Will Illinois’s Marijuana Legalization Plan Include a Monopoly?

In board games and in life, a monopoly is a great thing — for the tiny percentage of people who have control of the bank. For the rest of us, it’s a tedious bore, where the best you can hope for is an abusive relationship in which mediocre product is offered for a premium price.

From a purely capitalist perspective, it might be possible to justify or at least defend the power moves currently being made by Illinois medical marijuana growers.

Do Not Pass Go

As the Chicago Tribune reported, the state’s cannabis cultivators are celebrating their newfound freedom to spend money politically by lobbying Illinois lawmakers and the governor to secure a near-monopoly on supplying cannabis for a future recreational market.

Existing growers have hired a former state Senator, Pam Althoff, as the executive director of a new Medical Cannabis Alliance of Illinois, which put out a statement declaring that they “support no new cultivation licenses.”

New Illinois Gov. J.B. Pritzker campaigned hard last year on the promise to legalize recreational marijuana in the state, which has a sizable and growing medical marijuana industry — bolstered in no small part by a recent allowance for anyone with a prescription for opiate-based painkillers to also access medical cannabis.

Pritzker, at least, is literally banking on the legislature getting legalization done: the governor’s proposed budget plans on the state reaping $170 million from licensing fees, as the Belleville News-Democrat recently reported.

At the moment, it costs about $200,000 for a medical-marijuana cultivation permit, with a $25,000 non-refundable application fee. Once that $225,000 is plunked down, there’s a $100,000 annual renewal fee — plus, you know, the build-out and the labor costs required to actually grow cannabis. There are currently 22 cultivation centers across the state, one in each state police district, according to the newspaper.

A pair of Chicago-based state lawmakers who have been working on marijuana legislation for the past two years recently said that they plan to introduce a bill to legalize recreational marijuana within the next month or two.

Language has yet to be finalized and whatever is in the introductory bill may not be what makes it through the lawmaking process which, like most everything else, is often susceptible to the influence of enormous amounts of money.

And money is exactly what’s already at play in Illinois’s medical-marijuana industry, with even more cash at stake should recreational marijuana become legally available in Chicago, America’s Second City and the Midwest’s major population center.

Game Over?

The prospect of the state’s limited medical growers receiving state approval to grow all of Illinois’s cannabis prompted Mark De Souza, CEO of Revolution Enterprises, a state-licensed cultivation operation that bills itself as the largest cultivator in the state, to pen an op-ed in Crain’s Chicago, the esteemed business journal, arguing against such a scenario.

“I oppose a limit on new licenses for commercial production,” he wrote. “I cannot and do not speak for other cannabis firms, but I crave competition, because competition will ultimately lead to a healthier, more robust industry — one that generates more tax revenue and jobs for Illinois.”

Deploying an argument that seems to hold more water given the results in other states (the main reasoning why California, for example, has only reaped about half what it expected to from marijuana taxes is a thriving underground market sustained by high prices on the regulated market), De Souza argued that a monopoly situation would lead to a “new and unregulated market.”

“The whole point of ending pot prohibition is to bring this market out of the shadows,” he wrote. “If the new market immediately becomes the Wild West, it will not succeed.”

Other states with limited cultivation capacities have seen demand far outstrip supply. This script has played out in Washington a few years ago, in Nevada in the summer of 2017 and again in Pennsylvania. Canada, too, saw some empty shelves after limiting or at least strictly regulating the supply-side of the marijuana industry.

Will Illinois learn from those lessons, or will it decide that money talks most convincingly? De Souza, at least, is offering an argument that is compelling because of both its reasoning and its source. Revolution would stand to benefit with a monopoly, but at a greater cost that could severely hurt marijuana legalization’s purpose.

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