Note: Effective January 6, 2020, the cannabis retail lottery rules for the first allocation of 25 retail store authorizations have terminated and are revoked. They are published here for archival purposes.

Alcohol and Gaming Commission of Ontario

Cannabis Retail Store Licensing

Expression of Interest (EOI) Lottery
 

Preamble

Additional Allocation of Cannabis Retail Stores

On July 3, 2019, the Government announced that an additional fifty (50) cannabis retail stores will be permitted across Ontario, consisting of forty-two (42) in any municipality that has not opted-out of hosting cannabis retail stores, with the exception of the North Region, where a cannabis retail store location must be located in one of five (5) cities.  There will be a separate allocation of eight (8) cannabis retail stores on First Nations reserves.

Ontario Regulation 468/18 Amendments 

The Government has amended Ontario Regulation 468/18 to allow the Registrar to develop and implement a new method for selecting applicants who are eligible to apply for a Retail Operator Licence.  The amended regulation:

  • Creates a separate process different from the first lottery process conducted by the AGCO in January 2019; 
  • Permits Applicants on the first lottery Wait Lists to participate.  A new expression of interest application must be submitted to participate in the new process and will be subject to the Allocation Lottery Rules, which are separate and distinct from the Expression of Interest Lottery Rules set out below for the first lottery process;
  • Requires prospective cannabis operators to meet certain pre-qualification requirements, including an attestation, in the event they are selected to make an application to apply for a Retail Operator Licence; and
  • Requires that the Registrar shall continue to meet and maintain the 25 retail store authorizations allocated through the Expression of Interest Lottery from the respective Wait Lists.

Amendments to Expression of Interest Lottery Rules

As set out in the rules below, Expression of Interest Applications were accepted and the Expression of Interest Lottery was held on January 11, 2019.  The results of the lottery were published on the AGCO website.

As a result the amendments to Ontario Regulations 468/18 on July 3, 2019, the Registrar has amended the Expression of Interest Lottery Rules that apply to the first 25 applicants selected and those on the Wait Lists.  First, the definition of Lottery Process has been amended so that the Lottery Rules will remain in effect until Ontario Regulation 468/18 is amended, anticipated in July 2020.  Second, an exception to Rule 2 has been added (refer to Rule 2c).  

Preface Regarding the First Lottery Process

On December 13, 2018, the Government of Ontario announced that a temporary cap of 25 Retail Store Authorizations will be imposed while cannabis supply stabilizes.  The Government of Ontario remains committed to permitting the opening of cannabis retail stores in Ontario.

As set out in Ontario Regulation 468/18, the Government of Ontario gave the Alcohol and Gaming Commission of Ontario (AGCO) the mandate to hold a lottery to determine who may apply for Retail Operator Licences.

AGCO established Expression of Interest Lottery Rules (Rules) with the specific intent to:

  • conduct a lottery that provides a fair and transparent opportunity for potential operators to apply for a licence to operate a cannabis retail store
  • support the government’s objective of providing a safe, legal alternative to the illegal market by having licensed operators open cannabis retail stores on April 1, 2019
  • regulate licensed retail operators in the public interest.

The Expression of Interest Lottery covers a period of time from January 2, 2019, when the Rules are published, to one year from the date when O. Reg 238/19 amending O. Reg. 468/18 is filed. This period of time is referred to as the “Lottery Process” and is the timeframe established by the government for the temporary cap of 25 Retail Store Authorizations while cannabis supply stabilizes.

KPMG is monitoring the Lottery Process to assess whether it is conducted fairly.  The AGCO has also submitted its lottery software program for independent testing and certification from Gaming Laboratories International (GLI®), an independent  testing laboratory which holds international accreditations for compliance with ISO/IEC 17025, 17020, and 17065 standards for technical competence in the gaming, wagering and lottery industries.

Expression of Interest Applications were accepted online from 12:01 AM Eastern Standard Time (EST) January 7, 2019 until 12:00 PM (noon) EST January 9, 2019. There was no advantage or disadvantage to when an Applicant submits an application during this timeframe.

The AGCO published the results of the lottery, which was held on January 11, 2019, on its website within 24 hours of the lottery selection.

The lottery Rules have been established to encourage the opening of stores on April 1, 2019.  Potential applicants who were not committed to opening a cannabis retail store on April 1, 2019 should not participate in this lottery.  

