Cannabis Retail Store Allocation Lottery Rules

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

PREAMBLE

In its April 2019 Budget, the Government of Ontario announced it would:

Continue to take a market-oriented approach to allow private-sector cannabis businesses to build a safe and convenient cannabis retail system to combat the illegal market; and,
In the absence of sufficient cannabis supply, develop a process to allow the AGCO to pre-qualify prospective cannabis operators that seek to enter the market and participate in future allocations of Retail Operator Licences and Retail Store Authorizations.

New 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 a previous lottery wait list to participate. A new Expression of Interest Application must be submitted to participate in the new process and will be subject to these Allocation Lottery Rules; and,
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 (see Rule 8c).

As a result, AGCO will hold a second lottery to allow pre-qualified prospective cannabis operators to apply for a Retail Operator Licence.

The AGCO has established Allocation Lottery Rules to:

Support a process that provides a fair and transparent opportunity for pre-qualified prospective operators to apply for a Retail Operator Licences and Retail Store Authorization to operate a cannabis retail store; and,
Provide a safe, legal alternative to the illegal market by having additional licensed and authorized operators open cannabis retail stores beginning in October 2019.

In the future, if the Government proceeds with additional retail store allocations rather than moving to an open marketplace, any such allocations may be based on the results from this lottery. Rules for any future retail store allocations may differ from these Allocation Lottery Rules.

Pre-Qualification Requirements

The amended regulation requires that an Applicant provide evidence indicating that, if selected in the Lottery, the Applicant has already secured retail space that could be used as a cannabis retail store, and has sufficient capital to open a cannabis retail store. Failure to provide this evidence at the time of the Expression of Interest Application will make the Applicant ineligible to participate in the Lottery.

Prospective Applicants are expected to carefully review the Allocation Lottery Rules to ensure that they are fully aware of, and ready to meet, the requirements before submitting their Expression of Interest Application.

Prospective Applicants should be:

Prepared to comply with requirements under the Cannabis Licence Act, 2018, its regulations, the Registrar's Standards for Cannabis Retail Stores and the Allocation Lottery Rules;
Committed to act in accordance with the AGCO’s mandate, in a manner designed to ensure that Ontario’s cannabis retail environment operates with integrity, honesty, and in the public interest;
Aware that the Ontario Cannabis Retail Corporation, operating as the Ontario Cannabis Store, determines supply of legal cannabis for authorized cannabis retail stores, and that a commercial agreement with the Ontario Cannabis Store is required in order to sell cannabis under a Retail Store Authorization; and,
Prepared to operate an authorized store following notification from the Registrar as early as October 2019.

KPMG will monitor the application of the Allocation Lottery Rules up to and including the Lottery to assess whether it is conducted fairly. KPMG will issue a report on its findings as fairness monitor. In addition, the AGCO will submit the Lottery software program for independent testing and certification to Gaming Laboratories International, 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.

First Nations Allocation

The Government is also allowing for eight (8) cannabis retail stores to be located on First Nations reserves. More information on the application process for operating a cannabis retail store on-reserve is available on the AGCO’s website.

Ontario Regulation 468/18 requires that in order for an applicant for a cannabis retail store to be located on a First Nations reserve the applicant will only be eligible to obtain a Retail Store Authorization if that applicant has demonstrated that the Band Council has approved the location of the prospective cannabis retail store, and the cannabis retail store is located at that approved location.

To receive a Retail Operator Licence or Retail Store Authorization for a cannabis retail store to be located on a First Nations reserve, a prospective operator will be required to meet the requirements of the Cannabis Licence Act, 2018. The pre-qualification requirements noted in the Allocation Lottery Rules do not apply to applicants wishing to operate a store to be located on a First Nations reserve.

Persons who are on the selected list for the first cannabis lottery or who have been selected for one of the forty-two (42) cannabis retail store authorization opportunities through the second cannabis lottery will not be able to apply for these eight (8) store authorization opportunities.

