On January 12, 2019, the Alcohol and Gaming Commission of Ontario (AGCO) announced the 25 winners of its retail cannabis lottery. The selected parties are now eligible to apply for a licence to operate one of 25 retail cannabis stores in Ontario. The licences have been divided by region, with five going to the City of Toronto, six to the Greater Toronto Area, seven to Western Ontario, five to Eastern Ontario, and two to Northern Ontario. While the lottery was open to both individuals and corporations, the majority of the selected applicants appear to be individuals.
A full list of the 25 parties that were selected through the lottery can be found on the AGCO's website.
Next Steps for Lottery Winners
Lottery winners now have until January 18 at 5 pm to submit an application for a Retail Operator Licence (Operator Licence), along with a $6,000 non-refundable application fee and a $50,000 letter of credit. As part of the Operator Licence application, lottery winners will be subject to a thorough background check, including a review of the applicant's financial statements, tax returns, and criminal record.
Following submission of an Operator Licence application, selected applicants will be required to submit a Retail Store Authorization (Authorization) application, along with a non-refundable $4,000 Authorization fee payment. In order for a proposed cannabis store to qualify for an Authorization, it must meet the eligibility requirements prescribed in the Cannabis Licence Act, 2018 and its regulations, including that it must be located in a municipality with a population of 50,000 or over, and over 150 metres from a school.
Throughout the licensing application process, selected applicants will be required to use the same legal name and applicant type as was used in their lottery application. Therefore, if a person applied for the lottery as a sole proprietor, they are required to apply for both the Operator Licence and the Authorization as a sole proprietor. In addition, successful applicants are not permitted to change their ownership and/or corporate structure in such a way that would result in a change of control before December 13, 2019.
If the applicant is unable to sell cannabis by April 1, 2019, the AGCO Registrar has reserved the right to draw on the $50,000 letter of credit in the following manner: $12,500 if the applicant is not selling cannabis by April 1, 2019; an additional $12,500 if the applicant is not selling cannabis by April 15, 2019; and the remaining $25,000 if the applicant is not selling cannabis by April 30, 2019.
Lottery winners will need to move swiftly in order to meet the tight deadlines set by the AGCO. Fasken is monitoring the situation closely and is available to assist should any selected parties need assistance with the application process.
Future Outlook for Parties Not Selected in Lottery
Currently, the number of retail cannabis stores in Ontario has been capped at 25 until December 13, 2019, at which time it is expected that cannabis supplies will stabilize. Until then, interested parties may want to consider partnering with selected applicants, keeping in mind the restrictions on ownership and change of control set out in the Cannabis Act, 2018 and its regulations, as well as the lottery rules published by the AGCO.
 Refer to our Bulletin New Cannabis Regulations Provide Guidance on Retail Cannabis Stores in Ontario for more information on the eligibility requirements for an Operator Licence and Authorization.