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HIGHLIGHTS
  1. Regulators did not give 11 winners of the second Ontario retail cannabis lottery enough time to submit all the required application materials before they were disqualified, the legal challenge claims
  2. Disqualified winners want the licence allocation process frozen for the next 42 legal recreational cannabis shops previously expected to open across Ontario as soon as next month
  3. The case has the potential to create an “utter disaster” for the Ontario cannabis retail lottery system, which critics argue places more emphasis on random chance than on merit and effort

Eleven disqualified winners of the latest Ontario retail cannabis lottery are asking a judge to give them another chance in a move that could delay the opening of more legal pot shops across the province.

An application for judicial review filed Monday in Ontario Divisional Court seeks to freeze the licence application review process for the next 42 legal recreational cannabis stores set to open across Canada’s largest consumer market as soon as next month.

After the Alcohol and Gaming Commission of Ontario (AGCO) selected 42 winning entries in an Aug. 20 draw, 12 were subsequently disqualified for failing to submit all their required application materials within five business days of the results. Names were moved up from several regional waiting lists to replace them.

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All but one of those disqualified winners now claim the AGCO did not give them enough time.

“We are asking that the disqualification of our clients be reviewed and no further licences be granted for anybody, including those people on the waitlist, until our review of the disqualification has been settled,” Peter Brauti, co-managing partner at Brauti Thorning LLP who is acting on behalf of all 11 lottery winners, said in an interview. “[This case] has the potential to be an utter disaster in relation to [Ontario’s] cannabis retail lottery.”

The plaintiffs are related in that many submitted applications listing the same address for their proposed store locations, with half of those disqualified listing addresses of proposed High Life Cannabis Co. stores on their applications. While there are a “few nuances” among the 11 now seeking a judicial review, Mr. Brauti said all were effectively cases of the AGCO failing to properly notify the winners.

“The AGCO sent [winners] an e-mail notification saying congratulations, except that the e-mail didn’t go through, it bounced back,” he said. “They also sent registered letters but those were received two days later and [the winners] assumed they had five days from when they received the letter because they never got the email. Once they were notified, they met the requirements, but the AGCO position is they were notified by an email they never got.”

AGCO spokesperson Phil Serruya said the regulator “acknowledges that a number of disqualified candidates have commenced an application for judicial review,” adding “it is their right to do so.”

“The AGCO will not make further comment while the proceedings are ongoing,” Mr. Serruya said.

Those proceedings, meanwhile, have the potential to move quite slowly.

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“When you bring this kind of legal action, you have to notify the parties as well as anybody potentially affected by the order you’re seeking. That is all the people for sure on the waitlist,” said Mr. Brauti. “We are endeavouring to do that, but we only have those people’s names and don’t have their telephone numbers or their emails [and] we can’t really proceed with phase two until they have all been served and we set a [court] date.”

“I don’t know if the people on the waitlist are going to say they don’t care, they agree or they could do everything they can to fight us because if [my clients] are knocked out, they could get a licence,” Mr. Brauti said. “They can say, look, we want to be heard on this as well.”

In total, the second lottery had 4,864 submissions from roughly 1,800 businesses or sole proprietors. The process was intended to be an improvement upon the first lottery in January, which saw more than 17,000 individuals compete for the right to apply for Ontario’s first 25 permits.

Applicants in the first draw were only required to submit proof of Ontario residency and a $60 application fee, while the second lottery required access to $300,000 and a suitable retail space. However, the rules did not require a signed lease or deed, leading to widespread criticism of a process that allowed for multiple applicants to make submissions using the same address.

While the challenge of needing to contact several relevant parties could delay a ruling on his application, Mr. Brauti is hopefully the process can move quickly.

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“As far as putting everything on hold goes, right now there are people on the waitlist who could potentially be granted licences,” he said. “So everybody wants to see this matter cleared up as soon as possible.”

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