Illinois Adult Use Licensing Decision Draws Legal Challenge

Foley Hoag LLP - Cannabis and the Law

Foley Hoag LLP - Cannabis and the Law

Illinois’ widely-watched application process for handing out 75 adult-use cannabis dispensary licenses has now wound up in federal court, following the September 4, 2020 filing of a lawsuit by several unsuccessful applicants.  The state on September 3, 2020 announced its intention to complete the licensing process – which had already been delayed several months – through a lottery including 21 of the roughly 700 dispensary applicants.

Many of the plaintiff applicants are owned by veterans, persons of color, or both, and allege that the state’s application process was fatally flawed.  Seeking a preliminary injunction to halt the lottery, the plaintiffs argue that the 21 lottery participants “are owned by politically-connected insiders,” some of which have “disturbing connections to the State’s cannabis program and the contractor hired to evaluate the applicants.”  The plaintiffs also charge that the scoring process contained significant irregularities, alleging that some applicants were contacted with deficiency notices and were given the opportunity to fix problems with their applications, while others were not given notices and simply received lower scores.  Similarly, the plaintiffs allege that essentially identical application responses given by different applicants received different scores, raising questions about whether uniform standards were applied across the scoring process.

Legislators too have raised questions about the lottery, noting that diversifying the ownership base of the Illinois cannabis industry was a key objective of the application process.  The Illinois Legislative Black and Latino caucuses have both asked Illinois’ governor to pause the lottery and further investigate how the 21 lottery participants were chosen.

The plaintiffs’ motion for preliminary injunction is set to be heard soon.  With such a large number of licenses in one of the most promising markets in the country at stake, businesses and regulators in other states will be watching closely to see how the process unfolds.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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