ALLOCATION LOTTERY RULES

The Lottery is open to the following Applicant types: corporation, limited partnership, partnership, trust, and sole proprietor.
Applicants who are selected to apply for a Retail Operator 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 Applicant or holder of a Retail Operator Licence during the Allocation Timeline; and,
3. Must operate their cannabis retail store at the same address as provided on their Expression of Interest Application unless:
  1. The Applicant submits a request to the Registrar to operate a cannabis retail store at a different address due to extenuating circumstances, and the Registrar agrees to the request; or,
  2. The Applicant is moved from the Wait List to the Selected List, pursuant to Rule 16 and Rule 17.
At the time of making an Expression of Interest Application, all individuals associated with the Expression of Interest Application including every director, officer, shareholder, partner and trustee, must be at least 19 years of age.
The following may not submit an Expression of Interest Application:
1. The holder of a cultivation, processing or nursery licence issued by Health Canada under the Cannabis Act (federal) or the Affiliate of the holder of a cultivation, processing or nursery licence issued by Health Canada under the Cannabis Act (federal);
2. The holder of a Retail Store Authorization or an Affiliate of the holder of a Retail Store Authorization in Ontario;
3. Persons who are on the selected list for the first cannabis lottery or who have been selected for a cannabis retail store to be located on a First Nations reserve;
4. Persons who are not legally permitted to operate a business in Ontario;
5. Employees and board members of the Alcohol and Gaming Commission of Ontario;
6. Employees and board members of the Ontario Cannabis Retail Corporation, operating as the Ontario Cannabis Store;
7. KPMG LLP, its partners and employees; and,
8. Gaming Laboratories International LLC, its employees, owners, and/or board members.

