Applicants for New Cannabis Licenses in Illinois Nearly Triple After Rules Overhaul

This story was republished with permission from Crain’s Chicago and written by John Pletz.

Nearly 3,000 applicants will be competing in next month’s lottery for 55 new licenses to sell marijuana in Illinois.

That’s almost three times the number of applicants that competed for the 185 licenses that were up for grabs in lotteries held two years ago.

The state recently overhauled the original licensing process, making it easier and cheaper to seek a dispensary license. The process was marked by delays, litigation and frustration among both those who created the law and those who hoped to benefit from it.

Under the new rules, gone are the lengthy applications that required extensive business plans, covering everything from security to operations, which ran thousands of pages and cost many applicants thousands of dollars to complete. The cost to submit an application also dropped from $2,500 to $250.

Perhaps the biggest change is allowing only one application per applicant, leveling the playing field and increasing the number of people or groups who would receive licenses. In the previous lotteries, 937 applicants who submitted 4,000 applications competed for 185 licenses. Under the new criteria, about 2,700 applicants will compete for 55 licenses.

One thing that didn’t change under the new criteria is the goal to diversify ownership in the industry. The rules still favor social-equity applicants by requiring majority ownership of a licensee to be held by people who have resided in neighborhoods disproportionately impacted by violence and poverty related to the war on drugs, as well as those who previously have been arrested or jailed for low-level marijuana crimes.

It’s more of a pass-fail approach than the original rules. Only applicants who win a lottery pick to receive a license will then have to prove they meet the criteria. One of the complaints about the prior process was that applicants spent thousands of dollars to apply and meet the standards for ownership only to lose out on the luck of the draw.

With more applicants having a shot at winning licenses, it means longer odds for many. The potential rewards look very different now. Even though Illinois has limited the number of licenses more tightly than many states, marijuana prices are dropping.

Capital necessary to open a store is harder to come by, but costs haven’t come down. The value of a store has decreased because of a drop in both the value of public marijuana stocks and newly acquired privately held stores.

“We’re in a recession right now: everything tightens up,” says Michael Mayes, CEO of Quantum 9, a Chicago-based consultant that specializes in cannabis-license applications. “People in the industry who are in it to get a license to flip it aren’t as interested because of their experience thus far. The transfer of licenses (in Illinois) hasn’t been easy. There are far safer investments outside cannabis.”