Four Things to Know if You Want to Apply
On January 30, 2023, the Illinois Department of Financial and Professional Responsibility (“IDFPR”) began accepting “Social Equity Criteria Lottery” applications for 55 available conditional cannabis dispensary licenses. Though the application window was originally slated to close on February 14, 2023, after dealing with a data error that required the application portal to be shut down for a few days, the IDFPR extended the application window to March 10, 2023. On March 10, 2023, the IDFPR announced that the application window would be extended once again to 5:00 pm Central Time on Friday, April 21, 2023. If you are interested in applying for one of the 55 available conditional cannabis dispensary licenses, here are four important things you need to know.
1. Lottery Based License Application Process
The first thing to understand about the current round of cannabis dispensary licensing is that if you submit an application by the April 21, 2023 deadline, you are applying to be eligible to participate in a conditional license lottery. Unlike the first round of cannabis dispensary licensing in Illinois, which involved the submission of operational and technical documents that were evaluated and scored, this round of licensing involves a random selection lottery that is not based on technical qualifications such as industry experience but rather on social equity qualifications alone.
According to the IDFPR, it changed its cannabis dispensary license application process to increase accessibility and opportunities for those that were negatively impacted by the war on drugs. As a result, initial application requirements have been scaled back significantly so that applicants do not have to spend thousands of dollars preparing application materials. Rather, applicants must submit a basic application that requires applicants to attest to a number of things, including their social equity status, but does not require applicants to upload operational plans or other documents. To help prepare applicants for the new application process, the IDFPR published, among other things, a flow chart that details the new license application process and a mock application that applicants can review while preparing to submit a real application.
2. Social Equity Requirements
In order to qualify to participate in the “Social Equity Criteria Lottery”, applicants must attest that they comply with the Social Equity Criteria requirements found in the Administrative Code. Specifically, applicants (which are usually entities of some sort) must attest to the fact that they are 51% or more owned or controlled by one or more individuals who each, themselves, meet certain social equity criteria. Such criteria are broken down into two groups and are referred to as “Criteria A” requirements and “Criteria B” requirements.
In general terms, to meet the state’s social equity criteria, each individual making up 51% of the applicant entity’s ownership/control must:
- Meet at least one of Criteria A’s requirements; AND
- Meet at least one of Criteria B’s requirements.
Both the Criteria A and the Criteria B requirements are outlined for reference below.
Criteria A Social Equity Requirements for Illinois Retail Cannabis Licenses
Criteria A Requirements (must fulfill one of the following)
To fulfill the Criteria A requirement, each applicable individual must have:
- Resided for at least 5 of the preceding 10 years in a census tract that has a poverty rate of at least 20% according to the latest 5-year American Community Survey (Table S1701: Poverty Status in the Past 12 Months) that is publicly available at the start of the application submission window for the lottery conducted under Sections 1291.400 through 1291.440;
- Resided for at least 5 of the preceding 10 years in a census tract where at least 20% of the households receive assistance under the Supplemental Nutrition Assistance Program in the latest 5-year American Community Survey (Table S2201: Food Stamps/Supplemental Nutrition Assistance Program (SNAP)) that is publicly available at the start of the application submission window for the lottery conducted under Sections 1291.400 through 1291.440;
- Resided for at least 5 of the preceding 10 years in a census tract area classified as “low income and low access” where at least 100 households are more than one-half mile from the nearest supermarket and have no access to a vehicle or a significant number (at least 500 people) or share (at least 33%) of the population is greater than 1 mile from the nearest supermarket, supercenter, or large grocery store for an urban area or greater than 20 miles for a rural area, as classified by the latest United States Department of Agriculture Economic Research Service’s Food Access Research Atlas data set that is publicly available at the start of the application submission window for the lottery conducted under Sections 1291.400 through 1291.440;
- Received Medicaid, Supplemental Security Income, Social Security Disability, and/or subsidized housing for at least 5 of the preceding 10 years; OR
- Resided for at least 5 of the preceding 10 years in a census tract in the top 15th percentile for the percent of residents in the census tract failing to graduate from High School in that state, as classified by the latest 5-year American Community Survey (Table S1501: Educational Attainment) that is publicly available at the start of the application submission window for the lottery conducted under Sections 1291.400 through 1291.440.
Criteria B Social Equity Requirements for Illinois Retail Cannabis Licenses
Criteria B Requirements (must fulfill one of the following)
To fulfill the Criteria B requirement, each applicable individual must be:
- An individual who has been arrested for, convicted of, or adjudicated delinquent for any offense, or substantially similar offense, of Illinois, federal or other state law for:
- possession of not more than 500 grams of cannabis; or
- manufacture, delivery, or possession with intent to deliver, or manufacture of cannabis up to 30 grams;
- An individual who has a family member who has been arrested for, convicted of, or adjudicated delinquent for any offense, or substantially similar offense, of Illinois, federal, or other state law for:
- possession of not more than 500 grams of cannabis; or
- manufacture, delivery, or possession with intent to deliver, or manufacture or cannabis up to 30 grams; OR
- An individual who has been a victim of firearm injury. This must be evidenced by either a police report or medical record.
