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US (IL): Social equity cannabis licenses likely to benefit big businesses

On January 7th, 2020, the State of Illinois published the requirements for small-business craft grower cannabis cultivation licenses. This license will initially allow a 5000 ft2 of flower canopy, with the option to expand to 14,000. The license numbers are limited to 40 this year and 60 next year. The limited number of licenses directly translates the process into a highly competitive, high-stakes opportunity.

Anyone can apply for a craft grower license, but the state has devised a "points system" where in-state residents, veterans and social equity applicants are given extra points. Illinois residents can grab an extra 90 out of 1000 points compared to those residing outside IL, veterans an extra 20 points, and social equity applicants a whopping 200 points out of 1000. Although the state had good intentions in trying to award potentially lucrative small-business cannabis licenses to local and disadvantaged demographic groups, they left some big holes in the design of this system that will likely end up enriching mainstream, non-minority investors.

First and most notably, the application requirements are on par with what's expected of the most competitive big-business cannabis licenses in the country. Hundreds of pages of technical documents are required to be submitted, along with strict and voluminous proof-of-eligibility documentation.

Jennifer Martin, founder of, who writes and sells licensing templates for IL craft grower applications, thinks average people will be all but left out. "We know from writing the Illinois operating plans that anyone starting from scratch on an application will spend 600 hours or more on research, writing and information gathering. They'll also need industry know-how and significant funding. This essentially means small-time operators applying without support are unlikely to pull it off."

The second big problem is that, looking at the total percentage of points going to social equity and resident applicants, it's clear that entrepreneurs who are not in those groups shouldn't bother applying. On its face it seems like only the intended disadvantaged demographics will win. But because IL is making it easy to sell and transfer licenses, wealthy out-of-state cannabis businesses are systematically finding social-equity-status Illinoisans to "front" their organizations so they can get every advantage. The Illinois Cannabis Regulation and Tax Act, states that "any person awarded a license pursuant to this subsection...may not sell that license until after December 21, 2021," which is less than 2 years away.

"I've been getting inquiries every day from IL applicants. All of them are social equity applicants from a technical standpoint, because they know that designation is necessary. The liberal rules for selling licenses mean wealthy investors are using veterans, residents and minority groups to get a foot in the door, with a plan to take control and probably sell out by 2022. We created documentation starter kits to try to help the average applicant also get a shot at it."


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