I’m really enjoying these guys reporting at the moment…it’s as though Dark Horse were taking the piss by calling themselves Dark Horse and snorting at the plain dumbass rules that Kentucky devised
Boof du Jour ( Read with a pinch of salt)
In what legal experts are calling “totally legal, but also, come on dude,” out-of-state cannabis operator Dark Horse Cannabis has allegedly app-stacked Kentucky’s medical marijuana licensing process so hard that even local moonshiners are calling bullshit.
Reports indicate Dark Horse submitted at least 104 applications under different business names, which, for context, means one guy applied more times than the entire town of Paducah has working toilets.
Dark Horse Cannabis, an Arkansas-based company that also operates in Missouri, has apparently perfected the “Trojan Horse Licensing Strategy”, where instead of running an actual Kentucky business, they simply disguise themselves as 100 different Kentucky businesses.
“No locals applied, just 104 businesses that all happen to list their headquarters at the same Shell station off I-64,” noted one investigator.
A closer look at some of the questionable entities that were awarded licenses reveals companies like:
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“Bluegrass Dank Holdings, LLC” (registered in a Delaware UPS box)
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“Lexington Cannabis Co-op” (owned by a guy from Phoenix who has never seen grass of any color)
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“Kentucky Home Grown” (literally incorporated three days before the application deadline in a state that doesn’t even allow adult-use weed)
“If you name it something with ‘Kentucky’ in it, people just assume it’s local,” said one Dark Horse insider. “We could’ve named one ‘Mitch McConnell’s Own Personal Grow Op’ and still got approved.”
Make sure you read the full report
Have highlighted the issue in a more pbs format for ya’all to read
Also raising eyebrows is the fact that Sean Clarkson — a co-founder and CFO of Dark Horse Cannabis, an Arkansas marijuana company — organized 350 new businesses with the Kentucky secretary of state’s office in the month leading up to the Aug. 31 application deadline, all of whom listed their principal address as the Arkansas headquarters of the company.
The companies tied to Dark Horse submitted at least 104 of the 918 total applications for cultivator and processor licenses, winning two: a processor license and one of the two given out for Tier 3 cultivators, the largest operators that can grow marijuana in greenhouses of up to 25,000 square feet. Under state regulations, a parent company or ownership interest can hold multiple licenses in one category, but not ones that are vertically integrated, such as one cultivator license and one processor license.
In response to questions about Dark Horse potentially subverting the process by stacking applications, the Beshear administration claims the Arkansas company did not game the system, as the executive and Dark Horse have no ownership interest in the hundreds of companies.
However, an investment pitch presentation obtained by Kentucky Public Radio shows the parent company of Dark Horse Cannabis also claiming ownership of two companies that won these licenses.
The pitch deck also says it expects to win 2-3 more dispensary licenses in Kentucky’s next two lottery rounds, which will give them “a full vertical that will allow for increased overall margins and bargaining power within the state,” estimated to bring in more than $150 million in revenue over the next three years.
Dark Horse Cannabis and its executives have not responded to numerous voicemails over the past month.
Michael Adair is one of the Kentucky hemp farmers who is fed up with the licensing process and has voiced those concerns repeatedly to the Beshear administration. The Dark Horse pitch deck confirmed his suspicions of application stacking, and he says the administration should pull the companies’ licenses.
“Clearly they broke the rules in being vertical and everything else,” Adair said.
He says he followed the rules when applying for cultivator licenses and was ready to start growing right away on six acres of greenhouses on his Paris farm had he won.
“I can hit the ground running,” Adair said. “I don’t have to build-out buildings. If they want material, I can have material in a couple months.”
Beshear and others in the cannabis industry have touted the lottery process as a way to limit big money lobbying corrupting the licensing process. He also says it could speed up the process of growing, processing and dispensing cannabis medicine to patients, ideally in the first quarter of 2025.
He has cited other states that attempted a competitive scoring process for who gets such licenses, only to get delayed for years by litigation from companies’ claiming they were discriminated against — an outcome less likely by a random lottery system.
Paula Savchenko, a Florida attorney with cannabis clients across the country, agrees that a lottery system is the best way to avoid litigation, but says that doesn’t necessarily mean that it leads to the best results for medical marijuana programs.
“I’m always going to recommend that it should be a competitive process,” Savchenko said. “The reason for that is because you really do want the best groups to be operating in this industry. When you go through a lottery, you are not able to really choose who’s best for the state and for the patients, in my opinion.”
Adair countered Beshear by arguing the lottery process will still lead to a long delay before there is any medical cannabis in Kentucky stores, as many of the license winners either have no experience or won’t have facilities in place to grow or process cannabis until well into 2025, if not 2026. Some winners are shopping licenses around to see how much money they can get for selling them or partnering with another business, while the potential of big vertically integrated marijuana companies could choke out smaller operators and raise prices.
While Beshear has held out hope that medical cannabis products will be in Kentucky dispensaries early next year, Adair says that’s nearly impossible given the companies that won licenses.
“Six months, a year from now, when there’s nothing on the shelves and people are screaming, and you’ve got big cannabis out here doing stuff, it’s gonna look real, real bad,” Adair said.
A wave of out-of-state applicants, license winners
Of the 16 businesses to win a cultivator license, only two Tier 1 licensees — the smallest tier, with a maximum of 2,500 square feet in a secure indoor facility — were made up of residents of Kentucky. None of the 16 cultivators had any ties to Kentucky’s hemp industry — despite the state giving local hemp businesses “priority” in the application review process.
What nearly all of the 26 lottery winners had in common is that they registered their business with the state within a month of the August 31 application deadline.
Though the Beshear administration has denied open records requests for all applications and a full list of the applicants, they did release a list of all cultivator and processor applicants after the Oct. 28 lottery. Of those 918 applicants, nearly two-thirds registered their business with the state within a month of the application deadline.
And these applications — 350 of which were organized by Clarkson of Dark Horse — were not cheap. The Clarkson businesses applied for 28 Tier 3 cultivator licenses that cost $20,000 each, 28 Tier 2 cultivator licenses that cost $10,000 each, and 48 processor licenses that cost $5,000 each — together totaling more than $1 million.
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