Was the Illinois cannabis dispensary lottery the fairest way to issue cannabis dispensary licenses, or was it just the luck of the draw?
In this post, Quantum 9 marijuana consultants discuss the results of the recent Illinois cannabis dispensary lottery. The results may not have been fair, but the winners were not just plain lucky. Applicants first had to secure a position in the lottery by achieving the highest scores possible on their competitive applications for dispensary licenses. And then strategize to increase the odds of being drawn from a pool of equally scored applications. How can license awards by lottery be fair when the manufactured scarcity of licenses is inherently unfair?
Approaches to cannabis licensing
Holding lotteries to award cannabis licenses goes back to at least 2014 in states such as Washington and Massachusetts. Those states had legalized medical marijuana early. Illinois established its Medical Cannabis Patient Program in 2013. However, it was not until after the legalization of recreational marijuana that Illinois regulators introduced the lottery idea. Many dispensary license applicants in Illinois were already far into their business planning by this point.
This threw many cannabis businesses scrambling. They were already aiming to win a competitive license due to the viability of their business plans. They had already been building the networks necessary to achieve the community benefits promised by their proposed cannabis business. Their dispensary applications provided proof of their business acumen and their dedication to furthering social equity. Suddenly, the prospect of achieving a dispensary license due to merit was thrown into turmoil. All that hard work was to be left to the luck of a BLS Regional Draw!
Marijuana license applications: the more you play, the more you win?
Michael Mayes, CEO and Founder of Quantum 9, a Chicago-based marijuana consulting firm, described how he tackled winning Illinois dispensary licenses for his clients through the lottery process. Interviewed in Crain’s Chicago Business, Mr. Mayes said that he advised his clients to submit as many competitive applications as possible. This would increase the odds of being awarded a lucrative marijuana license in a lottery process. “We put more submissions in the same (region) than normal, because of the probabilities.”
Simply put, “It was a gamble.” And smart cannabis business planning.
In the initial scoring process in Illinois, 21 applicants achieved those perfect scores required to be in the running. There were 75 dispensary licenses available in that lottery round. One perfectly scored application made them eligible for one chance in the tiebreaking lottery.
However, that did not mean that each applicant had just one chance in the dispensary license lottery. Instead, the rules allowed applicants to submit multiple marijuana applications up to the number of licenses available in any particular region of Illinois. These were primarily applicants with the financial means to pay the $2500 fee per license application. Applicants submitted as many applications as they could up to the limit available to increase their chances of receiving a license, or several of them!
The lottery process resulted in a very few winning a majority of the few licenses available. The winners were typically businesses that already had wealth and status-quo industry ownership. These results were not the groundbreaking aims of the June 2019 recreational marijuana law signed by Governor Pritzker of Illinois. One of its stated aims was to diversify ownership. Illinois’ social equity goal was to provide an equal playing field for all applicants, regardless of wealth, race or gender.
What were the Illinois cannabis dispensary lottery results?
Applicants who could afford to bet big did so and won 25% of the marijuana licenses available.
For example, five applicants submitted the maximum total of applications allowed and won three or more of the available dispensary licenses. One of Quantum 9’s clients submitted the maximum number of applications allowed (75) and won six cannabis licenses. Another submitted four applications and was awarded one dispensary license through the lottery.
Unsuccessful applicants and Illinois lawmakers questioned the legitimacy and fairness of holding lotteries for a limited number of licenses. The lottery had been computerized, rather than held publicly as in Powerball-type lotteries. Several applicants questioned why they received vastly lower scores than similar applications in the same categories. Cannabis businesses with equivalent scores as lottery winners wondered why their applications were denied a shot.
Lawsuits followed. The Governor’s Office and the IDFPR admitted that errors had been made in “clerical oversight in terms of data entry.” They announced an additional lottery held in October to give six applicants another shot. Meanwhile, even the dispensary licenses awarded in the earlier lotteries remain in limbo, on hold by a Cook County judge’s order. See current and upcoming cannabis license application opportunities.
What is the best bet to position your cannabis business in the next lottery for marijuana dispensary licenses?
The takeaway? Cannabis businesses that submitted a greater number of competitive applications with perfect merit scores had a much greater chance to win a dispensary license in the final regional lotteries.
For applicants who scored perfect based on their merit, the competitive cannabis licensing process ultimately did come down to the luck of the draw. But the more you played, the more you won.
- Viability of business plan
- Shrewd business partnerships
- Preparation of application
- Positioning your licensing bets
There may be no perfect system for states to decide who gets a dispensary license. Every system devised so far has met with both success and failure. States continue to consider pot licenses as a tool to falsely create a limited class of goods by issuing a limited number of licenses for marijuana dispensaries. As long as states continue to create scarcity, hopeful cannabis businesses must prepare for the possibility that licenses will be awarded by the luck of the draw. Prepare accordingly by submitting as many applications as your business can afford to do. Enter into partnerships if that helps your business achieve its goals.
Most importantly, you must achieve those perfect scores for your business to be eligible for a future lottery for cannabis licenses. Chicago-based Quantum 9’s experienced marijuana consultants help you secure the highest scores so that your cannabis business gets its well-deserved spot in the next lottery for dispensary licenses.
Contact our expert cannabis consultants at Quantum 9 to discuss your marijuana business planning and licensing strategies. Utilizing experienced marijuana consultants is your best bet to position yourself in the next lottery for cannabis licenses.