A maximum of forty-two (42) new Retail Store Authorizations will be allocated as follows:
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): seven (7) stores;
2. GTA Region (Durham, York, Peel and Halton): six (6) stores;
3. Toronto Region thirteen (13) stores;
4. West Region (Dufferin, Wellington, Hamilton, Niagara, Haldimand-Norfolk, Brant, Waterloo, Perth, Oxford, Elgin, Chatham-Kent, Essex, Lambton, Middlesex, Huron, Bruce, Grey, Manitoulin): eleven (11) stores; and,
5. North Region (Nipissing, Parry Sound, Sudbury, Greater Sudbury, Timiskaming, Cochrane, Algoma, Thunder Bay, Rainy River, Kenora): five (5) stores, with one to be located in each of the following cities: Kenora, North Bay, Sault Ste. Marie, Thunder Bay and Timmins.
Prospective 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 Applicant must submit all Expression of Interest Applications through the same iAGCO account, and not more than one Expression of Interest Application may be submitted per Region from the same iAGCO account
If an Applicant wishes to submit an Expression of Interest Application for more than one (1) Region, the Applicant must submit a separate Expression of Interest Application for each Region. For the North Region, an Applicant may submit an Expression of Interest Application for only one of the five (5) listed cities within that Region. The requirements set out in Rule 8 apply to each Expression of Interest Application.
An Expression of Interest Application must be submitted to the Registrar as follows:
1. Online through an iAGCO account using the Expression of Interest Application established by the Registrar;
2. Between 12:01 AM EDT August 7, 2019 and 8:00 PM EDT on August 9, 2019;
3. Including the following pre-qualification documents and attestation for each Expression of Interest Application:
  1. The Applicant, or if the Applicant is not a sole proprietor, an individual with authority to bind the Applicant, acknowledges and confirms the following:
    1. The Applicant has not made a false statement and has not provided false information in this application;
    2. The Applicant will exercise control over the cannabis retail business;
    3. The Applicant is legally permitted to operate a business in Ontario;
    4. It is possible that the Applicant may not receive a Retail Operator Licence even if the Applicant meets the statutory eligibility criteria;
    5. If issued a Retail Operator Licence and a Retail Store Authorization, the Applicant will abide by all applicable legislation, including the Cannabis Licence Act, 2018, the Cannabis Control Act, 2017, the Smoke-Free Ontario Act, 2017, and the Accessibility for Ontarians with Disabilities Act, 2005;
    6. If issued a Retail Operator Licence and a Retail Store Authorization, there is a risk that the Applicant may not be able to obtain a sufficient quantity of cannabis to operate a cannabis retail business; and,
    7. Ontario and its Agencies have not represented that there will be a sufficient quantity of cannabis for the Applicant to operate a cannabis retail business.
  2. Submission of a Letter of Confirmation – Cash or Cash Equivalents Capacity, from a bank found in Schedule I or Schedule II of the Bank Act (federal), or a credit union or caisses populaire registered under the Credit Unions and Caisses Populaires Act, 1994, which must be substantively in the form set out by the AGCO and uploaded in an electronic format to iAGCO that is clearly legible. The Letter of Confirmation that must be dated no earlier than July 3, 2019, must confirm the Applicant is in good standing and has the financial capacity necessary to obtain $250,000 in Cash or Cash Equivalents. Applicants who are applying for more than one Region are permitted to use the same Letter of Confirmation for each Expression of Interest Application;
  3. Submission of a Letter of Confirmation – Commitment to Provide Letter of Credit, from a bank found in Schedule I or Schedule II of the Bank Act (federal), or a credit union or caisses populaire registered under the Credit Unions and Caisses Populaires Act, 1994, which must be substantively in the form set out by the AGCO and uploaded in an electronic format to iAGCO that is clearly legible. The Letter of Confirmation must confirm the Applicant has the financial capacity necessary to obtain a Standby Letter of Credit in the amount of $50,000 and that the Letter of Credit will be provided within five (5) business days of the Applicant being notified of their selection by the Registrar from the bank or credit union providing the Letter of Confirmation. Applicants who are applying for more than one Region are permitted to use the same Letter of Confirmation for each Expression of Interest Application and,
  4. Submission of a document, substantively in the form set out by the AGCO, that confirms the Applicant has secured retail space, and that sets out the following:
    1. The street address for the retail space, which must be the same address identified in the Expression of Interest Application;
    2. Attest that the retail space will be available for the Applicant to operate a cannabis retail store as of October 2019; and
    3. The name and contact information for a person with a legal interest in the retail space.
4. With a payment in full of a $75 non-refundable fee for each Expression of Interest Application.
An Applicant and its Affiliate(s) may all submit Expression of Interest Applications, provided they are for different Regions.
1. If Affiliates are placed on a Selected List for different Regions, only the first drawn Expression of Interest Application will be notified by the Registrar that they may make an application for a Retail Operator Licence and the second drawn Affiliate Expression of Interest Application becomes ineligible; and,
2. If Affiliates are placed on a Wait List for different Regions, the first Expression of Interest Application that is moved to a Selected List will be notified by the Registrar that they may make an application for a Retail Operator Licence and the remaining Affiliate Expression of Interest Applications will become ineligible.
An Applicant who submits more than one Expression of Interest Application for the same Region will be disqualified from the Allocation Process. Additionally, if two Applicants who are Affiliates submit an Expression of Interest Application for the same Region, both Applicants will be disqualified from the Allocation Process.
