By: Scott F. Roberts
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Missed Wave 1? How to Still Get Into the Illinois Adult Use Cannabis Market
You want to enter the Illinois cannabis industry, but you missed Wave 1 of licenses, now what? There are two main options available for Illinois cannabis investors and aspiring licensees—buy your way in or wait it out.
Buying an Interest in Existing Business
One type of cannabis facility you can acquire ownership interest in is a dispensing center, also known as a dispensary. An Illinois adult use cannabis dispensing center is allowed to acquire cannabis from cultivation centers, craft growers, processing organizations and other dispensaries. To purchase this type of facility license or to be added as an owner/controlling officer requires approval from the Department of Financial and Professional Regulation prior to the transfer taking place. A $5,000 change of ownership fee must also be sent in with the application requesting departmental approval. A new officer or owner needs to complete a principal officer application as well and the department will conduct an inspection of the facility prior to the sale of ownership.
One thing to keep in mind is that only Conditional Adult Use Dispensing Organization licenses have been or will soon be awarded. A facility may not start buying or selling cannabis until an Adult Use Dispensing Organization License is issued. In order to receive the complete license an inspection of the facility must be done, and the license fee must be paid.
If you are more interested in acquiring a craft grower, infuser or transporter license the process to purchase an ownership interest is pretty similar to the above-mentioned process. The Department of Agriculture has made it so a transfer of the license is not allowed. However, principal officers can be added to the license. The proposed change of adding or dropping principal officers of any licensed facility must be approved by the Department before the changes are made. A fee of $1,000 will be required for processing.
Keep in mind, if you decide to purchase a company from a qualified social equity applicant while you yourself do not qualify, you could have a hefty bill to pay. If a qualified social equity applicant licensee is sold, within the first 5 years of being licensed, to a non-social equity applicant then the new licensee is responsible for paying all fees that the licensee originally had waived or reduced, any outstanding amount owed in loans to the Department, and the full amount of any grants the licensee had received.
It is still unclear how freely the Department will allow changes in ownership. However, with COVID-19 causing financial distress for many individuals and applicants, it may be something the Department has to start considering.
Wait for Wave 2
The Department of Financial and Professional Regulation is set to award up to 110 licenses for dispensing organizations on December 21, 2021. On the same day, the Department of Agriculture will be awarding up to 60 craft growers licenses and 60 infuser and transporting licenses. The departments have not announced when the application window will open, but it will likely be sometime mid-2021. Illinois Cannabis Attorneys will be closely monitoring the timeframe and ready to assist you with the application process and any questions you may have.
While December 2021 may seem far away it is actually closer than you may realize. Think about how long it takes to create a business plan, hire professionals to help you, find the right business partners (or make the decision to work solo), purchase and qualify property, get all the equipment you will need, and gather the information the state requests. Honestly, having worked on Illinois Cannabis applications, the whole ordeal is very time consuming. As cannabis attorneys, we understand how much work goes into an application before it is ready to be submitted to the state. That is why we encourage those who wish to apply during the next wave to get cracking now, or at the very least, not to wait until the last minute.
To be fair, there may be some downsides to waiting for Wave 2 depending on your personal expectations and situation. One item to consider is the social equity program. If you do not qualify as an Illinois social equity applicant, you may have a tough time receiving a license in Wave 2. This is because nearly 20% of the overall points available are awarded to social equity applicants. But don’t worry, that does not mean non-social equity applicants will be left out of the Illinois cannabis industry. Illinois Cannabis Attorneys is here to discuss options and business ideas for getting anyone who wishes to be in the Illinois cannabis industry, including how to meet social equity requirements without actually living in an disproportionately affected area or previously having a marijuana related criminal conviction.
If you plan on operating an Illinois cannabis establishment, Wave 2 is not a bad option. There is plenty of time to schedule consultations, obtain documents, and make a solid plan of attack for moving forward.
Mr. Roberts is the founder and managing member of Scott Roberts Law, a Detroit-based Cannabis Business Law Firm founded in 2014. Scott has spent his entire career representing businesses and helping them comply with municipal, state and local regulations, as well as assisting on transactional corporate and real estate matters. Scott is an accomplished attorney, author and public speaker, having spoke at CannaCon, Cannabis Industrial Marketplace, CannabisAid, and 420 Canna Expo, to name a few. He has also taught Continuing Legal Education on Marijuana business matters, meaning other attorneys see him speak to learn about the nuances of cannabis business law.