Illinois Craft Pot Group Joins License Litigation Melee

By Willis Jacobson
Oct 15, 2020

The Illinois Craft Cannabis Association (ICCA) has become the latest organization to sue the state over its stalled marijuana licensing process, arguing that its members have lost $20M due to allegedly illegal delays imposed by the state.

The trade organization represents dozens of members seeking craft grower, infuser and transporter licenses, which were initially slated to be awarded by July 1. The issuance of those licenses, which are separate from the retail license lottery that has drawn waves of criticism and litigation, was indefinitely suspended in late June by Gov. J.B. Pritzker.

ICCA’s lawsuit, filed Tuesday, argues that Pritzker and the Illinois Department of Agriculture, including its director Jerry Costello II, do not have the authority to unilaterally suspend the issuance of the craft grower, infuser and transporter licenses. It asks the court to compel regulators to issue the licenses immediately and to either reimburse applicants for their sunken costs or to relieve applicants of regulatory requirements that have become “overly burdensome” due to the delays. (Read the complaint here.)

Those latter requests are significant as the suit alleges the plaintiffs are collectively losing around $5M each month that the licenses go unawarded. This owes to a state law that requires applicants for craft grower, infuser and transporter licenses to secure a properly zoned property just to complete the application.

Because they followed those rules, the suit alleges, many applicants have been bleeding money ever since submitting their applications. The ICCA argues that, without the court’s intervention, the financial losses will continue to mount with no end in sight, since the state still has not set a date to re-start the licensing process. There are 455 craft grower applicants and 115 infuser applicants, according to the suit.

“It is unreasonable to expect applicants to continue to invest, throwing ‘good money after bad’ when Governor Pritzker’s office and the Department of Agriculture have failed to communicate any timeline whatsoever to applicants and have provided zero written transparency as to the disposition of the scoring process,” ICCA President Paul Magelli said. “If the state does not immediately issue licenses, financial relief must be provided to applicants.”

The lawsuit is the latest in what has been a tumultuous rollout of Illinois’ REC program, which went into effect Jan. 1.

The state was set to issue its first round of 75 social-equity retail licenses in May, but that was delayed, first due to the pandemic and then in response to public outcry after the state announced in September that just 21 applicants, out of more than 900, were advancing to the license lottery. Multiple lawsuits called into question the fairness of that licensing process, which led Gov. Pritzker to suspend it and announce changes that led to some applicants getting chances to amend and resubmit applications.

That decision by the governor led to a lawsuit from some of the successful applicants who felt the delay was illegally preventing them from receiving the licenses they felt they were entitled to in accordance with state law.

This week’s filing by the ICCA argues that the delay in the issuance of the craft grower, infuser and transporter licenses is harming many groups across the state. In addition to the financial hardships suffered by applicants, it alleges that consumers – including MED patients – face higher prices due to inadequate supply, and that the state is losing out on about $12M in monthly tax revenue.

SiSi Shen, head of research for ICCA, said applicants are also unable to make sound business decisions due to the lack of clarity provided by the state regarding the timeline for issuing licenses. ICCA members who are also social-equity applicants are being especially harmed, Shen said.

“Two-thirds of social equity applicants surveyed by ICCA indicate they will lose their real estate, zoning or staff by the end of October 2020,” she said. “A majority of applicants are at the end of their means and don’t know where to turn as the state has provided little or no information.”

A social-equity applicant who asked to remain anonymous said in a statement released by the ICCA: “We want to remind the governor that the time to worry about social equity is now, before we go bankrupt. Inconsistent messaging and an opaque process from the state does nothing to satisfy our creditors or investors.”

The Chicago Tribune reported Wednesday that Illinois Department of Agriculture spokeswoman Krista Lisser said the department was in the “final stages” of completing the scoring process for the craft grower, infuser and transporter licenses.

“We will announce the date licenses will be awarded in the near future,” she said, according to the newspaper.

Outside of those licensing issues, the state’s already established REC market appears to be doing well. Illinois officials reported this month that $67M worth of REC products was sold in September, marking a single-month state record. 

The ICCA is represented in its lawsuit against the state by David Ruskin and Julianne Dailey, with Chicago-based Horwood Marcus & Berk Chartered.

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