• After months of delays, Illinois finally released top scores for coveted cannabis dispensary licenses.
  • The 75 available licenses went to only 21 companies. These companies will be entered into a lottery, which the state will hold next month.
  • The scoring process and implementation of the law have come under intense scrutiny. Allegations of unfair scoring and mismanagement of the social equity intent of the law triggered multiple lawsuits.

Illinois Dispensary Licenses Released

Illinois’ long-awaited announcement of the winners of the cannabis dispensary licenses has drawn much criticism from around the state. Earlier this month, the Illinois Department of Financial and Professional Regulation (IDFPR) released a list of the top-scoring applicants. This announcement came after months of delays. Originally, the state planned to announce the license winners in early May. However, the COVID-19 pandemic led to delays in scoring, leaving applicants in a holding pattern for more than four months. The announcement also drew sharp criticism for other reasons, specifically that the state issued the 75 licenses to only 21 companies. Many of these companies are owned by well-known and wealthy individuals. This stands in stark contrast to the intended progressive nature of the bill touted by the legislature.

Only A Few Received Licenses

In January, over 700 groups filed 4,000 applications for 75 adult-use cannabis dispensary licenses in Illinois. On September 3rd, the IDFPR announced that only 21 applicants will move to the tiebreaker phase. Each of these applicants can apply for up to 10 licenses, which further limits diversity. The state will enter these companies into a lottery, scheduled for mid-October at the time this post is published, and award each company one entry into the lottery for each application fee paid. The maximum entries into the lottery will equal the number of licenses available in that region.

Many of the lottery-bound companies have overlapping owners and relationships, per Secretary of State records. Given this information, it seems like the winners are an interconnected group. Grown In, a cannabis-industry media company, compiled this list with the winners’ registered agents and managers.

Social Equity Fail?

Social equity status was a trademark of Illinois’ cannabis legislation. Minority groups around the state, and the country, touted this as a progressive way to include communities who suffered most from the war on drugs by giving them preference to licenses. However, the fact that only 21 applicants moved to the next stage of the licensing process casts serious doubt on whether the social equity portion of the law had its intended effect

Achieving social equity status amounts to 50 out of a total of 250 points to receive a license. The thought was that the extra 50 points would boost applications from communities of color, communities that have been discriminated against because of past drug-enforcement legislation. With social equity status, the theory goes, they would finally see a path to cash in on the legalization of cannabis. Since the winners all received a perfect score, this means that all the winners received those social equity points.

However, it seems as though applicants found a way around the intended nature of the social equity status. License recipients with owners or managers such as Phil Stephani, well-known local restaurant group owner, as well as owners of pot shops from neighboring states like Michigan. This is in direct contrast to the progressive nature of the law that the state has been widely touting since it passed.

Cannabis License Scoring Was Suspicious

In addition to the social equity debacle, there have been reports of inconsistent scoring on Illinois dispensary applications. The state was supposed to send deficiency notices to applicants if the graders found a problem. The applicant then had a certain number of days to address the issue. However, according to these reports, not everyone received these notices and an opportunity to fix the problem with their application. In addition, there are accusations of inconsistent scoring across applications. Lastly, the firm hired to score the applications, KPMG, has had PR issues of their own. One of KPMG’s employees submitted a winning application, an obvious conflict of interest that the state did not seem to catch.

On September 21st, in response to the uproar, Governor Pritzker announced that the state would take a second look. Any applicant who did not receive a perfect score will receive notices of deficiencies. They will then have a chance to amend their application or ask the IDFPR to rescore their original application. How long will this re-scoring process take? Will these applicants be allowed to enter the upcoming lottery? Or, will they have to wait until the next round of Illinois dispensary applications opens? It’s still unclear.

License Litigation

Almost as soon as the state released the perfect scorers, many who did not receive a top score filed suit in federal and state courts. These suits request that the state, among other things, stop the lottery process and regrade applications. Two of these cases are in federal court and include a total of over 70 applicants as plaintiffs. A case filed in the Sangamon Circuit Court focuses on the veteran scoring element, which awards 5 points to applicants with a veteran owner. This case alleges that these extra points turn veterans into an illegal special class. Since the points essentially give licenses to exclusively veterans, the case claims, it is therefore unconstitutional. These cases are recently filed and are working their way through the courts. It will be some time before we have a ruling.

Unintended Effects

As is so often the case, the irregularities predominately affect the applicants with the fewest resources and who find it hardest to fight the system, those who the law intended to help. The 21 winners all had access to consultants and attorneys to make sure their applications were perfect. They spent tens of thousands of dollars to submit flawless applications. The result: what seems to be a homogenous group of future license holders, under a supposedly groundbreaking law, legislation that should have led to more diversity and equity in this new field.

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