When the state of Illinois legalized the use or recreational marijuana, they were the first state in the Union to regulate cannabis through their legislature. As part of this process, the state started up a social equity program for the cannabis industry. And while advocates were initially pleased with this development, they have become frustrated since. There have been grumblings of a lack of transparency and a selection process that has favored multi-state operators. Additionally, a very limited number of companies were selected for the final lottery and those that were chosen failed to achieve the kind of representation that was the goal.
As such, the National Cannabis Industry Association (NCIA) sent a letter in late 2020 to Illinois government officials and regulators with recommendations for how to improve the state’s social equity licensing program.
The NCIA’s Diversity, Equity & Inclusion Committee (DEIC) letter was sent “In response to the early results of the Illinois Adult Use Dispensary application process, and with the interest of supporting Illinois’ Social Equity efforts”.
The letter goes on to say, “While the creation of the Social Equity Program in the Cannabis Regulation and Tax Act and Illinois Department of Financial and Professional Regulations (“IDFPR”) implementation of the licensing scheme was well meaning and intentioned, the recent litany of lawsuits and outcry from advocacy groups following Illinois’ inaugural issuance of cannabis licenses indicates heavy criticism. As demonstrated thus far, the Social Equity Program appears limited in its ability to capture a sufficient representation of persons most harmed by the War on Drugs in Illinois in business licensure and ownership, or to generate the opportunities for restorative justice and building generational wealth for such persons as hoped.”
Utilizing their expertise and resources, the DEIC put together a list of recommendations for the state’s program. They include:
- Removing the required possession of premises and overhead to hold onto property (not required of dispensary applications and may bankrupt existing applicants awaiting results)
- Ensuring oversight of KPMG (the 3rd-party firm hired by the State of Illinois to score the applications) by persons of color and social equity representatives
- Allowing for a documented appeals process internally with KPMG results before issuing them to all applicants
- Scrutinizing Operating Agreements in the rubric and gradient to ascertain and avoid predatory or straw-man agreements
Regarding transparency issues, the DEIC recommends the following:
- Evaluation Rubric
- Composition of the Reviewers
- Scoring Process and Determination of Grading
- Frequency of KPMG Meetings
- KPMG Public Relations Contact
- Timeline of Events During the Scoring Process
- Lessons Learned and Plan for Improvement on Future Scoring Rounds
And for the matter of considering future applications, the DEIC recommends:
- Pre-qualifying social equity applicants for state funding to ensure economic
empowerment in the application process
- Providing a path forward for those who are not (yet) qualified to operate a cannabis
business, but are qualified as social equity applicants
- Allowing for 100% Social Equity Applicant owned businesses to qualify for cannabis
experience points without partnering with a multi-state operator (“MSO”)
- Issuing delivery licenses for social equity operators
In response to the controversy surrounding the program, Governor J.B. Pritzker has asked the Department of Financial and Professional Regulation to reexamine the application process and hear appeals before allowing any licensing to proceed.