An Expression of Interest Application cannot be changed or amended once submitted and the non-refundable Expression of Interest Application fee is paid but the Expression of Interest Application may be withdrawn. If an iAGCO account holder requires a change to a submitted Expression of Interest Application between 12:01 AM (EDT) August 7, 2019 and 8:00 PM EDT August 9, 2019, the Expression of Interest Application may be withdrawn by the iAGCO account holder and a new Expression of Interest Application may be completed and submitted. An additional Application fee will be required for any new Expression of Interest Application.
An Applicant may withdraw from the Allocation Process as follows:
1. Between 12:01 AM (EDT) August 7, 2019 and 8:00 PM EDT August 9, 2019, an Applicant may withdraw an Expression of Interest Application from the Lottery using iAGCO;
2. Between 8:01 PM EDT August 9, 2019, and the AGCO publishing the Lottery results on the AGCO’s website, Applicants may not withdraw an Expression of Interest Application; and,
3. After the AGCO notifies Applicants on the Selected List and publishes the results of the Lottery:
  1. Applicants on a Selected List may withdraw an Expression of Interest Application by writing to the Registrar at connect@agco.ca. Retail Operator Licence, Retail Store Authorization, and Expression of Interest Application fees remain non-refundable.
  2. Applicants on a Wait List may request withdrawal of an Expression of Interest Application from any further consideration, including their name from the published Lottery results, by writing to the Registrar at connect@agco.ca. The Expression of Interest Application fee(s) remains non-refundable.
The Lottery selection will take place on August 20, 2019, at a time set by the Registrar, as follows:
1. Expression of Interest Applications will be randomly selected using a third-party certified Lottery software program;
2. There will be five (5) Region categories as described in Rule 6. There are forty-two (42) cannabis retail store opportunities on the Selected List by Region, which is equal to the number of Retail Store Authorizations by Region described in Rule 5;
3. Each Region will have a Selected List and a Wait List, with the exception of the North Region, which will have five (5) Selected Lists and Wait Lists, one for each of the five (5) cities specified within the North Region as described in Rule 5; and,
4. Expression of Interest Applications will be randomly selected as follows:
  1. The first drawn Expression of Interest Application for an Applicant will be placed on the Selected List for the identified Region in the case of the East, GTA, Toronto, and West Regions or will be placed on the Selected List for the identified North Region city in the case of the North Region, if the Selected List is not full. If the Selected List for the identified Region or North Region city as applicable is full, then the first drawn Expression of Interest Application will be appended to the Wait List for the Region or North Region city, as applicable.
  2. If an Applicant has submitted an Expression of Interest Application for more than one Region, the first drawn Expression of Interest Application will be placed in the Region identified on that Expression of Interest Application. Any remaining Expression of Interest Applications from that Applicant will be ineligible, with the exception noted in Rule 13.d.iii.
  3. If an Applicant’s first drawn Expression of Interest Application is placed on a Wait List and the Applicant’s subsequently drawn Expression of Interest Application is for a Region or North Region city as applicable that has available space on its Selected List, then the Applicant’s first drawn Expression of Interest Application on the original Wait List will be ineligible and the Applicant’s subsequently drawn Expression of Interest Application will be placed on the applicable Selected List.
Within twenty-four (24) hours of the Lottery, Applicants on the Selected List for a Region or North Region city 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. An Applicant on a Selected List will be required:
1. Within five (5) business days of the Registrar notifying the Applicant of their selection:
  1. To submit an original $50,000 Standby Letter of Credit from a bank found in Schedule I or Schedule II of the Bank Act (federal), or a credit unions and caisses populaires registered under the Credit Unions and Caisses Populaires Act, 1994, substantively in the AGCO form identified by the AGCO. The Standby Letter of Credit is to be secured until the end of the Allocation Timeline;
  2. To submit a formally executed legal instrument that demonstrates the Applicant has a right to possession of the retail space as identified in the Expression of Interest Application. The legal instrument must:
    1. Be in the name of the Applicant; and
    2. Provide the same street address for the retail space as identified in the Expression of Interest Application.
  3. To submit an application for a Retail Operator Licence and make the non-refundable $6,000 Retail Operator Licence fee payment; and
  4. To submit an application for a Retail Store Authorization using the same retail store location as provided within the Expression of Interest Application and make the non-refundable $4,000 Retail Store Authorization 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.
An Applicant on the Selected List must be in possession of the retail space as set out in the Expression of Interest Application by October 1, 2019 or as otherwise agreed to by the Registrar. If an Applicant has moved from a Wait List to a Selected List, timelines for possession of the retail space will be adjusted by the Registrar.
For the East, GTA, Toronto, and West Regions, once the Lottery selection is complete, the Applicants who are next on a Region’s Wait List will be moved to the Selected List for that Region if and when:
1. An Applicant on the Selected List for that Region is disqualified from the Allocation Process by the Registrar;
2. An Applicant on the Selected List for that Region declines the Registrar’s notification that they may make an application for a Retail Operator Licence;
3. An Applicant on the Selected List for that Region withdraws an application for a Retail Operator Licence; or,
4. A Retail Operator Licence within that Region is refused or revoked by the Registrar.

