The Maine Attorney General is investigating whether or not last fall’s Kittery’s cannabis license lottery constituted illegal gambling, according to correspondence between both parties obtained by Grown In.
“Our Office is concerned about the legality of the October 28, 2021 lottery. The lottery appears to have been held in violation of provisions contained in both Titles 17 and 17-A of the Maine Revised Statutes,” wrote Assistant Attorney Katie Johnson in a letter to the Town of Kittery on Jan. 27. “Specifically, it is illegal to conduct a “game of chance” without a license or registration issued by the Gambling Control Unit.”
In Maine any game of chance that carries a prize and is conducted to raise money constitutes gambling and must be licensed by the state’s Gambling Control Unit (GCU).
In a response letter to the AG’s office, the town’s attorney, Katie Johnson, argued that Kittery’s lottery didn’t technically guarantee a prize since winners could still see their applications rejected.
“The Town issued licenses only after a separate review and consideration of applicants’ completed applications. Thus, random selection ‘winners’ were not granted licenses but merely the opportunity to submit a completed application for the Town’s review,” wrote attorney Katie Johnson of Preti Flaherty, who represents the Town of Kittery. “The Town’s priority selection process involved neither a prize nor pecuniary consideration. Applicants did not pay any pecuniary consideration for their participation in the lottery. As with any valid license or permit fee, the pre-application fee was imposed to cover the costs incurred by the Town in reviewing those applications and administering the pre-application process.”
The town held a drawing in October using numbered ping pong balls and a rolling cage to select applicants for one of three adult-use licenses, split into separate geographic zones. Applicants were able to submit multiple entrees at $750 each. The town reportedly pulled in $535,000 in entrance fees.
Two of the three winning bids belonged to Nick Friedman and Brandon Pollock, who are the CEO and CSO of Theory Wellness, respectively. The two submitted over half of the 705 lottery entries the town accepted. Mitchell Delaney, who already owns Indico, a medical dispensary in Kittery, won the third and final available spot after submitting 10 of the 11 applications for Zone 3.
Collins explained, in a footnote, that although the town received $535,000 in fees from lottery entrants, the municipality had not anticipated receiving so many submissions.
“To the extent the Town received substantial application fees, this was due to some applicants’ attempts to manipulate the licensing process through the submission of dozens of separate applications through multiple business entities and was not a foreseen or intended consequence of the Town’s chosen procedures,” wrote Collins. “The Town is comfortable that the fees as assessed reflect a good faith estimate of its actual costs to review and confirm each application.”
The original letter was sent to inform the town that it was being investigated. The town was required to respond to the inquiry by Jan. 27.
Maine law limits lottery licenses to agricultural societies, non-profit charitable, educational, political, civic, recreational, fraternal, patriotic or religious organizations, volunteer fire departments, or auxiliary groups for any of the mentioned types of organizations.
“It is our understanding that the Town never obtained a license from the GCU and, in fact, is not eligible to obtain one,” wrote Johnson. “To help us with our review of this matter, please explain why you believe the Town could conduct its lottery without having obtained a license from the GCU.”
A spokesperson from the Attorney General’s office stated that any documents related to its investigation of the Kittery lottery were not public records under the state’s Intelligence and Investigative Record Act. He declined to comment further.
Collins declined to give a formal statement in response to the letter other than to share the official response sent to the Attorney General’s office.
“We feel that the letter speaks for itself,” she said.