What is the State of Illinois’ Cannabis Social Equity Program and How Will New Legislation Reform It?

June 18, 2021

The Illinois General Assembly recently passed major revisions to its initial 2019 adult-use cannabis law. The revisions target an important provision of the original law that was meant to ensure access by disadvantaged communities to the growing and lucrative cannabis industry. House Bill 1443 awaits the Governor’s approval, and he has indicated he will sign it. In previous blog posts about cannabis legislation in Illinois, the Civic Federation has focused on the taxation and regulatory provisions of the law. In this blog we will focus on the social equity provisions, specifically the social equity license process addressed in HB1443.

History of Cannabis in Illinois

Like most states, cannabis was outlawed in Illinois by 1931. In 1937, Congress passed the Marihuana Tax Act, which made recreational use illegal nationwide. The Act also regulated importation, cultivation, possession and/or distribution by requiring importers to pay an annual tax. 

As the years passed, Congress implemented stricter laws and placed cannabis possession on the same level as narcotics. The “war on drugs,” that followed had a devastating impact, particularly on people and communities of color. However, during the 1970s the view of cannabis in the U.S. was also changing, with certain states decriminalizing or reducing the penalties for distribution and/or possession. Illinois passed the Cannabis Control Act of 1978, which legalized medical cannabis but the Department of Human Services and the Illinois State Police failed to create regulations. Thus, cannabis was still illegal for medical and recreational use.

Thirty-five years later, and after years of debate, the Illinois General Assembly passed the Compassionate Use of Medical Cannabis Pilot Program Act in 2013. This Act legalized medical use cannabis for people with a number of specific conditions in tightly controlled circumstances, requiring a background check and an ID card to buy cannabis and requiring a prescription from a doctor with whom the patient had an existing relationship. Between 2013 and 2019, the laws surrounding cannabis in the State changed several times. Cannabis was decriminalized in 2016, where offenders could be fined for possessing up to 10 grams of the plant. In 2018 the medical cannabis program was made easier to access and expanded as an alternative to opioid prescriptions. In 2019, the program was made permanent and expanded to include 11 new health conditions such as chronic pain, migraines and arthritis.

Cannabis Regulation and Tax Act of 2019

Cannabis became legal in Illinois for adult recreational use under the Cannabis Regulation and Tax Act (CRTA) on January 1, 2020 after years of work by advocates and legislative sponsors. Public Act 101-0027 made Illinois the 11th state to legalize recreational cannabis and the first state to do so legislatively for retail sale. The CRTA was, according to the sponsors and the Governor, intended to both generate revenue for the State as well as address injustices and create opportunities for communities that have historically been impacted by the criminalization of cannabis. In addition to automatic expungement provisions for cannabis possession convictions and community investment programs, the bill contained the Illinois Adult-Use Cannabis Social Equity Program. While the first wave of retail availability of cannabis in Illinois came through the holders of existing medical cannabis licenses, the majority of which had been issued to white male applicants, the social equity program was intended to ensure communities of color received priority access to the next wave of recreational cannabis licenses.

Illinois Cannabis Social Equity Program

The Illinois Cannabis Social Equity Program, created as part of the CRTA, was designed to offer disadvantaged people and communities of color disproportionately impacted by the war on drugs an opportunity to benefit from the cannabis industry. The program provides several resources for applicants. Some of the resources for the social equity applicants include additional points for license applicants, access to financial resources, training programs at colleges for individuals seeking to enter the cannabis industry and development programs to community groups serving disadvantaged communities. The Cannabis Regulation and Tax Act of 2019 created five types of license applicants: dispensary, infuser, transporter, craft grower and cultivation center.

The Social Equity Program involved a lottery that high-scoring applicants would be able to enter for a chance to receive up to 10 of 75 available licenses for retail cannabis dispensaries, with the additional points available to social equity applicants intended to make it more likely that they would receive the necessary scores. However, after delays in the process due to COVID-19, of the over 900 applicants that filed, only 21 received the perfect scores that allowed them to advance to the lottery. The process was subsequently put on hold as unsuccessful applicants and public officials noted problems in scoring and in the tiebreaking process, and some alleged that many of the finalists weren’t as diverse as they appeared to be. There were also concerns that some social equity applicants had just fallen short of the required perfect score because they did not have a veteran on their application teams.

Some of the unsuccessful applicants filed multiple lawsuits. The Governor subsequently announced that unsuccessful applicants would be allowed to amend their applications to fix deficiencies. However, that initiative was also put on hold as some of the successful applicants filed their own litigation. State officials then went back to the drawing board to develop compromise legislation that would reform the process and ensure its intention to diversify the cannabis industry was fulfilled.

New Legislation – HB1443

In February 2021, Representative LaShawn K. Ford introduced House Bill 1443 to resolve some of the issues in the original CRTA bill and after a previous attempt to pass legislation reforming the process came up short during the lame duck session in January 2021. Over the following months, the bill was amended following hearings in the General Assembly and had orginally been developed with input from social equity applicants and the Governor’s Office. The bill eventually passed both houses of the Illinois General Assembly on May 28, 2021. Governor Pritzker issued a statement the same day indicating he would sign the bill.

HB1443, as amended, outlines a process with three lotteries. The first lottery would still be available to the applicants for the original 75 licenses that were delayed due to the problems with the process outlined above. It also includes a second and third lottery for an additional 55 applicants each. The second lottery is for social equity applicants who had previously received 85% or higher of the 250 total points needed to enter the first lottery. The third lottery allows applicants who received 85% or more of the points necessary in the first lottery, meet the criteria for the social equity program and additionally meet the definition for Social Equity Justice Involved Status[1]. Therefore, a total of 110 additional licenses will be available with social equity applicants more likely to qualify. The original lottery applicants do not need to pay additional fees or resubmit their applications. Further provisions addressed concerns that the best locations for dispensaries are already taken by allowing the new dispensaries in the social equity program to locate within 1,500 feet of an existing dispensary.

Although some applicants who were not finalists in the first lottery and legislators from both political parties have expressed doubts and questions with HB1443, sponsors have emphasized that that the bill is the result of compromise and moves the state closer to the original goals of ensuring that a diverse group of entrepreneurs benefit from the legalization of adult-use cannabis.

Timeline for Implementation

Once the lotteries are held and the new licenses are awarded, the cannabis industry is likely to grow even more quickly, along with the projected increase in the amount of revenue the State and local governments will collect. The Illinois Department of Financial and Professional Regulation reported that as of June 2, 2021 cannabis sales in Illinois have increased nearly every month since recreational sales started January 1, 2020.

[1] Social Equity Justice Involved Status means majority ownership by individuals who have lived at least five of the last 10 years in areas disproportionately impacted by the war on drugs, been arrested or convicted themselves for cannabis offenses or have family member(s) impacted by the war on drugs.