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Legal Doesn't Mean Easy: Cannabis Dispensaries Still Face Challenging Landscape

Illinois legalized adult-use cannabis nearly nine months ago, but making it legal didn’t transform weed into a normal product. Retailers and growers are still subject to an array of regulations and requirements no other business has to deal with, and as state officials learn more about how to make legalized cannabis work, providers need to be prepared for constant changes.

“It’s not just COVID that threw us for a loop,” Green Thumb Industries Senior Vice President Dina Rollman said last week during Bisnow’s Chicago Deep Dish: Cannabis Real Estate webinar.    

Windy City Cannabis, 923 West Weed St., Chicago

“Every day, regulations are changing and changing quickly,” Cresco Labs Executive Vice President John Sullivan added.

Both Cresco and Green Thumb are publicly traded firms that operate cannabis retail dispensaries and growing operations. 

This week, Illinois officials said they were going to let some recent unsuccessful adult-use applicants make changes and resubmit their applications, according to Marijuana Business Daily. Officials had announced finalists this month for 75 “social equity” licenses, ones meant to bring in groups harmed by the so-called war on drugs, but some applicants said they were not allowed to make corrections before submitting paperwork, while others were.

Rollman and Sullivan said making it through such uncertainty requires a lot of lawyers, accountants, real estate experts and many other professionals who can keep abreast of and navigate through the thickets of regulations.

“Know what you don’t know,” Freeborn & Peters partner Anthony Zeoli said. “Being in an industry that is emerging gives us the ability to be unique and help with these creative problems. That’s why I like it.”  

“It’s all-consuming, the cannabis industry, to say the least,” Sullivan said. “So it’s important to be well-capitalized.”

MBRE Executive Vice President David Graff manages construction of marijuana cultivation and processing facilities in several states and agreed it is unlike traditional commercial real estate sectors.

Clockwise from top left: MBRE Executive Vice President David Graff, Freeborn & Peters partner Anthony Zeoli, Green Thumb Industries Senior Vice President, Government and Regulatory Affairs Dina Rollman and Cresco Labs Executive Vice President John Sullivan.

“Finding teams in a relatively new industry is tricky,” he said. “You want to find some people who have skills in similar-type industries. As you’re looking at sites, getting the due diligence upfront and getting real estate folks involved in that site-selection process and even the licensing process, I think, is key to success.”   

Rollman added that the real struggle is on the retail side. State officials are leery of stirring up community opposition to cannabis operations, but so far, starting cultivation sites has aroused less local pushback than opening up dispensaries.

“It wouldn’t surprise me if people in a given community where Cresco or Green Thumb or whoever are operating a cultivation facility are not even aware that there is one in their town,” she said.

But opening a dispensary means conforming to a host of municipal rules, as well as winning local support. Cities and towns in Illinois typically require stringent security measures, and zoning regulations close off some neighborhoods and limit what sort of buildings can qualify for cannabis sales.

“It feels sometimes like getting your Ph.D. in calculus,” she said. “There is no road map because no one has ever done this before. It is a multilevel campaign that is almost never easy.”

Sullivan added that this dynamic could soon shift. The state is getting set to award dozens of craft grower licenses, and many growers plan to establish these smaller-scale operations in commercial districts rather than the rural areas favored by large growers like Cresco and Green Thumb.

“A lot of these issues we already had with dispensaries, busloads of people coming out to protest, you’re going to see that now on the cultivation side.”