To participate in the lottery, potential applicants were required to pay a non-refundable Expression of Interest Fee of $75 when submitting their Expression of Interest Application.

Subject to AGCO regulatory approvals and Ontario Cannabis Retail Corporation supply requirements, potential applicants should be prepared to sell cannabis under a Retail Store Authorization on April 1, 2019, and understand and be:

  • prepared to comply with requirements under the Cannabis Licence Act, 2018, its regulations, and the Registrar’s Standards for Cannabis Retail Stores
  • committed to act in accordance with the AGCO’s mandate to ensure that Ontario’s cannabis retail environment operates with integrity, honesty, and in the public interest.

Additionally, potential applicants for the lottery are expected to carefully review all the rules to ensure that they are fully aware of, and ready to meet the requirements before submitting their Expression of Interest Application.  

In particular, unless otherwise agreed to by the Registrar in writing, within five (5) business days of AGCO publishing the lottery results on the AGCO website, the 25 selected Expression of Interest Applicants will need to:

  • submit a Retail Operator Licence Application including a non-refundable $6,000 fee payment
  • provide a $50,000 Letter of Credit in the form provided. 

At any time during the Lottery Process, if the Registrar determines that an Expression of Interest Applicant has not followed the requirements in Ontario Regulation 468/18, or the Expression of Interest Lottery Rules, that Applicant will be disqualified from the Lottery Process.  Any pending application for a Retail Operator Licence will be considered abandoned.   If a Retail Operator Licence has been issued, the Registrar will revoke the licence.

Throughout the Lottery Process, AGCO will review the Expression of Interest Applicant information for compliance with the Expression of Interest Lottery Rules.  

Expression of Interest Lottery Rules

Throughout the Rules:

“Lottery Process” means the period of time from   January 2, 2019, when the Expression of Interest Lottery Rules are published on the AGCO website, to one year from the date when O. Reg 238/19 amending O. Reg. 468/18 is filed.. 

“Affiliate” has the meaning as set out in Ontario Regulation 468/18.

  1. The lottery is open to the following applicant types: corporation, limited partnership, partnership, trust, and sole proprietor. 
  2. Expression of Interest Applicants in the Lottery Process who are selected to apply for a licence:
  1. Must use the same legal name and applicant type identified on the Expression of Interest Application in their Retail Operator Licence Application
  2. 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.

  3. Despite Rule 2(b), EOI Applicants who, in accordance with notification from the Registrar that they may apply for a retail operator licence, have applied for a retail operator licence by July 3, 2019, are permitted to change their corporate structure in such a way that may result in a change of control of the EOI Applicant after December 13, 2019.

