Illinois' New Cannabis Law Under Attack, Michigan Co. Sozo Suing Over 'Unfair' Licensing Rules

Illinois is attempting to correct its cannabis licensing process, which has been

harshly criticized for not providing better access to minority-owned businesses. So, the state created a new cannabis law, according to which, the state will now award 185 additional adult-use licenses through lotteries. Problem solved. 

Not So Fast

Just one day after the new law took effect, a Michigan-based cannabis company filed a lawsuit to kill the process, reported Crain’s Detroit.

Sozo Illinois Inc. is asking a federal judge to halt the lotteries, arguing that both the state’s initial and new rules are unfair. 

The original law regarding licensing sought to protect social-equity applicants by giving them an advantage, or a 20% bonus in application scoring. That apparently didn't do the job, which begs the question: How does a company reach social-equity status? 

One way is to employ 10 people who either lived in areas most affected by the war on drugs or those who spent time behind bars for cannabis possession, reported Crain's. 

In its lawsuit, Sozo says it has laid out more than $350,000 to employ appropriate workers in Illinois to achieve this social equity status. 

Furthermore, the Warren-based company claimed that the five bonus points awarded to Illinois residents are unfair and discriminating and therefore violates both state and federal laws that demand equal protection. 

Sozo is arguing that it has been unjustly removed from the second of two lotteries like other applicants who also achieved social-equity status via employment requirements. 

"This is fundamentally unfair and damages applicants like Sozo," according to the lawsuit.

What was/is the deal with the licensing process in Illinois? 

The process has been under attack since it began with the first 75 licenses. Why? Because there was a tie between 21 applicants with ideal scores, “some of which appeared to have tenuous connections to communities the law was designed to help,” writes Crain’s Detroit. 

Then, the legislature offered applicants who did not win the first round of 75 licenses to enter two more lotteries for an additional 110 licenses to be provided this year.

Sozo, led by Aaron Rasty - a former Chicago entrepreneur who launched Bluestar Energy Services - could probably qualify for one of the three lotteries.

Crain's notes that Soso's layout of $350,000 to hire workers in Illinois, "demonstrates the lengths to which applicants are willing to go to win dispensary licenses, which can be worth $10 million or more." 

Soso is apparently not alone in its desire to protect its investment. Several other similar lawsuits have been filed. What next? Stay tuned.

Photo: Courtesy of Diyahna Lewis on Unsplash