New craft cannabis licenses issued amid ongoing turmoil in Illinois marijuana industry

Illinois has begun issuing new craft grow cannabis licenses, and a judge has authorized the state to hold a corrective lottery for dispensary applicants that filed lawsuits challenging the licensing process.

Those two developments mark small but significant steps in the long-delayed process of expanding access and improving competition in the state’s legal marijuana industry.

Last August, the state Department of Agriculture announced the first 40 craft grower conditional license winners. It took until Wednesday for the first three of those applicants to get their plans approved to begin construction. Those businesses, Galaxy Labs in Richton Park, Mint Cannabis in Forest Park and Star Bus Illinois in Rockford, are all majority Latino- or Black-owned.

Of those first 40 winners, 80% identify as nonwhite, and 88% qualified as social equity applicants, generally meaning the majority owner or a family member had a minor cannabis conviction, or came from poor areas with high rates of cannabis arrests, according to the state. Until those licenses were awarded, marijuana businesses in the state were almost entirely white-owned.

Up to 60 more craft licenses were to be issued last year, but were held up by lawsuits. In March, a judge cleared the way for those licenses to be issued. Last week, Agriculture officials began notifying the first applicants eligible for those new licenses. They have 10 days to fill out paperwork and pay the license fee.

Proposed rules for the next round of dispensary license applicants, expected to be considered by a state agency this summer, appear to open the process to out-of-state and nonsocial equity applicants.

The rules would be part of a new process that does away with a license application that ran hundreds of pages in a costly process that required lawyers and other experts to complete.

The new application would be a two-page online form, and anyone who qualifies would automatically be entered in a lottery.

Applicants could qualify through the prior social equity definition, though the new rules would eliminate what critics called the “slave” provision that allowed owners to qualify by hiring people from areas most impacted by the war on drugs.

For the first time, applicants instead could qualify by meeting four of seven new criteria.

Those criteria would lower the percentage of ownership by a social equity applicant to 26%; require businesses to operate in designated areas affected by the war on drugs; buy at least 25% of cannabis products from social equity owners; buy at least 30% of goods from vendors owned by minorities, women, or people with disabilities; and pay a $250,000 grant to a social equity business or $500,000 to the state’s cannabis business development fund.

The changes would water down the state’s social equity provisions, and would appear to respond to complaints that the state’s residency requirements violate the U.S. Constitution’s Commerce Clause.

Those rules are likely to be considered for approval by the state’s Joint Committee on Administrative Rules, or JCAR, this summer.

Despite the latest movement, 185 pending dispensary licenses remain on hold in court while litigation proceeds challenging the licensing process.

Meanwhile, three top state cannabis officials are leaving their jobs; Gov. J.B. Pritzker’s spokeswoman on cannabis, Charity Greene,; the cannabis regulation oversight officer, Danielle Perry; and the state’s top official for regulating dispensaries, Bret Bender.

Paul Isaac, deputy secretary of the Department of Financial and Professional Regulation, thanked them for their service, and becomes the interim cannabis regulation oversight officer.

The job was once known as cannabis czar, but has limited power since weed regulation is split up among at least a half dozen state agencies, and since licensing has gotten bogged down in court fights.

Still, an attorney for some of the license winners, Ryan Holz, welcomed the developments, saying it shows “light at the end of the tunnel” for the craft growers and the 185 dispensary licensees.

“I don’t think anyone would tell you this (licensing process) has gone exactly as planned,” Holz said. “Regulators were given an impossible task to grade every application like an exam. There’s too many ways to game the system.”

rmccoppin@chicagotribune.com