  1. All individuals associated with an Expression of Interest Application including every director, officer, shareholder, partner and, trustee, must be at least 19 years of age.
  2. The following may not submit an Expression of Interest Application to the lottery:
    1. Employees and board members of the Alcohol and Gaming Commission of Ontario
    2. Employees and board members of the Ontario Cannabis Retail Corporation
    3. KPMG LLP, its partners and employees
    4. Gaming Laboratories International LLC (GLI) employees, owners, and/or board members
    5. The holder or the Affiliate of the holder of a cultivation, processing or nursery licence issued by Health Canada under the Cannabis Act (federal) and the regulations.
  3. At any time during the Lottery Process, if the Registrar determines that an Expression of Interest Applicant has not followed the requirements in Ontario Regulation 468/18, or the Expression of Interest Lottery Rules, that Applicant will be disqualified from the Lottery Process.  Any pending application for a Retail Operator Licence will be considered abandoned.   If a Retail Operator Licence has been issued, the Registrar will revoke the licence.
  4. Subject to the restrictions set out in Rule 9, an Applicant may submit an Expression of Interest Application and identify up to five (5) Regions for a total of five (5) separate Expressions of Interest entries in the lottery (i.e., one per Region).  For example, an Applicant who has identified three (3) of the Regions within their Expression of Interest Application, will have three (3) Expressions of Interest entries in the lottery.
  5. The maximum 25 Retail Store Authorizations will be allocated in accordance with Ontario Regulation 468/18 which provides for the maximum number of stores in the following Regions:
    1. East Region: (Stormont, Dundas and Glengarry, Prescott and Russell, Ottawa, Leeds and Grenville, Lanark, Frontenac, Lennox and Addington, Hastings, Prince Edward, Northumberland, Peterborough, Kawartha Lakes, Simcoe, Muskoka, Haliburton, Renfrew): five (5) stores;
    2. GTA Region: (Durham, York, Peel and Halton): six (6) stores;
    3. North Region: (Nipissing, Parry Sound, Sudbury, Greater Sudbury, Timiskaming, Cochrane, Algoma, Thunder Bay, Rainy River, Kenora): two (2) stores;
    4. Toronto Region: five (5) stores; and,
    5. West Region: (Dufferin-Wellington, Hamilton, Niagara, Haldimand-Norfolk, Brant, Waterloo, Perth, Oxford, Elgin, Chatham-Kent, Essex, Lambton, Middlesex, Huron, Bruce, Grey, Manitoulin): seven (7) stores.
  6. Prospective Expression of Interest Applicants or their representatives must create an iAGCO account (if an account has not yet been created) prior to filling out an Expression of Interest Application.  An iAGCO account holder may submit only one Expression of Interest Application. 
  7. Expression of Interest Applicants, including its Affiliates if any, who submit more than one Expression of Interest for the same Region will be disqualified from the Lottery Process.  For clarity, where it is found that two Applicants who are Affiliates of each other have applied to the same region, both Applicants will be disqualified from the Lottery Process.
  8. An Expression of Interest Applicant and its Affiliate(s) may all submit applications, as long as they are for different Regions. 
    1. If Affiliates of each other are placed on the Selected List for different Regions, only the first drawn Expression of Interest entry will be notified by the Registrar that they may make a licence application and the second drawn Affiliate entry becomes ineligible.
    2. If Affiliates of each other are placed on the Wait List for different Regions, the first Expression of Interest entry that may be moved to a Selected List will be notified by the Registrar that they may make a licence application and the remaining Affiliate entries become ineligible.
  9. Expressions of Interest Applications must be submitted to the Registrar as follows:
    1. Online through the iAGCO using the Expression of Interest Application established by the Registrar;
    2. Between 12:01 AM EST on January 7, 2019 and 12:00 PM EST (noon) on January 9, 2019; and,
    3. With a payment in full of a $75 non-refundable Expression of Interest Fee for the Expression of Interest Application.
  10. Expression of Interest Applications cannot be changed or amended once submitted and the non-refundable Expression of Interest fee is paid.  If an iAGCO account holder requires a change to their submitted Expression of Interest Application between January 7, 2019 and 12:00 (noon) EST January 9, 2019, the application may be completely withdrawn by the iAGCO account holder and a new Expression of Interest Application may be completed and submitted.  Another Expression of Interest Fee will be required for the corrected Expression of Interest Application. 
  11. An Expression of Interest Applicant may withdraw from the Lottery Process as follows:
    1. Between 12:01 AM (EST) January 7, 2019 and 12:00 PM (noon) EST January 9, 2019, an Applicant may withdraw their Expression of Interest Application from the lottery from within the iAGCO portal;
    2. Between 12:00 PM (noon) EST January 9, 2019, and AGCO publishing the lottery results on the AGCO website, Applicants may not withdraw an Expression of Interest Application;
    3. After the AGCO publishes the results of the lottery:
      1. The 25 selected Expression of Interest Applicants, prior to commencing the licencing and authorization processes may decline the Registrar’s notification that they may make a licence application by writing to the Registrar at connect@agco.ca;
      2. Wait List Applicants may request removal of their name by writing to the Registrar at connect@agco.ca;
    4. Between publication of the lottery results on the AGCO website and January 25, 2019 at 5:00 PM EST, any of the 25 selected Expression of Interest Applicants may provide written email notification of withdrawal to the Registrar at connect@agco.ca. If an Applicant withdraws from the Lottery Process pursuant to this rule, the non-refundable licence and authorization fee payments if incurred will also pursuant to this rule, be refunded and the Letter of Credit will be returned.
