In the spring of 2019, the Democratic-led Illinois legislature voted to legalize the recreational use of cannabis for adults, paving the way for existing medical marijuana dispensaries to begin selling weed to the general population on Jan. 1, 2020.
Since then, the state has awarded dozens of dispensary and craft grower licenses, while Gov. JB Pritzker has expunged thousands of convictions for marijuana-related charges. With an eye toward correcting long-term discriminatory policing of marijuana laws, the state’s legalization effort also reserved some licenses for social equity applicants, including people of color living in areas disproportionately impacted by the war on drugs.
Pritzker ultimately touted it as “the most equity-centric law in the nation to legalize adult-use cannabis.”
But more than two years after legalization went into effect in Illinois, many industry experts say that social equity license holders have yet to reap the benefits of the state’s marijuana market. So far, they say, corporate multistate operators have been the biggest winners.
In January of 2020, the first month that recreational-use cannabis products hit dispensaries shelves, Illinois companies sold slightly more than $39 million in legal marijuana. In March of 2022, that number had ballooned to more than $130 million a month.
As Evanston City Council member and craft grower license-holder Bobby Burns said, the industry has proved wildly profitable, but the question remains: Who will benefit?
“I can tell you that there are no social equity candidates that are benefitting from any of that revenue,” Burns said. “There are individuals who are part of protected groups who are employed [by] those organizations, and therefore have a salary and benefits, but in terms of ownership – social equity owners, operators, people who are controlling their businesses – there are none currently in the state of Illinois.”
Most urgently, due to the pandemic and a months-long holdup in court over the constitutionality of the social equity plan, hundreds of those awarded licenses under social equity criteria are still waiting to actually get their licenses.
But there are other obstacles.
Craft growers are essentially small business owners who oversee a relatively limited amount of production and distribution, similar to craft breweries or local restaurants. A large, corporate grower or cannabis company is like the McDonald’s of the marijuana industry, with as many as dozens of farms and dispensaries across the country. Such companies have exponentially more access to money and capital than craft growers do.
Burns argues that one of the problems is that Illinois defines eligibility for social equity licenses using an “or” model in which applicants must live in disproportionately impacted communities or have a marijuana-related arrest, for example.
That opens the process up to many more people, Burns said. Limiting eligibility to people from marginalized communities who also have a cannabis arrest could have better targeted the most deserving applicants, he said.
He acknowledged that some who happen to fall in multiple categories have been granted licenses, but he said the state should be doing more.
“There are still people who live in disproportionately impacted areas, such as myself, there are still people who have expungable cannabis arrests, such as myself and at least two other of my principal officers,” he said. “So even though it wasn’t the way it needed to be, there are still some – not a whole lot – but there are still some that meet the standard that I wanted to see in our social equity program. To me, the most important thing to do is for the state to support the social equity applicants.”
Currently, the state operates according to a limited license model, in which only a certain number of applicants have received dispensary or craft grower licenses so far.
Another issue with limited licensing, according to Beau Whitney and Michael Correia of The National Cannabis Industry Association, is that limiting access to such a lucrative industry drives up the value of a license, which means that dispensaries and growers need more investment and more capital to be successful.
Burns, whose company Urban Garden, LLC, is fundraising and looking for a location to grow its product, said the capital and investment requirements have presented the biggest obstacles.
“States I think, from a policy perspective, are identifying this as an issue,” Whitney said. “At the same time, they’re trying to drive social equity, social justice and inclusion into the marketplace. And when you have a limited license state, data has shown there’s not as much inclusion by BIPOC communities, by minority owners. So right now, these regulatory structures are in conflict with other policies associated with social justice and social equity.”
And many of the nation’s largest cannabis companies are setting up shop in Chicago. Just a few weeks ago, Chicago’s Cresco Labs acquired New York’s Columbia Care, making Cresco the single biggest multistate cannabis grower and seller in the country.
Several other major corporations in the field with deep pockets, including Verano Holdings and Green Thumb Industries, are also headquartered in Chicago.
Representatives of Verano, Green Thumb and Cresco Labs were contacted for comment for this piece but did not respond.
Despite other states like California and Colorado having a head start on legalization, Whitney said he’s not surprised that companies are quickly tapping into the Illinois market because it stands in the middle of the country, with easy access to key distribution points for the markets on both the East and West coasts.
And though there’s no shortage of money in cannabis, Illinois has a long way to go to convert the black-market consumer into a legal dispensary customer, according to Correia and Whitney.
Estimates from Whitney, NCIA’s chief economist, show that Illinois should be capturing around $2 million in tax revenue from legal sales per day. Instead, the state is getting slightly more than $1 million in weed taxes every day. The rest of the marijuana sales business is conducted illegally, Whitney said.
Because limited licensing and a lack of sufficient product supply have led to high prices for legal marijuana in Illinois, many people do not have enough incentive to participate in the legal market instead of the black market, according to Whitney.
“The canopy – basically the amount of square footage that Illinois has licensed to support the retail channel – is rather limited,” he said. “So Illinois needs to expand the amount of square footage in their canopy in order to support the growth of the industry. Otherwise, [the limited canopy] is going to choke it off, and prices will remain high because there will be greater demand than supply, and it will suppress the transition of consumers from illicit to legal markets.”
Evanston currently has one dispensary, Zen Leaf, which is downtown on Maple Avenue, across the street from the Century movie theater. Burns said he expects at least one or two more retail cannabis stores to open in the city, with one likely to open on the southern end of town on Howard Street or Chicago Avenue. Potential store locations also are limited due to state laws that require new dispensaries to open a certain distance from schools, day cares and existing dispensaries.
In the future, Burns said he wants to see more support for social equity license holders and policies in place that protect social equity entrepreneurs in the industry from being priced out.
“There’s a reason to be concerned,” he said. “If you care about equity in the marketplace, especially in the cannabis marketplace, there are reasons to be concerned about the state of our adult-use program and our social equity operators right now.”
via Evanston RoundTable
April 20, 2022 at 06:50AM