A cannabis company has petitioned the Illinois Supreme Court on January 5th to allow the state to make public the winners of new craft grower licenses, put on hold by a current lawsuit because the delay is causing financial loss to the applicants.
Cannabis consumption increased, and more businesses want to get involved
Cannabis – also known as marijuana, pot, kush, and weed, among other names– is a psychoactive drug from the cannabis plant, used for medical or recreational purposes.
Cannabis in Illinois is legal for both medical and recreational use. Illinois became the eleventh state in the US to legalize recreational marijuana effective January 1, 2020. Retail sales from recreational cannabis in Illinois average an estimated $40 million in revenue each month since legalization.
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A lawsuit causes more delays and further risks for the cannabis companies
Understandably, producing and selling marijuana products is subject to strict rules, and delays in applying these rules can lead to difficulties for the companies involved in this particular market. And, if the revenues are high, so are the risks apparently, and risks translate into losing money.
This is why 1837 Craft Grow LLC filed its motion, January 5th, to modify a court order that prevents the state from naming the license winners until the litigation is decided.
What happened is a legal case, but the implications are already causing high losses to some cannabis businesses. 13 companies whose craft license applications were disqualified (along with one transporter license applicant), sued the state, challenging the licensing process.
Cook County Judge Neil Cohen and Sangamon County Judge Gail Noll ordered that all 60 new craft licenses supposed to be issued Dec. 21, 2021 according to a state law be held up until lawsuits end. A hearing in the case is set for March 10, but there is no telling how long proceedings could be, from a few months to even years.
Delayed licenses created problems for all applicants
Meanwhile, applicants such as 1837 Craft Grow cannot follow the business plans they had in place to develop their businesses after getting the licenses. They say they are spending too much money with little hope to stay afloat until the lawsuits are done, and they desperately need help.
The lawsuits are not the only reason these licenses have been delayed, business owners explain in the motion, also revealing the costs linked to initial problems with scoring the applications. The businesses lost not only the costs of buying or renting property, but also people they had hired or were planning to employ, as well as investor funding to help them start.
1837 Craft Grow, for instance, said it submitted a 728-page license application in April 2020. That implies at least tens of thousands in legal and consulting fees. As part of its application, the company secured land for a marijuana growing warehouse in northwest suburban Wheeling, paying $20,000 under the purchase and sale agreement. The initial deadline for the issuing of the first 40 licenses was July 1st, 1837 Craft Grow wanted to close the deal in September 2020. The company paid an additional $30,000 when that deadline was missed by the Illinois Department of Agriculture, trying to hold the property. But things got even worse when, a year later, July 1st, 2021, the state finally issued those 40 licenses, but only to veteran-led companies, and 1837 was not one of them.
Since state officials announced the following 60 licenses will be given to applicants from the same group, 1837 tried to keep the rights to its property, negotiating more extensions and paying another $25,000 in earnest money to reserve it, according to the motion.
The Illinois attorney general’s office had asked County Judge Gail Noll to allow the state to announce the 60 winners, without actually issuing the licenses, so the businesses would be able to follow their business plans. Noll denied the request, without any further explanations as to why 60 licenses were on hold when only 13 craft applicants had sued.
Loss of funds, properties, and business opportunities
On behalf of 1837, attorney Ryan Holz said the ruling would cause “serious and irreparable” harm.
“This is a unique situation whereby this court, in compliance with Illinois law, can provide a substantial, tangible benefit to dozens of Illinois craft grow applicants,” Holz wrote, “without creating any corresponding harm to any other parties.”
1837 cannot close on its $2.5 million property without being sure it will get a license, Holz argued. If the company gives up on the deal, it will lose the $75,000 in earnest money. If it tries to find another property, that would imply more time and further expenses.
1837 is not the only applicant in this situation. According to sworn affidavits filed with the motion, other applicants also detailed their expenses due to the delays.
L-evation Botanicals LLC already spent more than $100,000 in rent, but lost its property because of the delay, and might also lose a $40,000 equipment deposit.
Shermer Farms LLC lost not only a property and a special-use permit in Fox Lake, but also a second property for which negotiations were underway in Richmond, and might also lose $10 million in investor funding commitments, without which they would not be able to start the business.
EJ’s Dream LLC paid $25,000 for rights to its property, and $13,000 in real estate taxes, payments to be made again this year in order to keep the site. Green Aero LLC lost its property when the Dec. 21 licensing deadline passed, also losing the $10,000 it had already paid.
Kind Craft Grow and Transporter LLC had to spend another $10,000 in nonrefundable earnest money just to keep its property in 2022. Mother Marys Meds LLC lost a 32-acre property in Woodstock, and another 42-acre property and now stands to lose its head grower too.
Tierra Industries LLC lost properties in Batavia and Belvidere, while GCF Industries Inc. spent $100,000 in rent in Chicago, and then lost that site because of the delays.
“1837 recognizes that the announcement of the 47 winners will not be a panacea,” Holz wrote, “but it will provide valuable and much-needed clarity.” If applicants know they will get a license eventually, they can proceed with plans to get up and running.
