Michigan firm drops suit that threatened to derail pot shop licensing process again

Just two days before state officials are slated to unleash a new batch of lucrative pot shop permits, a Michigan-based cannabis firm dropped a federal lawsuit Tuesday that threatened to derail the long-delayed licensing process amid pressure from a coalition of minority applicants.

Sozo Health filed the suit July 16 against Gov. J.B. Pritzker and the acting director of the state agency that oversees dispensaries, claiming the state’s licensing rules are unfair while attempting to delay three upcoming lotteries to issue 185 dispensary permits.

The move came just a day after Pritzker enacted a law that created many of the new licenses in a bid to get the problematic process back on track. That same day, his administration also scheduled the lottery drawings, the first of which is set for Thursday.

For over a year, the licensing rollout has been stymied by delays, litigation and protests from applicants who criticized the grading process and railed against the clouted and well-financed firms that have already qualified to win permits prioritized to social equity candidates, a designation created to bolster minority participation in the lily-white weed industry.

Some minority applicants have now banded together to lobby for their mutual interests and have grown into a powerful force in the cannabis world, commanding an outsized influence over the new pot law that was signed by Pritzker. But after the latest lawsuit was filed, their attention turned to Sozo and its founder Aaron Rasty, a white man who previously helped launch a Chicago-based alternative energy supplier that was later bought out.

On Tuesday morning, a group of applicants and advocates urged Sozo to drop the lawsuit during a news conference outside the Dirksen Federal Courthouse, where a hearing in the lawsuit had been scheduled later in the day.

“We find that Sozo’s lawsuit is hurtful to social equity and racial equity and acting in complete disregard to the entrepreneurs and regular Illinoisans who have been a part of this conversation for years,” said applicant Edie Moore, also the executive director of the Chicago chapter of National Organization for the Reform of Marijuana Laws.

Sozo’s short-lived suit targeted a provision that awards extra application points to Illinois residents, saying it’s discriminatory and runs afoul of state and federal laws. It also held that Sozo is effectively being locked out of one of the lotteries based on updated qualifications for earning social equity status.

Sozo notably 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. Lambasted by members of the social equity coalition 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 qualify.

Rickey Hendon, a former state senator and current applicant for dispensary licenses, questioned the company’s diversity hiring efforts while ripping its lawsuit.

“Don’t come from another state and think you’re gonna gangster us, trick up and pimp these groups, which is the worst part,” Hendon told reporters.

Though state lawyers filed a motion Monday undercutting some of Sozo’s key claims, the company’s decision to drop the suit was apparently prompted by the backlash from other applicants. Spokespeople for Pritzker and the Illinois Department of Financial and Professional Regulation declined to comment.

In a statement, Sozo expressed its commitment to social equity but criticized the new law, which it said creates “a deeply flawed and unconstitutional process for distributing cannabis dispensary licenses in which rules of qualifying applicants were changed after applications were scored.”