Some pot license winners now looking to sell to highest bidder
State law doesn’t prohibit the new licensees from unloading for millions of dollars and potentially “giving it away to the white boys again,” one critic said.
The applicants waited for more than a year for a chance to jump into Illinois’ booming weed industry.
But now that they have won lucrative licenses to open marijuana dispensaries, craft grow operations or other related businesses, some could sell the licenses before ever opening up — potentially collecting millions in the process.
With the state’s troubled pot licensing process careening toward a conclusion, corporatized weed firms and other cash-rich buyers are now expected to go after the new licenses — many of which are slated to go to so-called social equity applicants, a designation created to boost diversity in the lily-white weed industry.
Rickey Hendon, a former state senator who won a dispensary license in last week’s lottery, acknowledged he and other companies are now entertaining a host of proposals to sell to owners with deeper pockets. A court order in a pending lawsuit has, however, blocked the formal issuance of the pot shop permits for now.
“Of course some of the smaller companies are listening to all kinds of offers,” said Hendon, who became a de-facto spokesman for social equity candidates after they were shut out of the initial licensing process a year ago. “I’m listening to all kinds of offers.”
Hendon, who said he is merely exploring his options, believes a license could fetch between $3 million and $15 million, depending on which statewide region it allows a buyer to set up shop.
An industry source, however, estimated that each of the 185 new pot shop permits is likely worth much less, between $1 million and $3 million. The source pegged the going rate at $4-$5 million for each of the 40 new craft cultivation licenses, which were announced last month along with other permits to infuse and transport cannabis products.
But critics say the potential massive selloff goes against the spirit of the legalization law and the recent trailer bill Hendon helped write, both of which went to painstaking lengths to give people of color ownership in the highly profitable industry. What’s more, some fear predatory forces will attempt to take advantage of social equity firms trying to turn a quick profit.
Edie Moore, a fierce proponent of diversifying the industry who serves as the executive director of Chicago NORML, a marijuana advocacy group, couldn’t hold back her frustrations about the prospect of social equity firms now dumping licenses so many in the state fought hard to get to them.
“I’m not upset for people who want to get a payday. But I thought that they had got into this business to be in this business, not to just make a quick buck,” said Moore, who helped write the latest pot law and has already won a dispensary permit.
“That’s what we were fighting for,” she added. “For people to build generational wealth on owning and building and creating something within their communities, not giving it away to the white boys again.”
The current pot shop owners are almost all exclusively white, and a similar feeding frenzy for those licenses has already gotten underway as multibillion-dollar cannabis firms went on buying sprees in Illinois.
Moore fears the operators of multi-state pot firms will inevitably buy out social equity licenses and “win again,” a prospect that’s particularly prickly given her experience. She previously sold dispensary and cultivation licenses for medical marijuana to Arizona-based 4Front Ventures — a move she said was prompted by the conditions created by former Gov. Bruce Rauner’s overly cautious handling of the program years before recreational pot was legalized in 2020.
The recreational law, though, contains few restrictions on selling the permits. It says only that craft cultivation licenses can’t be sold until after Dec. 21, according to Charity Greene, a spokeswoman for Gov. J.B. Pritzker’s office. There’s no similar language about selling dispensary, infusion or transportation licenses, though all cannabis permit transfers require regulatory approval.
Should a social equity applicant sell a license to a firm that doesn’t qualify, the buyer must pay back any fees that were waived and any cash owed for state-issued loans or grants.
For its part, the influential Cannabis Business Association of Illinois is now tentatively planning an event where new entrants to the industry can meet existing players, creating an environment for potential deal-making and license sell-offs.
Former state Sen. Pam Althoff, the group’s executive director, noted that many of the new license holders are now in difficult straits because they’ve lost investors and important expertise on their teams as they’ve waited for new licenses to be awarded.
“There have been some massive consequences to many of these applicants,” Althoff said. “And in many instances they decided that it is in their best interest to try to divest the license that they know that they’re not going to have much success moving forward.”
While the event isn’t specifically designed to connect new license holders with buyers, “what comes from those conversations is their own personal business,” she noted.
“We really are committed to meeting the challenge to make the industry diverse, and we want people to be successful,” she said. “But if they can’t, we certainly want to be able to provide them with enough resources and guidance on how to move forward.”
But some worry powerful pot firms could take advantage of those trying to offload licenses. Attorney Akele Parnell, who recently earned dispensary and craft cultivation permits, said he has no problem with other firms flipping licenses — “as long as it’s not predatory.”
“I don’t want people selling for way below market value,” he said.