Illinois Stops Issuing New Cannabis Licenses to Give Industry Time to Grow

With over 130 licenses to hand out before hitting the state’s cap of 500 cannabis licenses, Illinois is not looking to hand out any new cannabis industry licenses, Crain’s Chicago Business reports.

Illinois state law allows for up to 500 active cannabis licenses, and there are currently 260 licensed cannabis stores and 103 “conditional license” holders, leaving 137 remaining cannabis licenses that could theoretically be awarded. However, the industry is wrought with difficulties — including competition with the illicit marketplace and an inability to rely on traditional funding opportunities — and most of the cannabis license holders in the state have yet to open their doors for business.

State Rep. La Shawn K. Ford (D), however, said in the report that by freezing new cannabis licenses, the state could help social equity entrepreneurs by giving them time to launch their businesses. Ford also said he’s planning legislation to help social equity entrepreneurs attract investors and raise money.

“What we’re focused on is making sure the current conditional licenses have the ability to scale up and attract investors. That’s the goal.” — Ford, via Crain’s Chicago Business

Meanwhile, Illinois lawmakers this year again failed to take action against intoxicating hemp products, according to the Chicago Tribune, and many cannabis operators believe that consumable hemp products, which are not subject to the same stringent regulations as medical or adult-use cannabis products, undercut the regulated cannabis industry.

After five years of legal recreational cannabis, Illinois has 260 operational retail shops and another 103 entrepreneurs with “conditional licenses” won via permit lottery — meaning there are still 137 dispensary permits left to award before the state hits its cap of 500.

But the 137 dispensary permits are on hold indefinitely, state Rep. La Shawn K. Ford, D-Chicago, told Crain’s.

Ford and other lawmakers are searching for solutions that will allow the struggling 103 retailers with conditional licenses — and other types of marijuana business permits given to “social equity” candidates that have some type of cannabis criminal record — to get off the ground.

Social equity companies are typically mom-and-pop startups that don’t have immediate access to the hundreds of thousands of dollars — sometimes millions — required to get legal marijuana businesses off the ground. Typical business loans are out of the question, since banks essentially refuse to lend to anyone in the marijuana business, and investors have been difficult to come by or only offer sky-high interest rates that industry experts say border on predatory.

The sum result has been that few of the licensed social equity companies in Illinois have been able to get open for business.

To illustrate, the state has issued 88 permits to craft growers, but thus far, only 21 of them are operational, according to Illinois’ Division of Cannabis Regulation.

To remedy the situation, Ford last week formally introduced legislative language he intends to get amended onto a larger bill, which he said would deliver a number of new options for those companies to raise money, build their businesses and finally join the Illinois marijuana market.

“Right now, that has not been a topic of discussion,” Ford said when asked if lawmakers were considering another cannabis license lottery. The last such permit lottery was held in July 2023.

“What we’re focused on is making sure the current conditional licenses have the ability to scale up and attract investors. That’s the goal,” he said.

To that end, Ford introduced a formal amendment to Senate Bill 90, which he said would deliver significant regulatory changes for social equity companies by tweaking rules enforced by the state Department of Financial & Professional Regulation, which oversees dispensaries, and the Department of Agriculture, which oversees cultivators, manufacturers and all other cannabis businesses.

“It’s really a regulatory bill. We’re looking to do everything we can to help social equity get their footing and to bring in principal investors,” Ford said. “That’s another thing that’s been very challenging; they haven’t been able to bring in investors.”

The updates include pushing back license renewal dates for craft growers and product infusers, creating a “hardship waiver” for social equity companies to reduce or eliminate license fees, expanding the canopy size for craft growers to 14,000 square feet from 5,000 square feet, and perhaps critically, would allow social equity businesses to add a new principal officer “for investment purposes,” according to a legislative fact sheet shared by Ford.

“What’s most important is that Springfield has finally made the decision to treat cannabis separate from hemp, in the spirit of helping social equity and regulators,” he said. “The good thing is we have decided to focus on strengthening social equity without a conflict with hemp. Hoping to have a comprehensive hemp bill soon. That’s really huge.”

Cannabis industry advocates and social equity champions said Ford’s bill is a mixed bag, and while the bill is very much welcome, it doesn’t truly address some major underlying issues the legal marijuana industry is facing.

“While we thank Rep. La Shawn Ford for his leadership on this legislation, which contains important reforms we have long advocated for — including expanded access for medical patients, added support for social equity license holders and flexibility for transporters — additional action is needed to prevent further erosion of the legal cannabis market,” Tiffany Ingram, executive director of the Cannabis Business Association of Illinois, said in a statement.

Ingram said what the industry really needs is “meaningful regulations to rein in the parallel intoxicating hemp market, which is undercutting licensed operators, evading health and safety regulations, and generating de minimis revenue for state programs because these products are not taxed at the high rate levied on licensed cannabis products.”

A proposed bill that would have established new rules for the burgeoning hemp THC industry died in January due to disagreement among lawmakers on how exactly to tackle the complex topic.

“Today’s action is a step forward, but the work cannot stop here,” Ingram said last week of Ford’s amendment.

Brendan Shiller, executive director of the Alliance of Independent Cannabis Entrepreneurs, called Ford’s amendment “an important first step,” but also said there’s more that needs to be done for the Illinois social equity program to succeed.

“We are disappointed not to see any regulation addressing the proliferation of illegal cannabis and will continue to remain focused on comprehensive reform and enforcement regarding sales and distribution of illegal cannabis in the upcoming months,” Shiller said.