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Pritzker’s plan to legalize pot could benefit relatives invested in the industry

JB Pritzker | Kevin Tanaka/For the Sun Times

Democratic gubernatorial candidate J.B. Pritzker has claimed that his proposal to legalize marijuana would create between $350 million and $700 million in revenue for the state, but the plan could also advance the business interests of certain family members who are deeply invested in pot-centric ventures.

Joseph “Joby” Pritzker, his second cousin, and his father, former Hyatt Development Corporation CEO Nicholas J. Pritzker, run a San Francisco-based firm called Tao Capital Partners that invests in a range of companies, including Tesla, SpaceX and Uber. The group headed by the father-son duo, who both previously lived in Chicago, has also poured money into a pair of cannabis-related ventures, PAX Labs and MJ Freeway.

J.B. Pritzker has no ties to Tao Capital or the companies Nicholas and Joby Pritzker have invested in. The candidate hasn’t spoken to the family members about marijuana policy or anything else “in a long time,” according to Galia Slayen, a campaign spokeswoman.

PAX Labs, which began simply as a vaporizer company in 2007, developed the wildly popular JUUL e-cigarette. PAX and JUUL Labs have since split into separate entities. In 2016, PAX unveiled its Era model, a vaporizer that’s used to puff on “pods” of cannabis oil that are filled and sold by third-party vendors the company has partnered with. This marked a shift from selling products used for vaporizing cannabis to partnering in an effort to market the actual drug.

The PAX Era vaporizer | PAX Labs website

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The vaporizer model is sold at over 50 locations across the state, according to the company’s website.

PAX has received over $100 million in funding from venture capital firms, including Tao Capital, according to Crunchbase, a database that tracks startups.

A spokeswoman for PAX declined to comment, citing the company’s status as a private corporation.

Tao Capital has also invested heavily in MJ Freeway, a Denver-based company that deals in proprietary compliance software and point of sale systems used by 40 percent of cannabis businesses, according to the company’s website.

MJ Freeway has raised $11 million in funding from investors, including Tao Capital, according to Crunchbase.

State governments have contracted MJ Freeway to track cannabis inventories using the company’s Leaf Data system, which has been affected by multiple hacks, according to Forbes. Following a series of breaches, the state of Nevada, which has legalized marijuana for recreational use, ended a five-year contract with MJ Freeway last November after less than two years.

The company’s work for the state of Washington — another place with a legal pot law on the books — has also been marred by a data breach since it took on a government contract in February, according to the Seattle Times.

That contract was previously held by Fort Lauderdale-based BioTrack THC, a company that currently holds a contract with the state of Illinois to handle seed-to-sale compliance matters.

The state’s contract with BioTrack, which went into effect in 2015, is set to expire in August, according to Jack Campbell, the director of Illinois’ medical cannabis pilot program. The deal can potentially be renewed for a total of four years beyond that. The state spent $230,000 to contract BioTrack, plus continuing yearly fees of more than $41,000 for maintenance and hosting.

Under state law, individual dispensaries can use whatever software they choose to personally inventory sales as long as they have entered necessary information into the statewide system maintained by BioTrack, Campbell said. It wasn’t immediately known how many Illinois dispensaries use MJ Freeway’s software, if any.

MJ Freeway didn’t respond to multiple requests for comment.

Kristin Celauro, a Tao Capital spokeswoman, said the private firm doesn’t disclose information about its investments, personnel or operations.

Both MJ Freeway and PAX could seemingly benefit financially if marijuana were legalized for recreational use in Illinois. The number of marijuana dispensaries that could potentially use MJ Freeway’s software and services would skyrocket, and there would be more opportunity to sell Pax products.

According to his 2017 financial disclosure, J.B. Pritzker hasn’t invested in Tao Capital, PAX or MJ Freeway.

J.B. and Nicholas Pritzker are only financially connected through Hyatt stock holdings and family trusts, which the Democratic candidate doesn’t control, Slayen said. The majority of J.B. Pritzker’s Hyatt shares have been sold off since he announced his candidacy for governor last April.

Members of J.B. Pritzker’s policy team met earlier this year with representatives from the Marijuana Policy Project, the largest organization in the country focused on changing marijuana laws. Joby Pritzker serves as the organization’s board chairman.

Joby Pritzker | Myspace

The non-profit’s mission statement outlines plans to increase support for “non punitive, non-coercive” marijuana policies, change state laws to reduce penalties for cannabis use and gain influence in Congress.

“We change laws,” the organization’s tagline boasts.

The meeting happened April 3, weeks after J.B. Pritzker won the Democratic gubernatorial primary, according to Slayen and Chris Lindsey, a spokesman for the MPP.

Lindsey claimed the conversation centered around Senate Bill 2275, a measure that would have placed a non-binding resolution about marijuana legalization on the November ballot. The window to pass SB 2275, which was approved by the state Senate in March, has since expired.

“From our perspective, while it sounded promising on the surface, it could change the dynamic of the legalization effort in the state, likely making it somewhat more complicated, and had the potential to make it far more expensive,” according to Lindsey, who added that Pritzker’s candidacy for governor wasn’t discussed at length during the meeting.

Lindsey said the MPP wanted to “lay out those considerations and see where [J.B. Pritzker’s] team was in its thinking” based on the Democrat’s support for legislation proposed last year to legalize recreational marijuana statewide. At the time of the meeting, Pritzker had already outlined his own plan to legalize pot in Illinois.

Chris Lindsey | Marijuana Policy Project

“J.B. believes that legalizing marijuana will not just bring tax revenue to the state, but it will help reform a broken criminal justice system that has disproportionately harmed communities of color for far too long,” Slayen said. “J.B. knows we can legalize marijuana in a safe way that will benefit communities across Illinois and he is ready to do that as governor.”

The MPP doesn’t endorse political candidates, Lindsey said.

Colin Williams, policy director at the Illinois Campaign for Political Reform, said the meeting doesn’t raise any ethical red flags, although the familial ties “add a little bit of complication in there, but not especially.”

Given that marijuana legalization is a hot topic in Illinois politics, it’s not unusual for campaigns to discuss the issue with organizations like the MPP, according to Williams, who added that it wasn’t particularly unusual for J.B. Pritzker’s interests to intersect with those of “well-connected” family members involved in the public sector.

“The bigger issue is transparency with the relationship,” Williams added. “As long as the Pritzker campaign or, if J.B. wins in November, the Pritzker administration keeps the relationship between his organization and the Marijuana Policy Project transparent and above the board, that’s kind of a standard relationship that a group would have with a member of government if they want to affect policy that relates to their work.”