Applicants that move from a Wait List to a Selected List will be required to meet the requirements of Rule 14, with the exception of Rule 14 (a), which must be met within ten (10) business days of the Registrar notifying the Applicant of their selection.

For the North Region, once the Lottery selection is complete for this Allocation Process, the Applicants who are next on the Wait List will be moved to the Selected List for the North Region city selected in their Expression of Interest Application, if and when:
1. An Applicant on the Selected List for a North Region city is disqualified from the Allocation Process by the Registrar;
2. An Applicant on the Selected List for a North Region city declines the Registrar’s notification that they may make an application for a Retail Operator Licence;
3. An Applicant on the Selected List for a North Region city withdraws an application for a Retail Operator Licence; or
4. A Retail Operator Licence within that North Region city is refused or revoked by the Registrar.

If the Registrar determines an Applicant has not met the requirements of Ontario Regulation 468/18 or the Allocation Lottery Rules:
1. Once an Expression of Interest Application is made, and prior to the Lottery, the Applicant will be disqualified and the Registrar will note this disqualification when the Lottery results are published. The Expression of Interest Application fee is non-refundable; or,
2. Once an Applicant is placed on the Selected List, the Applicant will be disqualified. Assuming the $50,000 Standby Letter of Credit has been provided it will be drawn in full, unless the selected Applicant submits a request to the Registrar not to draw down on the Standby Letter of Credit due to extenuating circumstances, and the Registrar agrees to the request. Any pending application for a Retail Operator Licence will be considered abandoned.
If the Registrar determines that an operator has not followed the requirements in the Cannabis Licence Act, 2018, Ontario Regulation 468/18, or the Allocation Lottery Rules, the Registrar may revoke the Retail Operator Licence.
The Registrar reserves the right to cancel, amend or suspend the Lottery, or to amend the Allocation Lottery Rules, and will communicate such changes to Applicants in a timely manner.

TERMS

Throughout the Allocation Lottery Rules:

“Affiliate” means an affiliate as defined in Ontario Regulation 468/18.

“AGCO” is the Alcohol and Gaming Commission of Ontario.

“Allocation Process” means the Allocation Lottery Rules and supporting policies and procedures that apply during the Allocation Timeline in order to allocate forty-two (42) cannabis retail stores.

“Allocation Timeline” is the period of time from July 3, 2019, when the Allocation Lottery Rules (Rules) are published, to July 3, 2020.

“Applicant(s)” is a corporation, limited partnership, partnership, trust, or sole proprietor that has submitted an Expression of Interest Application.

“Cash or Cash Equivalents” means cash in bank accounts, or short-term investments, or available through a debt instrument.

“Expression of Interest Application” is an application made through iAGCO to enter the Lottery during the Expression of Interest Application submission period.

“iAGCO” is the AGCO’s online service portal, through which, among other things, Applicants submit their Expression of Interest Application, and Applicants on the Selected List submit their Retail Operator Licence application and Retail Store Authorization application.

“Lottery” means the AGCO process to select Expression of Interest Applications for the Selected List and Wait List, to be held on August 20, 2019, and as described in Rule 13.

“Region” refers to one or more of the East Region, GTA Region, North Region, Toronto Region, and West Region under Ontario Regulation 468/18.

“Registrar” is the Registrar under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996.

“Selected List” means the Expression of Interest Applications that have been chosen through the Lottery, as described in Rule 13.

“Wait List” means the Expression of Interest Applications that are, after the Lottery, not on the Selected List and are not otherwise disqualified from, or ineligible for, the Lottery.