On March 15, 2022, Illinois Governor J.B. Pritzker announced another planned lottery process to occur later this year, whereby an additional 50 new adult use dispensary licenses would be issued through a new, simplified online application process.[1]  The proposed rules governing this process were released by the Illinois Department of Financial and Professional Regulation (“IDFPR”) on March 25, 2022[2], and included the following highlights:

• To participate in the lottery, applicants will need to provide basic information about the applicant and its principal officers and acknowledge that (i) they will meet (and prove) the required social equity qualifications and (ii) they will not violate the limitation on serving as a principal officer of more than 10 adult-use cannabis licensees in Illinois.

• With respect to the social equity qualifications, applicants must either satisfy Tier I or Tier II:
  • Tier I:
    • Applicant must be an Illinois resident that is at least 51% owned and controlled by one or more individuals that:
      • has lived in a Disproportionately Impacted Area (“DIA”) for at least 5 of the last 10 years; or
      • has (or their parent, legal guardian, child, spouse or dependent has) been arrested for, or convicted of, or adjudicated delinquent for an offense eligible for expungement under the Illinois Cannabis Regulation and Tax Act (the “Act”).
    • Tier II
      • Applicant must satisfy at least 4 of the following criteria (which can be through any combination of 4 or a single criterion 4 times):
        • Applicant is at least 26% owned or controlled by one or more individuals that:
          • has lived in a DIA for at least 5 of the last 10 years; or
          • has (or their parent, legal guardian, child, spouse or dependent has) been arrested for, or convicted of, or adjudicated delinquent for an offense eligible for expungement under the Act;
        • Applicant will operate the dispensary in a DIA for at least 2 years from the date of issuance of the final adult use dispensing organization license;
        • During at least the first 2 years from the date of issuance of the final adult use dispensing organization license, Applicant will purchase at least 25% of its products offered to consumers from one or more infusers or craft growers licensed as a “Social Equity Applicant” as that term is defined in the Act;
        • During at least the first 2 years from the date of issuance of the final adult use dispensing organization license, Applicant will purchase at least 30% of the total amount of its contracts on subcontractors and vendors that are registered Illinois BEP vendors owned by minorities, women and persons with disabilities;
        • For a minimum of 2 years from the date of issuance of the final adult use dispensing organization license, Applicant will facilitate a cannabis industry training or education program at a Illinois community college, through a grant of least $250,000 and mentorship (including paid internships, paid fellowships, and one-on-one mentoring and career advice) for students and graduates of the program;
        • Within 60 calendar days from the date of issuance of the conditional license, Applicant will pay $250,000 as an unrestricted grant to another cannabis business establishment licensed as a Social Equity Applicant, or another winner in this lottery process that qualified as a Tier I applicant; or
        • Within 60 calendar days from the date of issuance of the conditional license, Applicant will pay $500,000 to the Cannabis Business Development Fund.

• Once the form of application is posted, applicants will have no less than 10 business days to submit their applications. Applicants can only apply to one BLS region, and may only submit one application per region.  No individual or entity can be listed as a principal officer on more than one application.

• Once the application window is closed, IDFPR will announce the list of eligible applicants, and potential participants will have 5 days from the release of that list to challenge the list of applicants eligible to participate.

• Once the lottery is complete, the certified results will be published by IDFPR and subject to appeal pursuant to Illinois administrative law.

• Applicants awarded a license in the lottery will then have 45 days to submit sufficient supporting documentation to confirm that they meet the required social equity qualifications. The list of supporting documents required to prove that an applicant meets the social equity qualifications will be posted on the same day that IDFPR opens the application window.

• If two or more applicants have the same principal officer, IDFPR will notify both applicants and the principal officer, and the identified principal officer will have 3 business days to notify IDFPR of its resignation from all but one of the applicants.

According to the adopting release for the proposed rules, they were adopted under IDFPR’s general authority to implement the provisions of the Act, without reference to any specific section.[3]  However, as described above the proposed regulations make significant changes to who will be eligible for one of the 55 new licenses and how those licenses are awarded, which arguably exceeds the authority granted to IDFPR under the Act.  Under Illinois law, proposed regulations do not become law until a 45 day comment period has passed and the regulation has been approved by the legislative Joint Committee on Administrative Review.  The 45 day comment period is scheduled to end May 9^th, 2022, and it will be interesting to see the response to the proposed rules.

[1] Pritzker Administration to Propose New, Simplified Approach to Cannabis Dispensary Applications

[2] 2022 Illinois Register Issue 13 (ilsos.gov), pp. 5127-5148.

[3] Ibid.

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