As noted above, during the initial application submission process, applicants will be required attest that at least 51% of the applicant entity is owned or controlled by those individuals that meet at least one of the Criteria A and one of the Criteria B social equity requirements. That being said, documentation PROVING that the applicable individuals meet the social equity requirements, and that the applicant entity is at least 51% owned or controlled by such individuals is not required to be submitted up front.
As shown in the IDFPR’s Steps for Social Equity Criteria Lottery graphic, only applicants that (1) successfully submit their initial applications and (2) are among the 55 “top participants” selected during the lottery will move forward to what is called a 45-day “Prove Up Period”. During the Prove Up Period, top participants will have 45 days to submit proof of their compliant social equity status and operational requirements. Thus, applicants do not need to be ready to submit proof that they meet all ownership/control and social equity requirements on the day they submit their initial applications to the IDFPR. However, it is a good idea to get all required paperwork compiled ahead of time.
3. Principal Officers and Application Limits
In addition to attesting that they meet the social equity requirements described above, applicants also have to identify their Principal Officers on their Social Equity Criteria Lottery applications. “Principal Officer” is a term of art defined by the Illinois Cannabis Regulation and Tax Act as follows:
“Principal officer” includes a cannabis business establishment applicant or licensed cannabis business establishment’s board member, owner with more than 1% interest of the total cannabis business establishment or more than 5% interest of the total cannabis business establishment of a publicly traded company, president, vice president, secretary, treasurer, partner, officer, member, manager member, or person with a profit sharing, financial interest, or revenue sharing arrangement. This definition includes a person with authority to control the cannabis business establishment or a person who assumes responsibility for the debts of the cannabis business establishment
Per the definition above, at the very least, all board members, officers, and owners of an applicant entity and anyone else with the authority to control the entity or its debts must be reported to the state as a Principal Officer. According to the mock application released by the IDFPR, applicants will be required to provide the following information for each Principal Officer:
- Legal name
- Home address
- Primary phone number
- Date of birth
- SSN or ITIN
- Email Address
Principal Officers cannot be listed on more than one application for the Social Equity Criteria Lottery, so it is very important to ensure all Principal Officers understand that they can only associate themselves with one dispensary license applicant during this round of licensing. If two or more applications include the same Principal Officer, the IDFPR will notify each relevant applicant and the Principal Officer who is listed on two or more applications, via email. Upon this notification, the identified Principal Officer will only have three (3) business days to notify the IDFPR of its resignation from all but one of the proposed applicant entities. If the identified Principal Officer does not notify the IDFPR of the Principal Officer’s required resignation within the required time period, each applicant notified shall forfeit its application and nonrefundable fee. Thus, applicants should (1) ensure that their Principal Officers understand the limitations associated with the Social Equity Criteria Lottery process and (2) have all Principal Officers confirm that they will only be listed on the applicant’s Social Equity Criteria Lottery application before said application is actually submitted.
Though not fully discussed herein, it is also important to note that once an applicant submits a Social Equity Criteria Lottery application, it will not be allowed to amend its Principal Officer list (either by adding or removing or replacing people to the list), except in extremely limited circumstances involving the death of a Principal Officer. Therefore, it is crucial that all applicants vet their Principal Officers and their social equity qualifications well before submitting a lottery application.
4. BLS Region Selection
When submitting an application for the Social Equity Criteria Lottery, applicants will be required to select or otherwise identify the BLS region in which they are applying. For those that are not familiar with the Illinois cannabis licensing process, this may seem confusing, but it is actually pretty straight forward.
Essentially, the state of Illinois has been, conceptually, broken up into multiple BLS regions. A “BLS region” is a region in Illinois used by the United States Bureau of Labor Statistics to gather and categorize certain employment and wage data. The 17 BLS regions in Illinois are: Bloomington, Cape Girardeau, Carbondale-Marion, Champaign-Urbana, Chicago-Naperville-Elgin, Danville, Davenport-Moline-Rock Island, Decatur, Kankakee, Peoria, Rockford, St. Louis, Springfield, Northwest Illinois nonmetropolitan area, West Central Illinois nonmetropolitan area, East Central Illinois nonmetropolitan area, and South Illinois nonmetropolitan area.
Each BLS region has a limited number of cannabis dispensaries that may be located within it. To help applicants visualize the BLS regions and how many of the 55 cannabis dispensary licenses to be issued via the Social Equity Criteria Lottery are available for each region, the IDFPR created a helpful BLS region map, which shows where the BLS regions are and how many licensed are available within them.
Though applicants are not required to have a potential operating location identified in order to submit a lottery application, they do have to identify the BLS region they will operate in if selected in the lottery and granted a conditional license (after the 45 day Prove Up Period).
If you are interested in participating in Illinois’ Social Equity Criteria Lottery and would like assistance preparing your application materials, contact Rogoway Law Group to speak with a cannabis licensing and permitting attorney that can assist you.