9/7/2020 Recreational cannabis: Illinois strives for social equity - Marijuana Venture

https://www.marijuanaventure.com/recreational-cannabis-illinois-strives-for-social-equity/ 1/2

Recreational cannabis: Illinois strives for social equity

LEGAL

By Jonathan Sherman, Brian

Crump and Madison Schmid

February 10, 2020

Only a limited number of new licenses will be granted in 2020

On January 1, 2020, Illinois became the 11th state to legalize the recreational use of

cannabis. According to the Chicago Sun-Times, more than 495,000 transactions occurred

in the first 12 days of recreational sales, resulting in nearly $20 million in sales. With such a

positive reaction to the new, emerging market, many entrepreneurs will try to enter the

industry by applying for one or more licenses to grow, sell or transport cannabis, or to

produce cannabis-infused products.+

Abraham Lincoln statue in front of the Illinois State Capital Building in Springfield, Illinois

EXHIBIT 8

Case: 1:20-cv-05264 Document #: 4-8 Filed: 09/08/20 Page 1 of 2 PageID #:100
9/7/2020 Recreational cannabis: Illinois strives for social equity - Marijuana Venture

https://www.marijuanaventure.com/recreational-cannabis-illinois-strives-for-social-equity/ 2/2

However, only 75 new dispensary licenses, 40 infuser licenses and 40 craft grower licenses

will be issued in the first round of applications in 2020. Prospective licensees, ranging from

individuals to large multi-state corporations, will submit thousands of applications for those

licenses. Given the limited supply of licenses, applicants can expect to face strong

competition and intense scrutiny by regulators. In addition, the application process itself is

extensive, requiring each applicant to submit a wide range of information about principal

officers, employee training procedures, environmental considerations, proposed locations,

security plans and more. But the most unique component of the application process is the

state’s explicit focus on diversity and social justice in its decision-making process.

This article originally appeared in the March 2020 issue of Marijuana Venture, © 2020 Marijuana

Venture.

The Illinois Legislature recognized that in the past, a significant portion of its residents were

disproportionately affected by laws criminalizing the possession and use of cannabis. When

the decision was made to legalize cannabis for recreational use, legislators designed the

law in a way that was intended to benefit those who were adversely affected by prior laws.

As part of the application process, applicants are required to submit a diversity plan

designed to promote equal opportunities among their employees. Applicants must also

provide a community reinvestment plan that highlights how the business would use its

profits to build and support its community. Applicants that qualify as “social equity

applicants” receive a significant advantage over those applicants who do not.

The dispensary application, for example, is based on a 250-point scoring system with

several components, with each component allocated a certain number of points. Of the

available points, 50 points are awarded to for those qualifying as a social equity applicant.

To qualify for this status, an applicant must meet at least one of three qualifications: (a) an

entity that is at least 51% owned and controlled by one or more individuals who have lived

in a “disproportionally impacted area” for five of the last 10 years; (b) an entity that is at

least 51% owned and controlled by one or more individuals that have been arrested for, or

convicted of, any offense that became eligible for expungement under the new law; or (c)

an entity that has 10 or more full-time employees, at least 51% of which meet one of the

first two criteria.

(Most states’ social equity programs are based on race. In Illinois, however, race is not

technically considered as part of social equity status, but practically speaking, the

designated “disproportionally impacted areas” largely cover communities of color as those

historically have been the most adversely impacted by prior laws. That said, anyone that

can prove they lived in any of these designated areas can qualify regardless of race.)

The new law offers significant financial benefits exclusively for social equity applicants,

including reduced application and license fees and exclusive access to low-interest loan

programs. These financial benefits are intended to reduce barriers of entry and make

capital available to applicants who may otherwise not have the financial resources to break

into the cannabis market. The Department of Financial and Professional Regulation

reported that approximately 600 of the 700 applications submitted for new dispensary

licenses self-identified as social equity applicants.

Though the legalization of cannabis has gained traction nationally, states across the country

have been criticized for creating programs that allow big business to profit from the sale of

cannabis products while creating barriers for people and communities that were adversely

affected by prior laws. In response, Illinois Governor J.B. Pritzker and legislative leaders

addressed these concerns by championing legislation that incorporates social goals and

benefits, provides for expungement of an estimated 770,000 criminal records related to

cannabis offenses and supports economic development, violence prevention services and

youth development efforts through the Restore, Reinvest and Renew Program (R3).

With one of the most socially progressive programs in the country, Illinois now has a holistic

program that seeks to correct past injustices while promoting diversity and opportunity in

the growing cannabis marketplace.

Jonathan D. Sherman is a trusted legal advisor in the cannabis law group at Chicago-based

firm Much Shelist. He has more than 30 years of experience as a business attorney and

litigator, counseling publicly traded and privately owned companies in numerous industries.

Brian J. Crump, also from Much’s cannabis law group, advises clients on business, venture

and financing transactions while spending significant time working with startup and earlystage companies and draws on his background in finance, management and real estate.

EXHIBIT 8

Case: 1:20-cv-05264 Document #: 4-8 Filed: 09/08/20 Page 2 of 2 PageID #:101