Revelations that Illinois regulators were far advanced with craft grow license application scoring last August and that state leaders failed to scrutinize scoring contracts roiled the state’s cannabis business community and will figure into at least two cannabis lawsuits against the state currently underway.
“We are in front of the judge within the next week on the motion by the state to dismiss and this information will be presented as part of our pleading,” said Illinois Craft Cannabis Association (ICCA) President Paul Magelli. “I think it clearly shows the administration can not use Covid as a rationale for their incompetence and delays.”
ICCA is suing the state to release scores for 40 craft grow, 40 infuser, and an unlimited number of cannabis transport licenses.
David Standa, an attorney for Locke Lord representing a group of social equity dispensary applications suing the state in Sangamon County Circuit Court, says after his case was filed, “the state reviewed the scoring process and said based on what we have here, we can’t win this lawsuit.”
“Between that and what you guys published last week, it appears as if the state said we can’t even defend the scoring process. Let’s not even try. Instead, let’s see if we can improve everyone’s changes to get in the lottery,” with a supplemental deficiency process, said Standa.
“I think there’s huge frustration,” said Pamela Althoff, executive director of the Cannabis Industry Association of Illinois. “The past several months have made it abundantly clear that Rep. Marcus Evans’ bill, creating one cannabis commission, is needed.”
The proposal from Rep. Evans, HB109, would transfer authority for cannabis license regulation from the Department of Agriculture and Department of Financial and Professional Regulation to a seven person state commission. The bill has not advanced beyond committee but includes the co-sponsorship of much of the House Black Caucus, which has recently taken leadership on many state cannabis issues.
Social equity advocates for applicants expressed dismay that the dispensary license process was delayed due to contractor problems, rather than the Covid-related reasons claimed by state leaders.
“KPMG came at the eleventh hour,” said S.E.E.N. President Natacha Neptune. “[They] submitted a late entry and delayed the process for six weeks and then got a no bid contract. Then they came back and got paid $12 million to clean up the mess. [Why should we] pay them rather than sue them to clean up their mess?”
Standa says that although he has been in contact with attorneys from the Attorney General’s office, he has not been in contact with state legislators attempting to craft a bill that would persuade his clients to drop their suit. Standa says he told attorneys for the state last week that the bill discussed in the media, “does not result in our suit being dropped.”
“Because there are all these competing interests, I think at some point the state will have to try one of these issues. And they will probably lose,” said Standa. “But once they lose, they’ll know, and they can move forward. Right now you have a jello mold. You push on one side, the other side wiggles and goes crazy. Until you try an issue, and have a judge make a ruling, you don’t know which way things will go.”
Amy Nathan, founder of Gromentum Lab, a Chicago-based accelerator for social equity cannabis businesses pointed out that Illinois’ license delays may add up to investors ultimately by-passing the state.
“My concern is that New York and New Jersey are five minutes from doing this, and investors could just as easily go there. We tried to create opportunity but squandered it in this process. Investors go where they can build something and make money. And they don’t want to mess around with a dysfunctional situation,” said Nathan.