Audit Alleges Costly Failures and Questionable Fairness in Missouri’s Marijuana Licensing Rollout as State Regulators Forcefully Dispute Findings
State Auditor Says Flawed Scoring, Litigation Fallout, and Oversight Gaps Plagued Early Cannabis Program While Regulators Call Report ‘Baseless’ and ‘Misunderstood’
Missouri State Auditor Scott Fitzpatrick released a sharply critical report Wednesday examining the state’s marijuana program, concluding that significant missteps in the 2019 licensing process triggered more than $12.5 million in litigation and administrative appeal costs while raising enduring concerns about whether licenses were awarded fairly.
The nearly three-year audit of the Missouri Division of Cannabis Regulation points to what it calls “perceived and actual deficiencies” in how applications were scored, arguing those weaknesses fueled hundreds of appeals and years of costly legal disputes. At the center of the findings is the state’s “blind scoring” system, which was designed to conceal applicant identities but, according to the audit, contained vulnerabilities that made it difficult to rule out error—or bias.
“It was a monumental task, and I know it was not easy,” Fitzpatrick said in a press release. “But at the same time it’s clear there were some significant issues with how license applications were evaluated and scored that cast a shadow over the program and ultimately cost the state millions of dollars.”
Regulators responded with equal force. In a 23-page rebuttal, the division rejected the audit’s conclusions as “baseless” and “flawed,” arguing the auditor reviewed only 67 applications—about 3 percent of the more than 2,000 submitted in 2019—too small a sample, they said, to support sweeping claims about the system’s legitimacy.
When Missouri launched its medical marijuana industry, regulators awarded 348 licenses: 192 dispensary, 86 manufacturing, 60 cultivation and 10 testing facility permits. Nearly 850 unsuccessful applicants appealed, citing inconsistent scoring, potential conflicts of interest involving the contracted scoring company, and disputes over the state’s authority to cap license numbers.
Questions Over ‘Blind’ Scoring Intensify as Audit Highlights Identifiers That May Have Revealed Applicant Identities
A central flashpoint in the audit involves applicant-created identification codes. Regulators allowed businesses to generate unique identifiers to label supporting documents. The auditor argued that recognizable codes could have allowed graders to deduce applicant identities, undermining anonymity.
Of the 67 applications reviewed, 12 included identifiers auditors believed could be recognizable. Eighty-three percent of those applicants received licenses—compared with roughly 15 percent overall—suggesting, Fitzpatrick said, that anonymity may have been compromised.
“What was meant to be a blind scoring process was able to be circumvented,” he said, noting applicants who signaled their identity won licenses at a far higher rate.
The division disputed that interpretation, saying graders reviewed only one or two sections of each application, limiting influence. It also argued that allowing applicants to create identifiers reduced administrative risk and logistical burdens.
Division Director Amy Moore said years of litigation have produced no evidence that graders knew applicant identities, noting that fewer than 1 percent of scoring challenges have succeeded.
Audit Finds Scoring Inconsistencies and Limited Documentation While Regulators Cite High Reliability Ratings
Auditors also flagged scoring disparities. The review identified 59 instances where identical or nearly identical answers received different scores, and 38 applications where responses meeting minimum criteria were graded zero.
Regulators countered by pointing to administrative appeal rulings and expert analysis supporting scoring consistency. One expert review found a 98 percent average consistency rate across application responses, which regulators say demonstrates reliability.
Still, Fitzpatrick argued that in a tightly scored system, even minor variations could determine who secured lucrative licenses.
“A slight shift in score one way or the other could have resulted in a license being granted or not being granted,” he said.
The audit further criticized instructions given to scorers to limit note-taking, allegedly to reduce records available in lawsuits—an issue that previously drew legislative scrutiny over potential conflicts of interest involving the scoring contractor.
Oversight, Inspections, and Social-Equity Licensing Also Scrutinized in Wide-Ranging Review of Cannabis Program
Beyond licensing, the audit cited broader regulatory concerns. It found delays in processing ownership transfers, questioned the awarding of some social-equity licenses, and said oversight of licensed facilities and market activity needed strengthening.
Auditors reported that some businesses operated without required inspections and that inventory checks aimed at preventing black-market diversion were minimal. The report also said the state’s track-and-trace system lacked real-time capability to flag purchases exceeding legal limits.
Regulators rejected those claims as “egregiously inaccurate,” maintaining that all licensees undergo rigorous inspections and that compliance monitoring includes both on-site visits and digital record reviews.
They also accused the auditor’s office of lacking sufficient cannabis-regulation expertise to evaluate the program fairly.
Adversarial Tone Emerges as Auditor and Agency Clash Over Cooperation During Investigation
Fitzpatrick additionally described the division as “uncooperative,” expressing surprise at what he called an adversarial posture during the audit.
Moore said she was unaware of those concerns, noting the agency fulfilled 160 information requests and dedicated more than 70 staff members who logged thousands of hours assisting auditors through interviews and site visits.
“We were not aware at any point that this level of cooperation was considered insufficient,” she said, adding the division would adopt any constructive recommendations.
State Cannabis Program’s Early Turbulence Offers Lessons for Future Regulatory Efforts, Auditor Says
While sharply critical, the audit acknowledged that regulators improved processes over time. Fitzpatrick said the findings should serve both as guidance for Missouri’s cannabis oversight moving forward and as a roadmap for other state agencies launching complex regulatory programs.
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