Sozo Illinois Inc., which applied for dispensary licenses, sued in federal court, claiming a provision in the application that gives Illinois residents five bonus points unfairly discriminates against the company and violates state and federal laws guaranteeing due process and equal protection. The company also said it’s being unfairly excluded from one of three lotteries that will be used to distribute licenses, taking aim at a legislative fix to one of the most controversial provisions of the licensing process.
It’s just the latest twist in a process to add new marijuana businesses that’s taken longer than expected. The original law aimed to diversify the white male ownership of the newly legal weed industry by giving licenses to “social-equity” applicants from neighborhoods hit hard by poverty, crime, violence and imprisonment related to the war on drugs.
One of the ways to achieve social-equity status, which carried a 20 percent bonus in application scoring, was for an applicant to hire 10 people who either lived in areas disproportionately impacted by the war on drugs or those who had been arrested or jailed for marijuana possession that was no longer a crime. It was derided as the “slave-master clause.”
The process to issue the first 75 licenses for new marijuana shops has been under fire since it resulted in a tie between 21 applicants that achieved perfect scores, some of which appeared to have tenuous connections to communities the law was designed to help. The Legislature decided that applicants that didn’t win the first 75 licenses would be eligible for two lotteries for 110 more licenses to be distributed this year. Applicants such as Sozo, which achieved social-equity status through employment, were excluded from the second of the two lotteries.
“This is fundamentally unfair and damages applicants like Sozo,” the lawuit says.
Sozo is likely, however, to qualify for one of the three lotteries.
The company is based in Warren, Mich., where it has marijuana cultivation and retail operations. It’s led by Aaron Rasty, a former Chicago entrepreneur who launched Bluestar Energy Services, an independent electricity supplier with 23,000 customers that was acquired in 2012 by American Electric Power for an undisclosed price.
The company claims in its lawsuit that it spent more than $350,000 employing the workers in Illinois to maintain its social-equity status. That demonstrates the lengths to which applicants are willing to go to win dispensary licenses, which can be worth $10 million or more. The lawsuit, one of several that have been filed, shows that companies are willing to spend money to protect those investments.