Out-of-State Operator Drops Lawsuit that Challenged Illinois’ Cannabis Licensing Process

The state can now proceed with its plan for upcoming lotteries to award 185 new dispensary licenses.

Out-of-State Operator Drops Lawsuit that Challenged Illinois’ Cannabis Licensing Process

An out-of-state operator has dropped its lawsuit challenging Illinois’ cannabis licensing process, meaning that the state can now proceed with its plan for upcoming lotteries to award 185 new dispensary licenses.

Sozo Illinois Inc., whose parent company operates vertically integrated cannabis operations in Michigan, sued the state last week over its revised licensing plan, which Gov. J.B. Pritzker unveiled earlier this month.

The new licensing rules give priority to social equity applicants whose businesses are majority-owned by people from communities deemed disproportionately impacted by the war on drugs, which deviates from the state’s original regulations that allowed applicants to commit to employing a certain number of people from those communities.

Sozo took aim at these new rules in its lawsuit, arguing that it structured its business and prepared its application under the initial rules allowing the company to qualify as a social equity applicant by hiring a certain number of employees from disadvantaged communities. The company said the change in regulations made it impossible for it to qualify for a license, and that the new rules discriminate against out-of-state operators, as well as violate the commerce, due process and equal protection clauses of the U.S. Constitution.

The company sought a temporary restraining order and preliminary and permanent injunctions to prevent the state from issuing the licenses, but AP News reported that Sozo dropped the case on July 27, allowing the state to proceed with its licensing process.

Advocates for Black and Latino applicants held a news conference July 27 to encourage Sozo to end its litigation, according to the Chicago Tribune. In response, the company issued a statement saying that it wanted to challenge the “deeply flawed and unconstitutional process” but that after hearing from other social equity applicants and out of a desire to avoid additional licensing delays, company officials decided to drop the lawsuit.

Illinois initially announced 75 cannabis dispensary licenses in May 2020, and 110 new retail licenses were created this past spring.

The 110 new licenses will be awarded in two lotteries on July 29 and Aug. 5, and the original 75 dispensary licenses will be doled out in a third and final lottery on Aug. 19.