It’s common for people to say that America’s legal cannabis market is not one market, but actually thirty-eight, or however many states and territories that have legalized sales in one form or another. Thirty-eight, because in every state and territory (looking at you District of Columbia!) you have a different set of laws and regulations, changing how once would run a cannabis business.
But actually, that saying is not entirely true, because woven throughout the United States is an extremely efficient and pervasive underground market that really doesn’t care about anyone’s regulations, yet still manages to serve somewhere between 65% and 75% of all American cannabis consumers, depending on which estimate you’re looking at.
But then there’s another thread that runs through all of America’s state-level cannabis regulation, which is that every regulator is warily watching every other state to make sure they’re not doing something better, or smarter than everyone else. How does a lobbyist or advocate most often pitch a new idea? By saying, “Well in [insert other state capital here] they are doing [insert preferred idea here].” It’s a smart way of doing things, but it’s also a bit like Springfield’s jealousy of North Haverbrook’s monorail in the Simpsons. It always seems better in the town next door.
One town next door nobody wants to be in the cannabis world is Chicago. They’ve had 185 dispensary licenses held up in court for at least three months now, but it’s really more like 19 if you’re counting when Illinois was originally supposed to start issuing new dispensary licenses. And actually, it’s officially 185 tied up licenses, but regulators have held off on issuing another five medical licenses (which is really ten, since you get one license to sell both medical and adult-use and another to sell just adult-use) and the lawsuits have been gumming up the works for 60 more craft grow licenses, which seem like they may be moving along – maybe! – in late December.
But really, the whole delay thing in Illinois is because the state:
- Is a limited license state;
- Created a complicated application process;
- Tried to weight the application scoring in favor of social equity applicants; but
- Ended up maybe weighting applications in favor of military veterans instead, which could actually be against the Illinois and U.S. constitutions.
The first three points are what many states creating an adult-use license system are contemplating. The last point though, is what has kept Illinois’ 185 licenses stuck in court for 19 months.
I’m going to tell you more about these court cases in a minute, because they actually are a hoot when you start getting into them. I honestly never thought a long, drawn out lawsuit could be so much fun!
But right now, I want to point out that the Illinois lawsuit, originally known as WAH Group LLC et al v. Illinois Department of Financial and Professional Regulation, has a ton of implications for almost every state considering a limited license process, and certainly for every state considering some kind of social equity-weighted scoring system. That especially means New York, Connecticut, New Jersey, maybe Pennsylvania, and maybe a bunch of other states where activists have been complaining that most licenses are going to out-of-state white dudes, but not locals, and certainly not people of color, against whom the whole War on Drugs thing was largely waged.
And this brings us back to the whole 65% to 75% thing.
Besides the legal stuff we keep talking about in this publication, cannabis is also a product distributed by a group of people who have no predilection with breaking the law. They also have – via Mexican imports – a much lower price floor than legal American producers. And, the people distributing these products are often part of the group of people regularly being shut out of the legal market – people of color.
What happens when all the good legal licenses are doled out and people of color are largely still shut out of ownership in the legal cannabis market? I’m willing to bet we’ll see the underground market still selling 65% to 75% of the total sales. Largely because I’m willing to bet Mexican growers will always supply cheaper pot for the average Joe and Jane that just want to get high.
This is a thing they talk about in Illinois quite a bit. There’s one group trying to convince legal weed buyers to go back to street dealers for economic justice reasons. There was a respected state legislator who suggested the state should essentially eliminate all pot possession laws, allowing illegal wholesalers to safely transport bulk product to street dealers.
Illinois regulators seem to be very aware of pressure from the underground market. To combat it, they say they are putting a top priority on social equity licenses, so that people of color currently participating in the underground market will shift over to legal. And Illinois is so far the only state to have really attempted to put social equity into the application process. States like New York and Connecticut have put equity into legislative guidelines, but so far, no specific laws or regulations.
That makes Illinois’ social equity process is a test case for everyone else.
