Illinois is set to become the 11th state to legalize the recreational use of marijuana – and the first state to do so by legislation rather than by voter initiative – after the State House passed a legalization bill on Friday, May 31. Governor J.B. Pritzker campaigned for office on a pro-legalization platform, and is widely expected to sign the bill into law.
The bill would allow recreational sales to begin as soon as January 1, 2020. It would allow Illinois residents age 21 and older to possess up to 30 grams of marijuana and would allow nonresidents to possess up to 15 grams. The bill creates a structure for licensing cultivation and dispensary facilities and gives localities control over zoning, including the ability to prohibit marijuana facilities. Remedying the past injustices created by marijuana prohibition is also central to the legislation. It instructs the governor to expunge certain marijuana convictions from residents’ criminal records, creates a program to help minority business owners enter the marijuana industry, and establishes a grant fund to help pay for programs in communities disproportionately affected by the war on drugs.
There are several key provisions of the bill that cannabis businesses looking to gain licensure in the nation’s 5th largest economy should be aware of.
- The Department of Agriculture will regulate cultivators, craft growers, infuser organizations, and transporting organizations, and the Department of Financial and Professional Regulation (“IDFPR”) will regulate dispensaries. This regulatory structure is the same as the state’s medical cannabis program. (Sec. 5-10)
- “Social Equity Applicants” for licenses will receive a 50% fee waiver and will have access to certain grant and loan programs. If the license is transferred or the business is sold to a non-Social Equity Applicant within 5 years, the balance of any waived fees, outstanding loans, and the full amount of any awarded grants will become due. (Sec. 7-20)
- Existing medical dispensaries can apply for an “Early Approval Adult Use Dispensing Organization License” to serve recreational users at an existing medical dispensary (sec. 15-20) or at a secondary site (sec. 15-25). The fees include a non-refundable $30,000 application see, a fee of up to $100,000 to the state’s Cannabis Business Development Fund, and up to a $100,000 contribution to certain cannabis-related community and social development initiatives.
- The law authorizes the IDFPR to issue up to 185 conditional dispensary licenses by the end of 2021. The IDFPR will issue up to 75 Conditional Adult Use Dispensing Organization Licenses” before May 1, 2020, and then will issue up to another 110 conditional licenses during 2021. (secs. 15-25, 15-35)
- No person can hold a financial interest in more than 10 dispensing organizations. (Sec. 15-36)
- The law includes robust disclosure provisions surrounding dispensary organizations’ ownership and management structures. For publicly traded companies, the law requires disclosure of all 5%+ owners, to the extent such owners are known. (Sec. 15-50)
- Transfers of licenses and sales of dispensing organizations will require prior approval from the IDPFR. The IDFPR will also review changes to principal officers to determine whether such changes constitute an effective transfer of a license. (Sec. 15-60)
Cultivation Centers, Craft Growers, Infusers, & Transporters
- The Department of Agriculture may make up to 30 cultivation center licenses available. This appears to be the total number of licenses for the medical and recreational programs. (Sec. 20-5)
- As with existing medical dispensaries, existing cultivation centers can apply for an “Early Approval Adult Use Cultivation Center License.” Fees include a $100,000 application fee, a Cannabis Business Development Fee ranging from $250,000 to $750,000, and a contribution of up to $100,000 to certain cannabis-related social and community development programs. (Sec. 20-10). An additional $100,000 registration fee is due after receiving conditional licensure and before receiving final licensure. (Sec. 20-20)
- No person can hold a financial interest in more than 3 cultivation centers. (Sec. 20-30)
- Cultivation centers are limited to 210,000 square feet of canopy space for plants in the flowering stage for cultivation of adult-use cannabis. (Sec. 20-30)
- Cultivation centers cannot discriminate in price when selling to dispensaries, craft growers, or infuser organizations. (Sec. 20-30)
- The law allows the Department to license up to 40 craft growers by July 1, 2020, and another 60 by the end of 2021. (Sec. 30-5)
- Craft growers may contain up to 5,000 square feet of canopy space for plants in the flowering state. (Sec. 1-10)
- The law allows the Department to license up to 40 infuser organizations by July 1, 2020, and another 60 by the end of 2021. (Sec. 35-5)
- The law creates a licensing scheme for issuing transporting licenses, and does not cap the number of licenses available. (Art. 40)