“We are not asking for anything special, no special privileges, but what was promised from the beginning.”
By Hannah Meisel, Capitol News Illinois
Nearly seven years after Illinois lawmakers approved the legalization of recreational cannabis, applicants who lost out on prized business licenses are still fighting the state in court, arguing that the law’s expansion undermined its supposed equity goals.
At the time of its passage in 2019, supporters of Illinois’ landmark law said it was the most legalized cannabis program in the nation. But one of the pillars of that legislation—relinquishing most cannabis business licenses to “social equity” applicants disproportionately affected by the war on drugs—turned out to be more complicated than the law’s authors imagined, spawning years of litigation in the process.
The last of dozens of lawsuits filed after the first cannabis license lottery of 2020 reached court last week, ending a years-long legal saga testing the state’s legalization policy. But it’s also the plaintiff, Well-Being Holistic Group’s last chance to get a dispensary license after losing all four of its applications in three draws.
“We just want a straight line,” the Rev. Otis Davis said after a hearing in the case. “We’re not asking for anything special, no special privileges, but what they promised from the very beginning … So we were saying, ‘Hey, the system is broken, then they should do it again, and they should give everybody a chance.'”
Davis preaches at Repairers of the Breach Ministries in Chicago’s Back of the Yards neighborhood and ran unsuccessfully for Chicago City Council in 2019. He was a member of the group that applied for dispensary licenses in 2020 as the Well-Being Holistic Group. Chris Harris, an attorney who represented David Davis, along with David’s client, joined his business partner and David’s business partner.
Harris was candid in his assessment of Davis’ value to the team: “Not only was Otis a veteran, but Otis was a practicing minister on the South Side of Chicago coming from an area of disproportionate influence; we had what we thought was the perfect team, and the team was designed to win this type of license.”
In fact, the Well-Being Holistic Group’s applications received a perfect score, but still did not win a license. While most of the lawsuits filed against the state after the lottery process have come from applicants who disputed their lottery entry scores, Well-Being’s case argues a different legal theory, which Henderson Parks attorney Chris Carmichael says is the “hardest path” of all lawsuits.
The plaintiff claims that the lottery was rigged
Well-Being argues that the Illinois Department of Financial and Professional Regulation, which administered the lotteries, improperly accepted approximately 450 ineligible entries in a lottery of 901 applicants for dispensary licenses in the Chicago area. This, Well-Being says, almost doubled the size of the pool and reduced the chances of others winning.
Well-Being complains that the entries should have been marked as ineligible because corporate dispensaries that already had a foothold in the Illinois cannabis market had their fingerprints on social equity dispensary license applications.
In one case, Carmichael said a company paid roughly $500,000 in application fees — something that should have been caught by IDFPR and the consultants hired to vet the applicants and run the lotteries because the “ship” line on those cashier’s checks had the company’s name on them.
The IDFPR says it did due diligence by verifying the people named as officers on license applications, which it says would have caught any attempts by the agency to skirt application limits or hide the true ownership of the entity behind an application.
But Well-Being argues that examining only individuals missed the forest for the trees, and the IDFPR ignored dozens of applications with the same corporate sponsor.
Alex Moe, an attorney with the Illinois Attorney General’s office, told Cook County Judge Patrick Stanton that Welfare lacked participation in the application process “as expected by the counselors.” There were also no rules against such consultants paying application fees, he said, unless the consultants had an undisclosed financial interest in the entity applying for the licenses.
Furthermore, Moe said Well-Being’s theory of mathematical unfairness in lotteries is fundamentally wrong.
“Even if Welfare is right and half the applicants shouldn’t be on it, it doesn’t change the outcome,” he said.
Following the “paper trail” created by the lottery, Moe said the IDFPR has recalculated what would happen if the applications reported by Welfare were to be ineligible if they were not in the pool. Welfare would rank 126 out of 450, he said.
“That’s something we know with mathematical certainty, that Welfare would not receive a winning drawing,” Moe said.
Corrective lottery?
But Carmichael noted that with the state’s unused social equity cannabis dispensary licenses, “the only meaningful thing that can be done is to do a corrective lottery.”
The state was already conducting corrective lotteries after initial lawsuits delayed the licensing process for a year. The first social equity licensee-owned dispensaries did not open until November 2022—almost three years after the application process opened. As of January, only 64 percent of licensed social equity dispensaries were operating, according to an analysis by The Chicago Reporter.
Stanton, who said several times during the hearing that the IDFPR had broad latitude to interpret state statute, said he understood Welfare’s claims but seemed skeptical of arguments that a court should step in and tell a state agency how to do its job.
“It seems to me that … there was some testing done before the lottery. Maybe not the level of testing that you think,” he told Carmichael. “You’re saying they didn’t do enough. And I feel like, ‘OK, that’s the department’s decision.'”
The judge said that further evidence that the IDFPR “failed to comply with the statute” would be required to warrant judicial review.
“They did something,” Stanton said of the IDFPR. “Maybe not enough. Applying the standards they did, I feel like they caught what they were supposed to catch.”
The judge will decide in a hearing on May 21.
This the article appeared for the first time Capitol News Illinois and is republished here under a Creative Commons Attribution-NoDerivs 4.0 International License.
Capitol News is an Illinois nonprofit news service that distributes coverage of state government to hundreds of news outlets across the state. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
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