Illinois Craft Grower, Infuser and Transporter Applications are Now Due March 30, 2020

 On March 12th, due to concerns about COVID-19, Illinois Governor JB Pritzker issued an Executive Order extending the deadline for submitting applications for adult use Craft Grower, Infuser and Transporter licenses by two weeks, until March 30, 2020. The Executive Order also directed all applications to be submitted via USPS certified mail. Applications delivered in person or sent via FedEx or UPS will not be accepted.

Ohio Company Accused of Misrepresenting Minority Ownership

In Ohio, a cannabis company was accused of misrepresenting its ownership structure in order to qualify as a minority-owned business. The company is 51% owned and controlled by a businesswoman who is a member of an “economically disadvantaged group.” However, the Ohio Board of Pharmacy claimed the businesswoman was only a 51% owner on paper, that she did not actually own and control the company and that the company committed fraud, misrepresentation or deception by including this ownership information in its application. The company did not admit to any violations or wrongdoing and resolved the issue by submitting an amended and restated operating agreement and agreeing to make a $500,000 donation to the Ohio Automated Rx Reporting System.

Social Equity Status in Illinois

Illinois’ cannabis applications are competitive, where licenses are granted based on a competitive scoring process. For new adult use licenses (dispensaries, craft growers, infusers and transporters), an applicant’s social equity status accounts for 20% of the available application points. Thus, most applicants attempt to qualify for social equity status. For example, applications for Illinois’ new 75 adult use dispensaries were due on January 2, 2020 and the Illinois Department of Financial and Professional Regulation reported that over 700 applicants submitted applications and that 600 of those applicants identified as qualifying for social equity status (those 75 licenses will be awarded on or before May 1, 2020).

There are three ways to qualify as a social equity applicant in Illinois:

  1. 51% ownership and control by one or more individuals who have resided for at least 5 of the last 10 years in a Disproportionately Impacted Area;
  2. 51% ownership and control by one or more individuals who: (i) have been arrested for, convicted of, or adjudicated delinquent for any offense that is eligible for expungement under the Act; or (ii) is a member of an impacted family; or
  3. A minimum of 10 full-time employees with at least 51% of current employees who: (i) currently reside in a Disproportionately Impacted Area; or (ii) have been arrested/convicted/adjudicated delinquent for an expungeable offense.

Do Not Misrepresent Social Equity Status

The above Ohio example is a reminder that statements and representations in cannabis applications are investigated by regulators. In Illinois, if you apply as a social equity applicant and claim your company is 51% owned and controlled by a social equity owner(s), that owner(s) must truly own and control the day to day activities of the company. If they do not, expect an investigation from the regulators.