Cannabis Dispensary Licensing

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7^th Circuit Court of Appeals

Case Name: Juan Finch, Jr. v. Mario Treto, Jr.

Case No.: 22-2050

Officials: Sykes, Chief Judge, and Ripple and Kirsch, Circuit Judges.

Focus: Cannabis Dispensary Licensing

In 2019, the Illinois Cannabis Regulation Act was enacted, legalizing the recreational use of cannabis and instituting a licensing system for cannabis dispensaries. The initial round of license applications concluded in 2020, and by mid-2021, the Department had issued 185 licenses through a lottery system. However, the issuance of these licenses was halted due to legal disputes in state courts.

In 2022, the Department introduced a new point-based system for a second batch of licenses, which strongly favored individuals who had long-standing residency in Illinois. The plaintiffs, who were not residents of Illinois but were interested in investing in cannabis dispensaries in the state, took legal action in March 2022. They challenged the residency requirements under the dormant Commerce Clause and sought a preliminary injunction to stop the issuance of the 2021 licenses and the ongoing process for the 2022 licenses.

Initially, the district court rejected their motion for a preliminary injunction, a decision that was subsequently upheld by the Seventh Circuit. This denial of the injunction allowed the Department to go ahead and issue the 2021 licenses, rendering much of the appeal moot. To the extent that it might still be possible to revoke these licenses, the judge considered various factors and concluded that the plaintiffs had delayed too long in challenging the residency requirements. Granting an injunction would have caused significant harm to those who had relied on the licensing process and would have disrupted the orderly completion of the initial licensing round.

At the time of the ruling, the Department had not finalized the criteria for the second group of licenses, making a challenge premature because the criteria could still be modified. Subsequently, the Department did finalize the 2022 rules and removed the provisions that had favored Illinois residents.

Ripeness doctrine prevents the premature adjudication of claims that are “premised on uncertain or contingent events. Here the judge was understandably unwilling to weigh in on a nonfinal licensing rule that was subject (and perhaps likely) to change before final adoption, especially when postponing judicial review would cause no hardship to the plaintiffs.

Dismissed in part and affirmed in part.

Decided 09/22/23

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