Cannabis industry in Illinois sees increasing minority ownership — but delayed startups say they may have to sell out

The Illinois cannabis industry is transforming to the point where half of new licenses are owned by minorities — but critics say many of those newcomers may never get to open.

At least half of 118 new licenses issued for craft growers, infusers and transporters have gone to companies majority-owned by nonwhite applicants, in contrast to the previous all-white ownership, said Danielle Perry, the state’s cannabis regulation oversight officer. Forty-three percent of the Department of Agriculture licensees are Black-owned, 10 percent by Latinos, 9 percent by coalitions of people of color and 4 percent by Asians, she said.

“This process has changed the face of what the industry looks like in Illinois,” Perry told a crowd at the NECANN Illinois Cannabis Convention. “This is proof in the pudding that using this approach to diversify the industry can work.”

The numbers may sound good, applicants said, but with 185 cannabis dispensary licenses held up for more than a year and now in a court fight, more minorities are going to run out of money and will have to sell their licenses.

“All the good intentions are great, but until we can actually open, it’s not helping us,” said Portia Mittons, a dispensary license applicant and co-chair of the Minority Access Committee of the Cannabis Business Association of Illinois.

Illinois legalized the sale of medical cannabis effective in 2015, and expanded legalization to adults in the general public beginning in 2020. Lawmakers said they wanted to diversify the industry, which was completely white-owned, by giving a bonus to “social equity applicants” who lived in areas most affected by the war on drugs, or who had been affected by low-level cannabis arrests.

But the application scoring process, run by KPMG, was complicated and costly, and ended up last year with just 21 of 937 applicants qualifying for the initial lottery to get 75 licenses for retail stores, known as dispensaries. After howls of protest and lawsuits pointing out that many applicants had wealthy or connected white investors, officials added 110 more licenses and two more lotteries to expand the pool of qualifying applicants.

The craft grower, infuser and transporter licenses were issued this summer, resulting in the greater diversity that Perry reported. But on the retail side, Cook County Judge Moshe Jacobius has ordered all 185 dispensary licenses held up indefinitely while he decides the fate of lawsuits by a few firms challenging the fairness and constitutionality of the process.

Several license applicants said they have already burned through six figures in dollars just to apply and keep going during the delay. The longer they have to wait, the more likely they will run out of money and have to sell their licenses, said Douglas Kelly, executive director of the Cannabis Equity Coalition Illinois, which advocates for minority applicants.

“If it takes another six months to a year, you might as well tear up those (diversity) numbers,” Kelly said.

Kelly said he was part of an applicant group that got disqualified in the scoring process but was never clearly told why.

The new businesses depend on each other, because without new dispensaries, the craft growers, infusers and transporters will have nowhere to sell their goods and services except their existing competitors. If new businesses can’t open, keeping prices high, it will only strengthen the illegal market.

“In the long run,” Kelly said, “the delay will hurt everybody.”

Nic Easley, CEO and founder of 3C Comprehensive Cannabis Consulting, a national company based in Denver, said Illinois had the worst program he’s ever dealt with.

Illinois was done in by the complexity, inconsistency and secrecy of the scoring process, and bonus points that meant only veteran-owned companies could get dispensary licenses, he said.

“It was just chaos,” Easley said. “The whole system’s broken.”

The key to helping minority investors survive, speakers said, is to immediately increase their allowed growing space from 5,000 square feet to at least 14,000 square feet. The limited canopy space makes it very difficult, they said, to get financing when competing against existing growers that can go up to 210,000 square feet.

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