But in the middle of all this, all the Illinois lawsuits allege that their state’s regulators messed up their social equity weighting so that veterans got access to more licenses than social equity applicants. Yes, Illinois reports that lots of social equity license holders got licenses too, but that’s because every one of the winning applicant teams was led by a veteran.
Might seem like this WAH Group might have a case, right?
You’d think that every state regulator that’s thinking, “Illinois has a good point about doing something about social equity when we hand out licenses,” is also looking at Illinois’ 19 month delay and probably thinking, “I don’t want to be like Illinois.”
It turns out that WAH Group isn’t the only applicant to have a problem with Illinois regulators. There’s a raft of applicants that have filed suit against the State of Illinois claiming there were particular problems with how their application was handled, which puts them into what’s called the Administrative Review Law in Illinois, because they’re asking for judicial review of a regulator decision.
Last month, following a petition by the Illinois Attorney General, the Illinois Supreme Court ordered all these cases to be consolidated in one big supercase so there’s one ruling to bind them, one ruling to rule them all.
So, the lawyers headed back to Cook County Zoom Court, to play what sometimes looks like a demented version of Hollywood Squares – and no I have not been watching too much of this stuff. Sitting in center square is the chief justice of Cook County’s Chancery Court, Judge Moshe Jacobius, a no-BS-taking guy, Zoom-casting from his beadboard-paneled home office, who’s been sitting on the bench for thirty years and likes to remind us that he once worked in the Illinois Attorney General’s office, so he has a sense of where they’re coming from.
For 19 months now he’s been giving all comers to the WAH Group case an intellectual and verbal pummeling. If he thinks your argument isn’t well considered, woe to you.
Most of the woe over WAH has been going to Assistant Chief Deputy Attorney General Doug Rees, who has been doing a yeoman’s job of arguing on behalf of a state that very clearly messed up the application process. And how, exactly, did the scale get tipped so that veterans got preference in scoring? The story Illinois politics insider site Capitol Fax unearthed is that a super-pro-veteran state senator inserted a requirement for extra points for veteran applicants at the last minute when the enacting legislation was moving through committee. Those five little veterans points out of 252 didn’t seem like a big deal at the time, but it turns out they upended the whole process.
So, now Illinois’ 185 (and more) licenses have been held up for 19 months because a couple back-slapping pols thought toying with the regulators’ delicately crafted application process would be no big deal.
That’s gotta give regulators some pause when considering tilting the scale towards social equity applicants, right?
Anyway, all the lawyers back in Cook County Zoom Court have been arguing about exactly where their cases should be consolidated. The Supreme Court said it had to be in Cook County, but they didn’t say exactly where in Cook County, says Assistant Chief Deputy Attorney General Rees. Clearly tired of the pummeling Judge Jacobius has been giving him, Rees and his team have been pushing to consolidate the cases in another judge’s courtroom, with Judge Cecilia Gamrath, who’s been hearing a bunch of Administrative Review cases for a couple of months. In contrast, Judge Jacobius has been hearing the WAH Group case since September 2020.
The lawyers in Cook County Zoom Court have been filing battling briefs in Judges Jacobius’ and Gamrath’s courts arguing about which court the cases should be heard in. But basically, all the applicants want it in Jacobius’ court, and the Attorney General’s team wants it in Gamrath. Applicants filed their petitions last week and then the Attorney General’s team missed their filing deadlines in both courtrooms.
But all of that may be moot because of a Cook County Court Rule that the courtroom trying the case with the lowest docket number gets the case (which would be the 19-month-old WAH Group case) and in case of any dispute in Chancery Court, the Chief Judge of Chancery gets to decide, who happens to be Judge Moshe Jacobius.
So, expect Judge Jacobius to pick this all up when he convenes the next WAH Group hearing on November 30. Bound up in all this are social equity, the future of Illinois’ underground cannabis sales, and the Illinois and U.S. Constitutions. Should be an easy one to figure out with almost zero implications for everyone else.
Correction: The original version of this article stated the incorrect number of veterans’ points. The actual number is five, as corrected.