  12. The lottery selection will take place on January 11, 2019, at a time set by the Registrar as follows:
    1. Expressions of Interest entries will be randomly selected using a third-party certified lottery software program.
    2. There will be five Region categories as described in Rule 7 above. 
    3. Each Region category will have a Selected List and a Wait List. 
      1. The number of available store opportunities on the Selected List will be equal to the maximum number of Retail Store Authorizations allocated to that Region.
      2. Once the Selected List for a Region is full, the Wait List will be comprised of other first drawn Expressions of Interest entries identifying that Region (subject to the exception noted in Rule 14.d.iii).
    4.   Expressions of Interest entries will be randomly selected as follows:
      1. The first drawn Expression of Interest entry for an Applicant will be placed on the Selected List for the identified Region, or appended to the Wait List in the order drawn, if the Selected List is complete.
      2. If an Expression of Interest Applicant has submitted for more than one Region, their first drawn Expression of Interest entry will be placed in that identified Region category.  Any remaining Expression of Interest entries from that Applicant will become ineligible, with one exception (see Rule 14.d.iii). 
      3. If an Applicant has submitted more than one Expression of Interest entry and the Applicant’s first drawn Expression of Interest entry is placed on a Wait List for a Region and another Expression of Interest entry for the Applicant is subsequently drawn that identifies a Region that has available store opportunities on its Selected List, then the Applicant’s subsequently drawn Expression of Interest will be placed on that Selected List. The Applicant’s first drawn Expression of Interest will be ineligible and removed from the Wait List.   
  13. Applicants with an Expression of Interest on the Selected List for a Region will be contacted by the AGCO and provided with a Notification Letter from the Registrar using the contact information identified in the Expression of Interest Application.
  14. An Expression of Interest Applicant on a Selected list will be required:
    1. Unless otherwise agreed to by the Registrar in writing, within five (5) business days of AGCO posting the lottery results on its website:
      1. To provide a standby Letter of Credit with an expiry date of December 13, 2019 in the amount of Fifty Thousand Dollars ($50,000) issued from a bank found in Schedule I or Schedule II of the Bank Act (S.C. 1991, c.46) substantively in the form identified by the AGCO, to the address identified by the AGCO, and;
      2. To submit a Retail Operator Licence application and make the non-refundable $6,000 Retail Operator Licence fee payment.
    2. To use the same legal name and applicant type in the Retail Operator Licence Application as was used in their Expression of Interest Application;
    3. Following submission of a Retail Operator Licence application, to submit a Retail Store Authorization Application and make the non-refundable $4,000 Retail Store Authorization fee payment;
    4. To open a cannabis retail store location that meets school distance requirements as set out in Ontario Regulation 468/18; and,
    5. To be  located in a local municipality that has a population over 50,000 as identified by the 2016 Canadian Census and that permits the retail sale of cannabis.
  15. Once the lottery selection is complete and during the Lottery Process, an Expression of Interest Applicant that is first on a Wait List for a Region will be moved to the Selected List for that Region if:
    1. An Applicant on the Selected List for that Region is disqualified from the Lottery Process by the Registrar;
    2. An Applicant on the Selected List for that Region declines the Registrar’s notification that they may make a licence application;
    3. An Applicant on the Selected List for that Region withdraws an application for a Retail Operator Licence;
    4. A Retail Operator Licence within that Region is refused or revoked by the Registrar.
  16. The Registrar reserves the right to draw on the Letter of Credit in the event that the Expression of Interest Applicant is unable to sell cannabis under their Retail Store Authorization.  If the Registrar draws on the Letter of Credit, it will be drawn on in the following manner:
    1. On April 1, 2019, if the Expression of Interest Applicant is not selling cannabis under their Retail Store Authorization $12,500 will be drawn;
    2. On April 15, 2019, if the  Expression of Interest Applicant is not selling cannabis under their Retail Store Authorization additional $12,500 will be drawn;
    3. On April 30, 2019, if the Expression of Interest Applicant is not selling cannabis under their Retail Store Authorization $25,000 will be drawn; and,
    4. For potential applicants on a Wait List who may be notified by the Registrar that they may apply for a licence, the timelines for drawing on the Letter of Credit will be adjusted by the Registrar to provide equivalent duration.
  17. Additionally, Letters of Credit will:
    1. Be returned to the selected Expression of Interest Applicant should they withdraw pursuant to Rule 13d;
    2. Be drawn in full should a selected Expression of Interest Applicant be disqualified by the Registrar during the Lottery Process.
  18. The Registrar reserves the right to cancel, amend or suspend the lottery, or to amend the Expression of Interest Lottery Rules in any way without prior notice or obligation.  The Registrar will communicate any cancellation, amendment, or suspension of the lottery and/or Rules to Applicants in a timely manner.

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