June 20, 2019

Concerns Raised Over Details of Cultivation Licensing and Meeting Consumer Demand


Illinois Senate Bill 7 passed on Wednesday, May 29th. The bill would allow for adults 21 and over to possess, consume, and purchase certain amounts of cannabis for personal use. It also seeks to create a legally regulated system for the cultivation and sale of cannabis.

We have reported, in our Premium Weekly Report, that at least one stakeholder had expressed concerns about adequate supply in a new adult-use market. More recently, Jonathan Loiterman, an attorney licensed in both Illinois and Oregon, as well as an operator of licensed cultivation and processing facilities in the latter state, circulated a document stating that SB 7 is “tragically flawed.

Loiterman claims that SB 7 will provide an unfair advantage to the roughly 20 existing medical cannabis cultivation operations in Illinois and will ultimately allow them to control a vast majority of the state’s production capacity. Our editorial team noted that no new large-scale cultivation licenses were to be issued under Illinois’ legalization plan, but rather up to 40 “craft growers” would be licensed by July 2020, six months after adult-use sales are scheduled to begin, should the measure pass in its current form.

Under the current bill, existing medical cannabis cultivators would be able to expand to up to 100,000 square feet of canopy space. Meanwhile, SB 7 states that, “A craft grower may contain up to 5,000 square feet of canopy space on its premises for cultivating plants that are more than 5 inches tall.” As essentially all commercially grown cannabis plants other than seedlings and clones are at least five inches tall, the 5,000 square foot canopy allowance implicitly includes both vegetative and flowering plants. SB 7 does state that craft growers would be allowed to expand to up to 14,000 square feet of canopy for flowering plants under certain circumstances.

According to Loiterman’s evaluation of the bill, existing cultivation centers would control up to 2 million square feet of canopy, while all craft growers combined would encompass only up to 300,000 square feet of canopy. Loiterman states, “As a result, SB 7 guarantees about 85% of the total cannabis supply in Illinois would be controlled by about a half-dozen firms, without any possibility that overwhelming dominance could be challenged in the marketplace.”

Illinois’ Spot Index has already distinguished itself as one of the highest in the country this year. With adult-use sales scheduled to begin in January 2020 and no new cultivators to be licensed until July 2020, if SB 7 is passed, it appears quite possible that additional demand from general consumers will provide further upward pressure on wholesale prices as existing growers work to expand their operations.