New lawsuit could upend state’s problematic pot shop licensing process — again

A new federal lawsuit aims to halt a series of newly announced lotteries to determine the winners of 185 upcoming pot shop permits, marking the latest threat to the state’s troubled cannabis licensing process.

Sozo Health, a Michigan-based pot firm that applied for 11 licenses, filed the suit late last week — just a day after Gov. J.B. Pritzker enacted a law that seeks to get the long-delayed process back on track. That same day, Pritzker’s administration also announced the dates for three lotteries to determine the winners of the new licenses, the first of which was set for July 29.

Sozo’s suit, filed in federal court in Chicago Friday against Pritzker and the acting director of the state agency that oversees dispensaries, now seeks to stop all three lottery drawings, claiming the state’s licensing rules are unfair. Pritzker’s office declined to comment on the pending litigation.

The suit targets a provision that awards five application points to Illinois residents, saying it’s discriminatory and runs afoul of state and federal laws. The suit also holds that Sozo is effectively being locked out of one of the lotteries based on updated qualifications for earning social equity status, a designation created to bolster diversity in the cannabis industry.

Sozo has earned social equity status by hiring a workforce largely made up of individuals who either lived in area disproportionately impacted by the drug war or who have a past cannabis-related criminal offense. But after being lambasted by critics as the “slave master clause,” the hiring provision was stripped out for one of the lotteries added in the new pot law, meaning Sozo can’t earn the 50 crucial points needed to qualify.

The legislative fix was devised after the initial 75 licenses were mothballed amid a series of lawsuits and resounding outcry from so-called social equity applicants, who raised concerns about the grading process and accused state officials of falling short of their goal of diversifying the lily-white industry.

The pushback started after state officials last September announced that just 21 firms were named as finalists for those initial licenses, which are expected to be issued Aug. 19. Many of those applicant groups included clouted and deep-pocketed partners, the Sun-Times and other outlets found.

Sozo, which currently grows and sells weed in its home state, spent over $350,000 while pursuing the lucrative licenses in Illinois, according to the lawsuit. That included hiring, training and offering benefits to employees.

While the suit acknowledges that Sozo could still qualify for one of the upcoming drawings, it calls for an overarching halt to the process, as well as attorneys’ fees, costs and other possible relief.

Following last week’s announcement, Pritzker’s chief pot adviser said she was aware of the prospect of new litigation.

“It’s always a concern, but also it’s out of our control,” said Toi Hutchinson. “We know that there are people who actively do not want this to succeed. ... And the longer it stays in chaos, there are people who benefit from that, and unfortunately, it’s not the applicants.”