Craft cannabis growers in Illinois try again to overcome industry opposition to expansion

But large cannabis companies and some lawmakers suddenly pushed to include a ban on hemp-derived products like delta-8 THC. That controversial measure blew up any agreement on the all-in-one “omnibus” bill.

The Cannabis Business Association of Illinois, which represents most of the existing industry and large growers, instead got the tax breaks it wanted approved, while the small business bill failed.

The Cannabis Equity Illinois Coalition, which was pushing for the legislation, issued statement saying, “Our lawmakers failed us by not advancing the cannabis omnibus.”

“All they really wanted was to kill the omnibus bill and slow down the growth of social equity,” state Rep. La Shawn Ford said.

Lawmakers who say they support diversity in the industry have a second chance to approve the measure in the fall veto session, which resumes Tuesday.

The key proposed change would increase the size of the growing area allowed for craft cannabis growers from 5,000 to 14,000 square feet. That expansion would help new business owners, who’ve been unable to open due to lack of funds, get financing to open their businesses.

New entrants into Illinois’ legal cannabis industry have had state law stacked against them from the beginning. A small group of 19 existing full-size growers in the state like Cresco, PharmaCann and Verano Holdings are allowed to grow more than 200,000 square feet, dwarfing the craft growers.

Gov. J.B Pritzker and legislative leaders repeatedly have professed support for new minority entrepreneurs, but little legislation has passed in their favor in nearly two years, while only a handful of new businesses have opened.

Former state Rep. and current McHenry County Board member Pam Althoff retired as spokeswoman for the Cannabis Business Alliance in May, just after the group got lawmakers’ approval to make state business tax deductions for marijuana, which are prohibited under federal tax law.

Althoff questioned the need for legislatively expanding the craft grow size, saying the Illinois Department of Agriculture could do so by its new proposal to change its regulations.

The proposed rule change would leave it up to the department to determine if expansion is necessary based on its interpretation of “market need,” including a business’ past sales. The growers see the issue as a matter of survival, saying they can’t get financing without being able to operate on a larger scale.

“The rule is far from acceptable to craft growers, so that’s a big disappointment if that’s how they want to push this forward,” said Scott Redman, founder of the Illinois Independent Craft Growers Association and attorney for Drecisco Farms, LLC, craft cultivators. The large cannabis companies are acting as the gatekeepers on the industry, he said.

As previously proposed, the omnibus legislation also would make permanent drive-thru and curbside sales for medical patients; allow people with prior criminal convictions to work in the industry; give licensees more time to open for business; allow investors to invest in dispensary licenses before they open; and create a lottery for licensed businesses to receive forgivable loans from the state cannabis fund.

For large growers, the bigger immediate competition comes from unregulated hemp products like delta-8 THC, which are derived from CBD that was made legal under the federal farm bill. Products like delta-8 THC can get users high like the delta-9 THC typically found in weed, but in Illinois they face none of the requirements for testing for contaminants and potency.

Seventeen states have banned delta-8, while another seven severely restrict it, according to CBD Oracle. Some delta-8 companies have asked for regulation to legitimize their business.

Ford has proposed testing and labeling products like Delta-8 and limiting their potency, likening it to the regulatory differences between beer and wine compared to spirits. But with only three days left in the legislative session this month, and other issues on the docket, it’s not clear whether lawmakers will act.

Some social equity license holders don’t support the all-in-one bill approach. Edie Moore, a founder of Illinois Minority Cannabis Business Owners Association who plans to open a Sway dispensary in Lakeview next year, called it a “gut punch” when the last proposal was defeated.

After repeated disappointments, she now would prefer to see evolving concerns addressed one bill at a time, every session. The omnibus bill, known as Senate Bill 1559, was 269 pages.

“We just don’t agree that the omnibus bill has been effective,” she said. “It’s too easy to take down everything.”

She’s also hopeful that working with the Cannabis Business Association’s new executive director, Tiffany Chappell Ingram, will be more productive. And she anticipates that the federal farm bill, which previously legalized hemp, will address hemp-derived cannabinoids like delta-8.

In response to Tribune questions about the omnibus bill, Chappell Ingram wrote: “Illinois’ cannabis industry is at an inflection point, and it is clear changes need to be made on a variety of regulatory fronts if the industry is to live up to its fullest potential, including reaching social equity goals at the center of the state’s adult-use law.

“While there were a few helpful fixes included in SB 1559, more work is needed to find comprehensive and effective solutions that benefit the diversity of Illinois’ cannabis businesses, patients and consumers. We remain committed to working in a collaborative and inclusive manner to implement reforms.”

One of the few craft growers that was able to raise equity financing to open this year is Cannect Wellness. Its founders expect to make their first harvest by the end of November, with products on dispensary shelves by the end of the year.

“Immediate expansion to 14,000 square feet, that’s the top priority,” co-founder and CEO Gabe Singal said. “It’s hard to raise money when it isn’t clear what size is going to be available.”

There is a provision in current law for craft growers to reach that size, in increments of 3,000 square feet, but the process may take years. One encouraging sign is that big cannabis companies and small new dispensaries alike want to buy their new small batch products, Singal said.

When marijuana became legal in Illinois in 2020, with requirements that only wealthy applicants could get a license, white investors took almost complete control of the market. To try to diversify the industry, Illinois lawmakers gave preference in new licenses to “social equity” applicants, defined as those with prior low-level cannabis offenses or those from areas with high rates of poverty or cannabis arrests.

A report by the Reason Foundation earlier this year found that states like Illinois are failing in such attempts to help those disproportionately arrested and incarcerated in the war on drugs.