Pot stocks rallied today following news that Ontario plans to scrap its much maligned cannabis retail lottery system in favour of an open market.

Attorney General Doug Downey announced the news after trading finished yesterday evening. He said the province aims to provide consumers with more choice and greater convenience, while ushering in a more reliable supply of cannabis.

“We have said all along that opening more legal stores is the most effective way to combat the illicit market, protect our kids and keep our communities safe – that is our number one priority,” said Downey.

Most major cannabis producers saw their share prices increase on the back of the news, including Canopy Growth Corp., Aurora Cannabis, MedMen, Aleafia and Organigram.

Ontario has previously drawn fierce criticism over its lottery system. The province permitted a mere 25 stores after Canada legalized recreational cannabis in October 2018.

Qualifying applicants were pulled out of a hat, but there were significant delays and Ontario was criticized for the lengthy approval process.

The province decided to issue a further 50 licences, tripling the size of its cannabis retail market, earlier this year. A second lottery took place in August, yielding 42 winners, while it permitted eight stores on First Nation Reserves.

However, there was more controversy when it emerged that the lottery had yielded three different winners within 200m of one another on the same street. The Alcohol and Gaming Commission of Ontario received 4,864 submissions, and there were only 42 licenses up for grabs, so there was dismay when three were awarded to businesses planning to open on the same stretch of Commerce Park Drive in Innisfil, particularly as many large towns received no licenses at all.

Now Ontario has decided to end the entire process and remove a cap on the number of private cannabis stores in the province. It will eliminate pre-qualification requirements for prospective retailers, while it will increase the ability of licensed producers to open stores across the province and at their facilities.

It will also allow retailers to sell additional cannabis-related items, like magazines and cookbooks, which are not currently covered in the licensing.

AGCO will begin accepting applications from prospective retailers on Jan. 6, 2020, and then it should start granting authorizations in April. It then plans to issue 20 licenses per month.

Until Aug. 31, 2020, retail operators may own a maximum of 10 cannabis stores in Ontario, increasing to 30 in September 2020 and 75 in September 2021.

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