortages of cannabis across the country, an OCS spokesperson said “our objective will be to provide initial stores with a reasonable amount of supply.”

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