With recent litigation indicating potential further delays for the distribution of additional adult-use dispensary licenses in Illinois, perhaps it makes sense to review how the Land of Lincoln found itself in this position.
On June 25, 2019, Illinois Governor J.B. Pritzker signed the Illinois Cannabis Regulation and Tax Act (the “Act”) into law, adding Illinois to the states that have legalized adult-use cannabis. Among other initiatives, the legislation sought to bring equity to Illinois communities that have been hit hardest by the war on drugs, in part by providing additional “social equity” bonus points on license applications submitted by certain eligible entities, as described in further detail below. As initially drafted, the Act required the Illinois legislature to issue 75 new adult-use dispensary licenses by May 1, 2020.
Over 4,500 applications were submitted by more than 900 different groups for this initial batch of 75 licenses, and only the 75 highest scoring applicants were to be eligible to receive a license. Although the Act initially did not contemplate ties, it was later amended to clarify that in the event of a tie, licenses would be awarded via a lottery.
As mentioned above, to further the Act’s intent to bring economic opportunity to communities hit hardest by the war on drugs, the criteria for scoring the applications allotted 50 points (out of a potential 252) to each applicant that qualified as a Social Equity Applicant. To be considered a Social Equity Applicant, at least 51% of the ownership group applying for the license must have lived for at least 5 of the last 10 years in certain designated areas deemed most impacted by the war on drugs known as “Disproportionately Impacted Areas,” or have been arrested or had family member arrested for a now-expungable cannabis related offense, or the licensee entity must hire more than 10 full-time employees, at least 51% of whom would qualify as Social Equity Applicant themselves.
Many hoped these criteria would create a diverse cannabis industry by granting licenses to minority-owned businesses – the Governor himself even dubbed the Act as “the most equity-centric law in the nation.”
Delays and Initial Lottery Announcement
The awarding of the licenses was deferred multiple times throughout 2020, as the COVID-19 pandemic strained government resources. This delay also strained the resources of many applicants, who were lining up properties, employees and resources for the initial planned license award date of May 1, 2020. Additional frustration sunk in among license candidates on September 3, 2020, when the State announced that only 21 of the 700-plus applicants had achieved a perfect score on their application, and would be entered into a lottery process whereby the 75 available licenses would be awarded among those applicants. This, coupled with the allegation that only 13 of the 21 accepted applicants were owned and controlled by people of color, sparked frustration among those left out. Some accused the Pritzker administration of favoring rich, politically connected insiders rather than the minority applicants who the law was intended to benefit.
However, faced with litigation from multiple applicants claiming various flaws in the process, the Governor suspended this initial lottery. He then offered to provide the excluded applicants with Supplemental Deficiency Notices, which would reference the specific sections of their application that failed to receive all of the available points and allow them an opportunity to subsequently amend their allegedly faulty application. Unfortunately, this proposed solution both failed to placate the excluded applicants and frustrated those applicants who had already received a perfect score. Complaints were amended and further lawsuits were soon filed by those on both ends of the spectrum, which have continued (in various forms, as described below) through the present day. As of March 31, 2022, none of the proposed new adult-use licenses have been issued.
HB 1443 and New Lotteries
To attempt to address the ongoing delays and controversy, the Illinois General Assembly passed H.B. 1443 – signed by the Governor on July 15, 2021 – that amended the previous process for awarding the new adult-use dispensary licenses. Under this new regime, two new lotteries were created to award an additional 110 adult-use licenses, for a total of three separate lotteries in which a total of 185 adult-use dispensary licenses will be issued. An additional lottery was also created to issue the five remaining medical dispensary licenses
The first lottery was held on July 29, 2021, for 55 new licenses, and included only applicants that received 85% or more of the available points on their application. The second lottery, also for 55 additional licenses, was held on August 5, 2021 and included applicants that received an 85% or higher and met the ownership and control requirements for Social Equity Applicants described above. For purposes of this Social Equity Justice Involved Lottery, applicants were not able to qualify for Social Equity status solely by promising to hire individuals from a Disproportionately Impacted Area. The final adult-use lottery, for the original 75 licenses, was held on August 19, 2021 and included the initial 21 applicants who received a perfect score, as well as an additional 134 applicants who reached a perfect score after submitting an amended application through the Supplemental Deficiency Notice process. The winners of the various lotteries were announced by IDFPR in press releases, but none of the licenses have been awarded yet due to the ongoing litigation.
More recently, on March 15, 2022, Governor Pritzker announced another planned lottery process to occur later this year, whereby an additional 50 new adult use dispensary licenses would be issued via lottery, with a new, simplified online application process. The proposed rules governing this process were released on March 25, 2022, and are summarized in a separate “In the Weeds” post found here.
Litigation – Where Things Stand and Does it Even Matter?
Unfortunately for those who have been successful in the lotteries held to date, further litigation has disrupted the process of actually awarding the dispensary licenses. There are currently three different ongoing lawsuits involving Illinois dispensary licenses, two of which have been ongoing for some time and one of which is relatively newly filed, and threatens to upend the entire lottery process.
The first lawsuit, Wah v. IDFPR, challenges the additional points awarded to veteran-owned applicants and claims that preference creates a special class of applicants, which would violate the Illinois constitution. The original judge in this case, who has since retired, issued a stay order that prevents IDFPR from issuing any of the 185 dispensary licenses until the issues raised in that case have been resolved. The next hearing in Wah is scheduled for April 25th and will be presided over by a new judge, covering the state’s motion to dismiss the case and remove the stay.
A second lawsuit, which is really a group of fourteen different lawsuits filed by over two dozen applicants that have been consolidated into one “supercase,” challenges the application process on the basis of alleged violations of Illinois administrative law, and asks that the plaintiffs be provided additional licenses beyond the 185 currently allocated. The judge in that case recently had the opportunity to take control over the stay in Wah, but declined. As a result, the resolution of this case will affect only the parties to the case, and will not affect the larger issue of the stayed licenses.
Unfortunately for all of the parties that have expended time and money on these cases, a third case was recently filed that could upend the entire licensing process, as well as Illinois’ plans to issue 55 additional dispensary licenses later this summer. That case, Finch, et al. v. Mario Tretor, Acting Secretary of IDFPR, 1:22-cv-0158 (N.D. Illinois, March 23, 2002), challenges the additional points given to Illinois residents as part of the application process for the 185 dispensary licenses currently in limbo, claiming that granting those additional points (as well as the fact that Illinois residency was required in order to qualify as a social equity applicant) should be deemed unconstitutional under what is known as the “dormant commerce clause.” Because the plaintiffs in that case are suing under federal law and have already won a case in federal court challenging similar requirements in Missouri, those watching the case closely are concerned that this court may reach a similar result and throw out all 185 licenses previously awarded through the lottery process.
It is difficult to predict how the courts may rule – as well as the impact that further delays may have on the Illinois cannabis market – but Fox Rothschild and “In the Weeds” will continue to track all developments in this process.
The author would like to thank Charlie Kogan (Loyola University Chicago School of Law, J.D. candidate May 2022), who collaborated on the article and provided research assistance.
 410 ILCS 705/15-25
 See 410 ILCS 705/15-35 – 15/35.10.
 See 410 ILCS 130/115.5
 See IDFPR July 29 Press Release for Qualifying Applicant Lottery; IDFPR August 5 Press Release for Social Equity Justice Involved Applicant Lottery; IDFPR August 19 Press Release for Tied Applicant Lottery