Ontario’s cannabis regulator told SNDL on April 13 that it must give up de facto control of its retail operations in the province or face possible licence revocation, a move that could put 46 cannabis stores under pressure. The confidential pre-enforcement notice said the company’s hold over Spirit Leaf Ontario Inc. and Superette Ontario Inc. runs against provincial rules that limit how much of the retail market a producer can control.
The warning landed at a sensitive moment for SNDL, which has not publicly disclosed the challenge to shareholders. The company was already navigating a drawn-out regulatory review of an earlier Ontario expansion plan, and last month it said a previously announced acquisition of 27 cannabis stores in Ontario was not expected to go ahead.
The regulator’s case turns on ownership limits written into Ontario’s cannabis regime. A federally licensed producer may operate only one farmgate retail location on the same site as a production facility, and it cannot hold more than a 25 per cent controlling interest in retail licence holders. In its notice, the Alcohol and Gaming Commission of Ontario said its investigation found SNDL effectively controls Spirit Leaf Ontario and Superette, giving it what amounts to 46 stores in the province.
Jeff Longhurst wrote that a proposal for a genuine, verified and complete divestiture of SNDL’s de facto control could provide a path to an alternative resolution and avoid contested public proceedings. That wording matters because the regulator’s own posture is less absolute than the warning suggests: Shae Greenfield said the AGCO has conducted an investigation but has not issued any orders related to the probe, even as the letter said licences could be revoked if the matter is not resolved. Greenfield said it would be inappropriate to comment further while the matter remains ongoing.
The unresolved question is not whether the province has leverage. It does. The AGCO said it intends to revoke all retail licences held by Spirit Leaf and Superette unless a satisfactory resolution is reached, and it will not process new cannabis retail applications or transfer requests tied to either company until then. SNDL did not respond to a request for comment, leaving the market to infer whether it will try to sell down its control, fight the finding or find a compromise that satisfies the registrar.
The stakes are notable because Ontario remains one of the country’s biggest cannabis markets, and the company has been trying to build through acquisitions rather than waiting for organic growth. SNDL struck a deal in April 2025 with Markham, Ont.-based 1CM Inc. to buy 32 Cost Cannabis and T Cannabis locations, then split the transaction eight months later so five stores in Alberta and Saskatchewan could close separately from the Ontario locations. A month ago, it said a separate purchase of 27 Ontario stores was not expected to proceed. For now, the pressure point is plain: unless SNDL offers a divestiture the registrar accepts, the province has said it is prepared to pull the licences that keep those Ontario stores open.
