Shaking Down The Cannabis Industry in Illinois?

According to the Chicago Tribune, hopeful cannabis firms in the state are being subjected to requests for “donations” if not ongoing revenue share as a way to influence their chances to win operating licenses in local municipalities.  

Elk Grove, a suburb of Chicago, for example, has required that cannabis companies operating within town premises fork over $75,000 to local non-profits and give a permanent 5% donation of profits to the town in perpetuity so long as they operate within municipal borders.

While not illegal, the practice is one that has raised eyebrows particularly in a state that has seen its share of contentious legal disputes if not politically connected individuals trying to trade influence for access to one of the prized and highly valuable state operating licenses.

This year across the country, the cost of obtaining a business licence has skyrocketed.  The average line of credit to open any kind of business in the state legal industry (in any state) now is estimated to be about $1,000,000 and many states require as much as $500,000 in liquid assets in addition to that.

A Republican gubernatorial candidate in Illinois has even suggested that the state skip current qualifying guidelines altogether and merely auction off all licenses to the highest bidders.

It is unclear at this time, however, whether this practice in Illinois will merely create a market where the operating costs are so high that it undermines the point of “legal” cannabis and puts the ball in the black market’s court.

Additionally, the issue of taxation is another place where this dilemma is rather contentious in every state where even medical cannabis is now legal.  Cannabis has the distinction now— under current state policy in every reform state— of being the only drug that is subjected to sales tax, even for medical users.

Given the much lower taxation structure however of the medical market, the tendency of states and state politicians to milk the vertical for state revenue in the form of fees and other ancillary add ons be one (short sighted) attempt to obtain similar revenue streams from the medical only marketplace.