CHICAGO — Two unsuccessful marijuana dispensary applicants are suing the state, hoping to hit the pause button on its plans to hand out 75 marijuana licenses.
Awarding of the licenses is more than four months behind schedule and last week, the state announced that only 21 of 700 applicants would proceed to a lottery for the 75 licenses.
Some lawmakers and unsuccessful applicants are decrying the state’s process, saying it defeats the stated goals of diversifying the largely white-owned industry. The lawsuit, filed Friday in Chicago federal court, is at least the second formal attempt to pause the process. The Illinois Legislative Black and Latino caucuses are calling on the Pritzker administration to suspend the lottery until the public can learn more about how and why the 21 groups were selected.
Southshore Restore and Heartland Greens, two applicants that will not proceed to the lottery, allege in the suit that the 21 groups are “politically-connected insider companies,” and seek to have the lottery delayed until they can challenge why they didn’t make the cut.
The suit was filed against the state’s Department of Financial and Professional Regulation, which regulates dispensaries, and Bret Bender, deputy director of the Cannabis Control Section in the department.
The department’s decision to move forward without giving the “unsuccessful applicants any opportunity to challenge their ineligibility is unconstitutional, and cannot be permitted,” the suit alleges.
Recreational marijuana sales started in Illinois Jan. 1, and the licenses mark the first opportunity for weed entrepreneurs to enter the already lucrative industry. The scored applications gave extra points to companies that were majority owned by a person who has a marijuana-related arrest on their record, lives in an area affected by the war on drugs or meets another qualification.
“Members of communities in need of economic development were encouraged to apply,” the suit alleges. “Many did, investing considerable money, sometimes their entire life savings.”
Every applicant in the lottery received a perfect score. To do so, the applicant had to achieve social equity status and veteran status, meaning at least 51% of the organization must be owned by a veteran or group of veterans.
Southshore Restore and Heartland Greens should have received perfect scores, the complaint alleges. Both are majority owned by social equity applicants and military veterans.
The Department of Financial and Professional Regulation has not released information on why applicants were not selected to proceed to the lottery, nor has it announced an administrative review process, the lawsuit alleges.
At least some of the 21 companies proceeding to the lottery are politically connected, the lawsuit alleges. As examples, it lists separate groups allegedly owned by a former Chicago Police superintendent, Illinois gaming operators, the leader of an Illinois cannabis trade association, a private equity fund, the owner of a Gold Coast restaurant, and more.
The lawsuit also alleges that at least one of the 21 companies lists as a manager a person identified on LinkedIn as a risk consultant for KPMG, a firm the state paid $4.2 million to score the dispensary applications.
Lawyers representing Southshore Restore and Heartland Greens did not return requests for comment. A spokesman for the Financial and Professional Regulation Department also did not respond.
The earliest the lottery could be held is Sept. 18.
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