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Was the Illinois Cannabis Dispensary Lottery Rigged? Sure Looks Like It!

by Vince Sliwoski, Attorney at Harris Bricken

I was born in Rogers Park, Chicago. When I abandoned college (one of the times), I moved back to work in a Greek and Albanian restaurant and live with my grandparents. I used to enjoy sitting at the breakfast table with them and reading the Tribune, which often carried stories of city and downstate corruption. My grandfather told stories of local aldermen spending $1mm to win $70k jobs (still happening), and recounted the sagas of the state’s jailed governors (there were four in his time). That sort of thing is endemic to Illinois, the most corrupt state in the nation by evidence and acclamation. It’s Chinatown.

Because these stories of graft and malfeasance are personally interesting to me, and because I’m a cannabis business lawyer, I thoroughly enjoyed this gem of a post last week by Thomas Howard, Esq., on LinkedIn:

 

Do I trust Mr. Howard’s research, and his math? I want to– he’s a lawyer and “licensing nerd” after all. Of course, nothing I wrote above about Illinois would be admissible as evidence of a lottery fix if we were in court; and neither would anything Mr. Howard wrote (although he is closer). You have to prove it. But the lottery has been rife with problems already, explained away as “clerical oversights” and leading to at least six filed lawsuits. If Mr. Howard’s data are correct, we should see more of them soon on theories spanning from civil rights to administrative process. In the meantime, here are a few takeaways.

Cannabis License Lotteries are a Bad Idea

Cannabis license lotteries invariably lead to litigation, as a quick Google search will show going back at least as far as 2014 in states like Washington and Massachusetts. Lotteries in general are a problematic tool to deal with scarce goods, as shown in categories from housing to visas. With cannabis, the government both creates and regulates the scarcity in real time, so it’s probably more analogous to visas than housing. Said another way: with cannabis, public policy doesn’t meld with market factors over a long period to create a limited class of goods. The government just says, “we are only going to issue X amount of cannabis licenses, and you all get to fight for them.”

When a jurisdiction decides to create a limited pool of cannabis licenses, one of three approaches to licensing is typically pursued. These include: 1) competitive licensing (which can also be controversial— we’ve filed these lawsuits); 2) “first to file an application” (always a disaster— e.g. L.A. in 2019; Oregon in 2014); or 3) the lottery. Of these three, competitive licensing and lotteries are attractive to policymakers in that the systems can be designed to favor certain classes of applicants— which is what Illinois was ostensibly trying to do with social equity applicants.

In my view, though, the best approach is NOT to cap license numbers artificially. There are better ways to help social equity applicants and marginalized communities, starting with priority application processing and extending through grants, reduced or waived fees, reinvestment of tax revenues in disproportionately affected areas, automatic expungement, etc. In all other respects, states should treat cannabis businesses like other state-licensed businesses, with zoning laws and local control factors allowed to shape the market. Could you end up like Oklahoma? Sure. But things will even out. The market and not the state should be picking winners here.

Public Records and Transparency are Essential

We have been writing recently about public records in the cannabis context, spurred by some frustrating experiences here in Oregon. Public records law is crucial in the context of cannabis licensing. Presumably, Mr. Howard extrapolated his data from a review of public records, a valuable tool for auditing government, gathering market information, or even defending cannabis businesses in administrative proceedings.

Some government records, including meetings, are published and available without much effort on the part of the public. Other records take some digging. You may even have to pay a nominal fee to the government body for their time and effort in fulfilling the request; but most information is up for grabs. With the Illinois cannabis lottery, it seems you can find information on the process and program here. But that is not the end of the story. You can bet the state is awash in public records requests related to its cannabis lottery and will be for a while.

“A Couple of Politicians Getting Together in Chicago is a Crime Scene Now”

A federal prosecutor named Jeff Cramer gave us that wonderful quip. Chicago — and Illinois — have always been famously corrupt. But was the lottery rigged? Maybe so! More likely, though, most of these licenses were granted legitimately, and some inappropriately. If that were the case, the scheme would still be consistent with a grand Illinois tradition going back generations— politicians using a state apparatus for personal benefit. Why should cannabis be any different?

Let us know in the comments if you have thoughts or intel on this one. I can’t wait to see what happens.

Re-published with the permission of Harris Bricken and The Canna Law Blog

This Post Has 2 Comments
  1. This is brilliant. Artificially suppressing supply of (especially) cannabis retail by government agencies has strangled California’s roll out, sent small town mayors and city council members to jail for bribery and corruption, and put enormous fuel on the illegal markets- especially grows that use highly toxic pesticides in San Diego county. Not to mention stacked the game for the few incumbents. Oklahoma is the best model, even if messy. There is no data showing capping licenses make cities safer. In fact, anecdotal evidence shows the opposite is occurring in giving cover to illegal operators. Thanks for writing this truth.

  2. All of this and a bag of chips. We can talk about all the corruption in Illinois until we’re blue in the face but the process is so opaque there’s no real way to get to the truth. While the ILGA’s heart was in the right place, the implementation was nothing short of an unmitigated disaster.

    LIMITED LICENSURE IS THE PROBLEM

    Limited licensure means the perceived value of these licenses is through the ceiling. When the licenses are crazy valuable, that’s when the lying, cheating, and gamesmanship starts to come into play (not to mention circling out of state MSOs with deep pockets). The funny part about the situation in Illinois is this….limited licensure is typically embraced as a way to protect the public (kids) from the devil’s lettuce. However, in Illinois, we’ve reduced the barrier of entry so far in order to help social equity applicants that we’re giving licenses to people with zero experience in the industry, in many cases zero experience with the plant, and certainly no experience in running a facility that works with a schedule I controlled substance in our communities (and yeah, I know the scheduling is crap, but facts are facts).

    So what happened to protecting the public?

    Now we have the mess we are in. The SE applicants are getting the shaft, the MSOs are laughing all the way to the bank with their TWO YEAR HEAD START, and we still have no idea when a social equity dispensary will open in this state.

    It’d be pretty funny if it weren’t so tragic. At the end of the day, you have to ask yourself whether or not more social equity eligible individuals in the state were helped or hurt by the Illinois Adult Use Social Equity program….I’m not sure anyone is going to like the answer to that question.

    Stay classy, Illinois.

    Sparky Rose
    Managing Partner
    Supercritical, LLC

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