TORONTO — The Alcohol and Gaming Commission of Ontario was aware of at least one “law enforcement matter,” as well as ongoing investigative work, in the days following its last cannabis lottery, a document obtained by iPolitics shows — just days after Ontario announced its impending move away from the lottery system.

A briefing note on the last retail lottery’s results, acquired through a freedom of information request, contains multiple sections redacted due to information that could “reasonably be expected” to interfere with a law enforcement matter, or an investigation undertaken with a view to a law enforcement proceeding. Information was also redacted that was seen to possibly reveal investigative techniques “in use or likely to be used.” Much of the redacted information was contained under a section detailing the AGCO’s “next steps” following the provincial draw.

The briefing note itself was prepared by a senior advisor in AGCO corporate affairs, Philip Klassen, and dated Aug. 27, 2019 — just shy of one week after the results of the lottery were announced on Aug. 21. (The lottery included 4,864 potential applicants for 42 spots, and was conducted on Aug. 20.)

It’s unclear what the precise law enforcement matter or matters were, nor how they were connected to the cannabis retail draw. A spokesperson for Ontario’s attorney general, Doug Downey, bumped iPolitics’ inquiries about the law enforcement redactions back to the ACGO, adding as well that law enforcement “related to illegal cannabis stores” was the responsibility of local police services. The AGCO wrote in a short statement that they were “unable to provide any additional information at this time.”

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Klassen’s briefing note also highlights some of the questions that were raised in the press about the lottery announcement in the ensuing days — particularly, the fact that a “large number of lottery entrants” were submitting the exact same addresses. “This is not a violation of the lottery rules,” Klassen noted under “key messages” for the commission. “Property owners were not prohibited from giving multiple applicants an opportunity to use their retail space if selected in the lottery,” he continued.

The lottery system in Ontario, overall, has been subject to criticism aplenty — including a court challenge from several individuals who were successful in the August lottery draw, but were disqualified just nine days later for failure to abide by the process rules. Their legal challenge aimed to question whether the process was fair; however, the individuals’ application for judicial review was dismissed by an Ontario divisional court after it was heard in late September.

“This was not an adjudicative decision, which usually requires a higher level of procedural fairness. The Registrar was assessing the applicants’ applications against the requirements set out in the Rules, and they were found wanting because an original copy of the ($50,000 standby letter of credit) was missing,” the decision says.

The province had endeavoured to structure a more rigorous application process for the August round of lottery picks, hoping that Ontario’s second phase of licensed stores could be rolled out more smoothly than the first. “We want to make sure that the applicants, the people who will go into the draw, are able to follow through and realize the opening of the store,” Attorney General Doug Downey told iPolitics during an interview in early July.

By that point, three of the stores resulting from lottery picks in January had yet to open — despite an expected opening date of April 1, 2019. From the first lottery to the second, the province implemented a requirement that applicants prove they had the capital and retail space to open a store, if their name was drawn. That translated to having access to $250,000, and an ability to pay a deposit of $50,000. Additionally, applicants would have to show they had access to retail space, and pay a $75 processing fee.

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Since the last draw, Ontario has moved away from the lottery system, with a major switch-up just last week. The Ford government announced on Thursday evening — the last day the legislature was scheduled to sit for 2019 — that it will be moving to an open market system for retail cannabis stores, beginning in January 2020. Gone will be the temporary cap on the number of private stores operating in the province, as well as the pre-qualification requirements for prospective retailers.

Licensed producers will soon be allowed to open a store at one of their facilities, in a move intended by the province to help legal stores open faster. Ontario will eventually phase in limits on the number of authorized stories one particular license holder can have. Operator license applications will be accepted as of Jan. 6, and store authorization applications as of March 2. Store authorizations are expected to be issued starting in April, at an initial pace of around 20 authorizations per month.

Ontario Attorney General spokesperson Jenessa Crognali wrote in an email on Monday that the provincial government was returning to their “original plan” with the announcement of open market allocation for cannabis retail licenses — attaching the timing to the resolution of a country-wide cannabis supply shortage. Her statement mirrored comments made last month by Finance Minister Rod Phillips.

Phillips, at the time, confirmed that the province was going to move away from the lottery system and into open allocation, but declined to say when they’d be doing so. On the heels of a BNN Bloomberg report that said analysts estimated a market of up to 1,000 outlets, Phillips declined to “speculate” on whether the figure was accurate.

“I have no idea the source of that, or where that number would come from,” Phillips said at Queen’s Park, dodging questions about whether such an estimate was within the realm of possibility. “It’s a number I’ve never heard referenced before,” he added.

There was a “range of options” around how many stores could be supported, he said.

“The concept of an open market is that the market will decide, obviously subject to the regulation of the AGCO, subject to the fact that municipalities, some have chosen to have stores in their municipalities, some have not. But the idea of an open market is that will work itself out over time,” Phillips told reporters.

As of Monday, Ontario had just 25 cannabis stores authorized to open province-wide, and 43 listed as “in progress.” The province’s public accounts showed in September that Ontario Cannabis Retail Corp. lost $42 million in the last fiscal year.

— With files from Kirsten Smith