Acreage Holdings (OTC:ACRGF) is at risk of running afoul of Massachusetts law in its dealings with small cannabis businesses in the state. According to a report in The Boston Globe, the company has admitted that a set of contracts it has with two such entities is "inoperable."

The article said that an investigation conducted by the Massachusetts Cannabis Control Commission found Acreage had possibly put itself "in a position to control the decision making" of two companies. Acreage has signed contracts to provide management services and loans to the pair.

These privately held companies, Patient Centric and Health Circle, have each applied for two recreational cannabis dispensary licenses in the state.

Gavel with marijuana leaf.

Image source: Getty Images.

However, according to Massachusetts law, a single company can only control a maximum of three dispensaries. And Acreage is itself an applicant, currently in the running for two licenses under its Botanist brand -- one in the city of Worcester and one in the nearby town of Shrewsbury.

It is not immediately clear whether Acreage's relationship with either or both Patient Centric and Health Circle could end up with Acreage effectively in charge.

The Boston Globe quoted Cannabis Control Commissioner Britte McBride as saying in a public meeting, "One of the things we've really been concerned about is the management contracts and what those relationships are and whether they form — implicitly or explicitly — a controlling relationship."

Acreage did not comment for the article. It has not yet issued a statement on the matter, although the commission said the company pledged to modify the terms of its contracts with the two smaller businesses.

The well-known marijuana stock fell by nearly 4% in Tuesday trading. 

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