Would-be minority pot entrepreneurs say state rules are scaring off investors
Regulations for businesses who got licenses in Illinois ‘social equity’ lottery make it hard to raise cash, panelists at a City Club luncheon said.
The small, minority-owned businesses that received “social equity” licenses to sell and grow cannabis in Illinois are likely to fail before they ever open their doors without changes to regulation, a panel of would-be pot entrepreneurs said Thursday at a City Club luncheon.
After years of delays related to litigation over the lottery for minority business owners, the state this summer nearly doubled the number of licensed cannabis businesses in Illinois when a stay preventing the licenses from being awarded was lifted.
But six months later, only one of those licensees has opened up, said panelist Ambrose Jackson, founder of the 1937 Group. Licensees have until March to stand up a business or risk losing their license, and most are struggling to raise the millions needed to get started, he said.
“From what I’m hearing talking to people, it’s looking like upward of 80%” will miss the deadline, Ambrose said.
Illinois’ plan to build social equity into the growing cannabis industry by creating licenses for businesses led by minorities and individuals with minor criminal backgrounds is admirable, said panelist Doug Kelly, executive director of the Cannabis Equity Coalition Illinois.
But the delay between when the state selected licensees from the pool of minority candidates and when the licenses were officially awarded drained many startups of capital, Kelly said.
A state program to lend money to cannabis businesses — which can’t deal with conventional banks because their product is still illegal under federal law — has yet to distribute any funds to applicants, Kelly said. Rules governing social equity licensees prevent them from raising capital by selling shares, and limits on the size of growing operations make them unattractive to investors, Kelly said.
“We’re hamstringing the social equity people,” Kelly said. “How is that equitable?”
The issues would be addressed by legislation in the veto session that begins in two weeks, or the lame duck session in January, said Jordan Abudayyeh, spokeswoman for Gov. J.B. Pritzker. The cannabis loan program will be contacting applicants “in a few weeks,” and a memorandum from the state broadened the ways that social equity licensees can raise funds. She also said two social equity cannabis businesses have opened.
Former state Sen. Rickey Hendon, who did not attend the City Club panel but holds a social equity license, said he’s confident that rules will be changed in the veto session, but he said the state would have to extend the deadline to open a business by six months to ensure they’re able to thrive.
“If we don’t do that, then we won’t be the shining golden example of equity in the cannabis business that we said we were going to be,” he said.