Illinois is shaping up to be one of the most competitive and inclusive recreational markets in the country. When recreational cannabis was legalized earlier this year, Illinois became the first state to accomplish legalization through legislation rather than a ballot initiative. Charlie Bachtell, CEO of Cresco Labs, estimates that the Illinois recreational market will be four to eight times the size of the current medical market in the state. Medical sales are around $130 million per year, while the estimated recreational revenue is around $1.6 billion per year. The bill, HB 1438, makes social equity integral to Illinois’ recreational licensing process.

The map to the left shows the 17 BLS regions where the 75 conditional dispensary licenses available in the first wave of applications will be awarded.

Medical License Holders Applying to Enter the Recreational Market

The 55 operational medical dispensaries will have the opportunity to apply for a recreational dispensary license before new businesses will be allowed to apply. These license holders are considered “early applicants” and will have the opportunity to begin selling to recreational customers on January 1, 2020 either at their original location or at an approved secondary location. This won’t come cheap to the companies, however. Medical dispensaries will pay around $260,000 for a recreational license, while medical cultivation centers will pay up to $750,000 for a recreational license.

The licenses awarded to early applicants do not count as part of the number of licenses that will be awarded to new businesses entering the market during the first and second wave of applications. The early applicant licenses do, however, count toward the total number of licenses that are available at any one time for each license type.

New Businesses Applying to Enter the Recreational Market 

New businesses will have the opportunity to submit applications for conditional dispensary licenses by December 10, 2019. The applications to apply for a conditional dispensary license in the first wave of applications were made available on October 1, 2019, and licenses will be issued by May 1, 2020. There will be 75 conditional dispensary licenses awarded in the first wave of applications, spread across 17 geographic regions, with a large majority being apportioned to the Chicago-Naperville-Elgin region. The second wave of applications will include 110 conditional dispensary licenses and will be awarded by December 21, 2021. The fee for applying for a conditional dispensary license is $5,000 and a registration fee of $60,000 if awarded an adult-use dispensary license. A conditional license does not permit the license holder to “purchase, possess, sell, or dispense cannabis or cannabis-infused products until the person has received an Adult Use Dispensing Organization License.” Applicants are not required to have a location secured when applying for a conditional dispensary license and have 180 days after receiving the license to secure a location. Once they have secured a location, passed an inspection by the Department, and paid its registration fee, the applicant will receive their Adult Use Dispensing Organization License. At this point, they will be able to legally obtain and sell cannabis. This will reduce the costs of entering the industry by giving applicants extra time to secure a location and can reduce some of the upfront costs and stress. The maximum number of dispensary licenses allowed at any time is 500.

The state will also issue up to 40 craft grower licenses and 40 infuser licenses by July 1, 2020 and another 60 craft grower licenses and 60 infuser licenses by December 21, 2021. The bill describes a craft grower license as “a license that permits a business or organization to cultivate, dry, cure, and package cannabis and perform other necessary activities to make cannabis for sale at a dispensing organization or use at a processing organization.” So how is a craft grower different than a cultivation facility? Size. A craft grower is only allowed to be up to 5,000 square feet of canopy space while some cultivation facilities are over 30,000 square feet of canopy space. An infuser license allows a licensed business to “directly incorporate cannabis or cannabis concentrate into a product formulation to produce a cannabis-infused product.

Similar to what has occurred in California, the state of Illinois is currently contending with the issue of local municipalities attempting to prohibit recreational businesses from opening their doors in their neighborhoods. Naperville has already stated they will not allow recreational cannabis businesses, and other municipalities are considering that option as well. One of the most significant regions that have banned recreational sales is the Loop and the Magnificent Mile in the Central Business District in Chicago. Both the Loop and the Magnificent Mile attract substantial tourism for the city. The question is, how will the banning of recreational sales affect tourism for this part of Chicago? There are already over 25 municipalities across the state that have stated they will not allow recreational sales. And some locations, such as O’Fallon, will be taking the decision to its voters through a referendum on the 2020 general primary ballot.

One of the most arduous aspects of securing a cannabis business license is finding a physical building to operate in. Zoning restrictions at the local level, combined with the possibility of landlords being averse to cannabis businesses operating on their property, despite cannabis businesses operating in compliance with state law, can create challenges for applicants. Illinois’ conditional dispensary license application does not require applicants to have a storefront secured when applying, and applicants will have 180 days to secure a building after being awarded a conditional dispensary license. If an applicant cannot secure a location within 360 days of being awarded a license, the license will be rescinded and given to the next highest scorer. However, physical buildings are difficult to find and secure in 180 days, particularly when local zoning regulations are at play and one is competing with other licensees who are seeking viable real estate in the same BLS region (for more on BLS regions, see map above). With that said, it is recommended to already have several locations in mind if not secured before submission of a conditional dispensary license, and it will be essential to have secured a location within a very specific timeframe in order to keep and operationalize a license once it has been won.

While the Illinois market is estimated to be one of the largest in the country, it will also be competitive and expensive. Application fees range from $5,000 to $100,00 depending on the license type. While there are social equity licenses available, they are even more competitive and are only available to applicants who meet certain qualifications. Everyone is waiting to see how many businesses apply and where those businesses are attempting to open their doors. With only 47 dispensaries permitted in the entire Chicago-Naperville-Elgin region, it is sure to be competitive as Chicago is the most populated city in the state and Naperville has banned recreational sales.

Thanks to blog.chicagocityscape for mapping Illinois’ BLS regions (see http://bit.ly/32F4kJc) and stay tuned for more info on Illinois’ process. Also, feel free to reach out to info@pistilandstigma.com for more information or inquiries as to the availability and scope of our services.