After the cannabis lottery: Three things to know about private pot sales

In January, the Alcohol and Gaming Commission of Ontario (AGCO) held a lottery draw to determine which of the more than 17,000 applicants hoping to become first movers in Ontario’s private cannabis retail market would be permitted to apply for the province’s initial round of licenses.

These stores are scheduled to open on April 1, 2019. Due to supply shortages among federally licensed producers, the province has temporarily capped the number of cannabis retailers at 25 while inventory levels stabilize. That cap is currently set to run until Dec. 13, 2019.

Of the 25 lottery winners, five were selected in eastern Ontario, including three in Ottawa – Superette on Wellington Street West, Byward Market Cannabis on York Street and Hobo Recreational Cannabis Store in Centretown. These lucky winners have since found themselves in a hot market, as non-winners – including big industry players – continue to seek creative ways to partner with the 25 holders of these (non-transferable) golden tickets.

Whether you’re one of those 25 lucky lottery winners – either planning your launch in April or fielding calls from big names in the cannabis industry – one of the many non-winners waiting out the cap period, or even a prospective employee looking to apply for a position at one of the province’s first private retail cannabis stores, the following three tips should assist you in navigating this new and highly regulated market.

1. All retail employees must undergo training with CannSell

On Feb. 7, the AGCO unveiled CannSell, a training program developed by Lift & Co. in partnership with MADD Canada, as the authorized cannabis retail employee training program for the province.

Similar to Smart Serve for alcohol retailers, all employees of privately run cannabis retail stores in Ontario, including licensed managers, must complete the approximately four-hour online training program.

According to the AGCO, the CannSell program will provide prospective employees of privately run cannabis retail stores with the knowledge needed to sell cannabis responsibly and in compliance with Ontario law. The training will also provide basic knowledge about cannabis to ensure those who are selling it understand its various forms, effects and consequences of use.

2. AGCO standards for cannabis retail stores

In addition to all applicable laws and regulations (including the Cannabis Control Act, 2017, the Cannabis Licence Act, 2018 and Ontario Regulation 468/18), aspiring retail store operators must comply with the Registrar’s Standards for Cannabis Retail Stores, established by the AGCO.

The Cannabis Licence Act, 2018 and Regulation 468/18 provide the registrar of the AGCO with the authority to establish standards and requirements in certain areas, including:

• Store premises, equipment and facilities, including surveillance and security;

• The prevention of unlawful activities;

• Advertising and promotional activities; and

• Compliance with the federal cannabis tracking system.

For example, under the registrar’s standards, licensees must ensure that cannabis and accessories are not visible from the exterior of the premises. Additionally, although sensory display containers may be used to allow patrons to see and smell cannabis, such containers must be locked and tamper-proof to prevent patrons from touching the cannabis and must not be able to be removed from the premises.

Holders of retail operator licensors will be well advised to familiarize themselves with the registrar’s standards.

3. I’m running out of pot puns – Are there limits on what I can name my store?

All signage, including the name of the store, must comply with Registrar’s Standard #22, and will be reviewed by the AGCO through the application process. Under Registrar’s Standard #22, language and images on exterior signage may not, for example:

• Communicate information about the price or distribution of cannabis or cannabis accessories;

• Appeal to young persons;

• Contain testimonials or endorsements;

• Depict a person, character or animal, whether real or fictional; or

• Associate consumption of cannabis with driving a motorized vehicle, or with any activity that requires care and skill or has elements of danger

More information regarding the Registrar’s Standards can be found here.

Until April!

Kyle Stout is an associate lawyer in the Business Law Group at Nelligan O’Brien Payne LLP. His practice is focused on commercial litigation and all aspects of corporate, business and ancillary issues, including incorporations, corporate re-organizations, and mergers and acquisitions.