How to Open a Dispensary in Illinois

It doesn’t matter which region of the country; opening a new cannabis market is a confusing and demanding process. For starters, each U.S. state needs to form a new regulatory agency literally out of the dust. After that, these brand-new agencies must figure out a way to award cannabis business licenses fairly and equitably. 

Whether with lawsuits or delayed deadlines, Illinois has seen its share of challenges in launching an adult-use cannabis market. The COVID-19 pandemic struck just months after Illinois started selling recreational cannabis in 2020 only added to the confusion of the situation. 

Controversy aside, the state of Illinois has worked tirelessly to expand its adult-use market and give people a chance to get business licenses that might not succeed in other states. For those hoping to open a dispensary in Illinois, the market shows serious growth potential, yet it doesn’t appear any new licenses will be issued soon.

As seen in many other U.S. markets, Illinois legalized medical marijuana before legalizing adult-use cannabis. However, Illinois is unique because it simply grandfathered medical dispensaries into the adult-use market when it launched in 2020. 

As of late summer 2021, 110 cannabis dispensaries are operating in Illinois - each of these locations sells cannabis to medical and adult consumers.

Illinois first legalized medical marijuana in 2013 with the Compassionate Use of Medical Cannabis Pilot Program Act. With this historic legislation, Illinois devised the regulatory infrastructure that would eventually be adopted in the adult-use market. With a system in place, the first medical cannabis dispensaries in Illinois opened in 2015. 

Today, medical marijuana patients in Illinois enjoy many benefits not seen by adult-use customers. Not only do they get cheaper cannabis products, but medical patients also have priority access over recreational consumers. Finally, medical patients are allowed to grow up to 5 plants at home.

Recreational cannabis was legalized in Illinois in the summer of 2019 with The Cannabis Regulation and Tax Act. The first legal adult-use sales of cannabis took place on January 1, 2020. 

While Illinois promised another round of dispensary license applications when they legalized adult-use cannabis, things ground to a halt with COVID-19. As such, all adult-use cannabis sold in Illinois to date has been through medical dispensaries that have been around since the beginning.

The biggest news to hit the Illinois cannabis industry in a long time has to do with new licensing opportunities for adult-use dispensaries. After many delays with lawsuits and COVID-19, Illinois announced that it would issue new dispensary licenses in three application rounds during summer 2021. 

In the new system, applicants must meet a minimum number of points to enter a lottery. Once in the lottery, applicants are chosen at random to be awarded adult-use dispensary licenses. The new round of adult-use dispensary licensing was set to issue 185 new licenses. 

The first round of lotteries took place on July 29, 2021. In this lottery, Illinois issued 55 new dispensary licenses as part of an adult-use market expansion. 

The second round of lotteries took place on August 5, 2021. According to MJ Biz Daily, this lottery was focused on “social equity applicants who live in an area impacted by the war on drugs or have past arrests for marijuana-related offenses.” This round also issued 55 new licenses. 

Finally, the third round of lotteries occurred on August 19, 2021. This application period was for the 75 licenses supposed to be issued at the outset of the Illinois adult-use market in early 2020.

One of the most standout features of Illinois' new adult-use application process is its social equity program. Perhaps more than any other state, Illinois went the extra mile to ensure social equity applicants stand a good chance at acquiring a license. 

The new Illinois adult-use dispensary application process underwent some notable changes in the summer of 2021. To enter the first round of lotteries for “social equity licenses,” applicants were initially required to get a perfect score on their applications. With this rule, only 21 companies were eligible for licenses. A change in qualifying criteria allowed applications with 85% scores to enter the lottery. This ruling pushed the number of qualified applicants to enter the lottery from 21 to 626. 

Illinois took its social equity platform even further by setting aside the second round of 55 licenses strictly for social equity applicants. Unlike other qualifying social equity criteria, this round of lotteries did not recognize companies that only employ people from impoverished neighborhoods. Instead, to qualify for this lottery, at least 51% of the business was owned by people who met qualifying social equity criteria. 

When adult-use cannabis was legalized in 2019, the law gave social equity applicants a “20% scoring bonus.” These applicants were represented in the 3rd round of licensing that occurred on August 19, 2021.

Due to controversy surrounding the point system for dispensary license applications, Illinois joined Ohio in creating a hybrid point/lottery system process. From the early days of medical cannabis in Illinois to the 2021 licensing rounds, the Illinois Department of Financial and Professional Regulation (IDFPR) has been in charge of awarding cannabis business licenses. 

For the initial licensing rounds in Illinois, the IDFPR enacted a point system to qualify applicants. In the simplest terms, the point system helps regulatory bodies understand what businesses are best suited for the new market. Some of the most prominent scoring criteria of the point system include ownership, finances, compliance, marketing, security, and location.

As seen with other states, the Illinois cannabis industry has been plagued by lawsuits related to the license application process. To remove some controversy from the situation, Illinois opted to add a lottery system to the existing point system. 

All adult-use dispensary license applications in Illinois will be scored according to the point system. Illinois will add them to a lottery rather than awarding licenses to the applicants with the highest scores. The final winners are then chosen at random in the lottery.

While the Illinois market has seen its fair of challenges, it also presents abundant opportunities for dispensary license winners. Product shortages have plagued the adult-use market in Illinois since the beginning, leaving ample room for growth. With this notion in mind, hopeful entrepreneurs should continue to pay careful attention to Illinois. In all likelihood, they will be issuing more licenses in the next few years. 

While we again wait to see how things shape up in Illinois, motivated parties can always entertain the idea of purchasing a dispensary license from another business. It is perfectly legal for dispensary owners to sell their licenses in Illinois. Beyond that, we recommend you keep an eye on the IDFPR website for new market developments.

As a leading cannabis consulting company, MOST is constantly paying attention to industry news and developments. With up-to-date knowledge on such a volatile business, we can give the appropriate guidance in entering new markets.

Contact Us today for questions about opening a cannabis dispensary.