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All Cannabis Is Local: Illinois and Municipal ‘Social Use Permits’

What role do municipalities play in regulating or controlling state legalized sales, growing and consumption? Perhaps, a very large, gatekeeper role. In many states, California and Massachusetts are just two examples, municipalities have the discretion to deny retail cannabis sales outright within their borders. They also have the power to add layers of regulation, including fees, when they do permit sales within their respective jurisdictions. And what about consumption in public businesses such as cannabis pubs and lounges? This article addresses the situation in Illinois and the use of municipal “social use permits.”

Background

A novel use case for fledgling cannabis entrepreneurs finds itself tucked away in the General Provisions found under Article 55 of the new Illinois Cannabis Regulation and Tax Act (the Act), 410 ILCS 705/55-25. The subsection permits not only “cannabis business establishments” to have on-site consumption, but also any other entity so authorized by the local government.” The Act defines “cannabis business establishments” under its Definitions article as any licensed cannabis business. The Act goes even further and provides additional rights to the local governments to expand on-site cannabis use beyond cannabis business establishments, like dispensaries, into any entity so authorized.

The Role of Local Government

Local governments wield lots of power when it comes to cannabis laws, despite the states setting the statutory framework. Most states allow municipalities to set the number of cannabis licenses in their jurisdiction. While Illinois has a state-mandated ceiling to its cannabis licenses, a municipality may set “reasonable zoning ordinances” to regulate cannabis business establishments. 410 ILCS 705/55-25(2). A local government can ban cannabis business establishments and make reasonable regulations regarding their numbers, distances from locations deemed sensitive by the municipality, and other time, place and manner regulations.

Reasonableness is always a fact intensive assessment based upon the circumstances, but it also provides the local governments with new and creative ways to foster cannabis related businesses and generate revenue. The classic analog to the cannabis social use space is a bar that serves liquor. Often, municipalities do not have just one regulation for alcohol. Review of one Illinois municipality revealed ordinances resulted in liquor licenses of Class A through L, and another seven sub-classes. Cannabis presents equally many variations for public use licensure, and perhaps more.

Municipalities could permit cannabis lounges where people may consume inhaled cannabis products alone because of the safety profile the accompanies the short duration of the effects of inhaling cannabis, but bar ingestion. Or the municipality could have more stringent, phrased as reasonable, regulations related to the public consumption of edible cannabis products to provide for additional safe-guards in dosing. Certain pitfalls may result with people that are not used to the different onset and duration of edible as opposed to inhaled cannabis. Educating the consumer and general public remains key in the move toward legalization and sensible regulation.

Social Use and Enjoyment

Additionally, the Act does not expressly provide for cannabis supper clubs where chefs prepare fresh cannabis infused dishes for guests. Perhaps the reasonable on-site consumption regulations set by the municipality provide a means to accomplish those ends. Granted, a dispensary alone cannot create the infused dishes. Plus, the rules for the Act are not due for several months. Time will tell on social use of cannabis in Illinois depending on what the municipal governments decide to do with cannabis in their communities.

As the liquor ordinances and their numerous classifications as a guidepost for what is possible with social use of cannabis, and the broad usage of the term “authorized entity” under the Act for those that may have on-site consumption, the sky’s the limit. Public consumption has been prohibited, but perhaps private events, like a music festival, may be able to qualify for a special type of cannabis license. Perhaps a local massage therapist could begin using cannabis topicals on patients. A Yoga class may have an event with the right joint pairing for your asanas. Bakeries that specialize in space cakes and hold both cannabis infuser and dispensary licenses may one day be real.

Municipal social use permits also means more revenue for the community. Typically, retailers pay the excise taxes for the beer and liquor they sell. The Act provided tax revenue for both the state and the municipalities from the sale of cannabis at the dispensaries. Perhaps the municipality could charge some excise tax from the sale of infused foods at an on-site restaurant, assuming the Act and its forthcoming rules so allow that type of infused food. What about the massage therapist that wants to use cannabis to massage sore muscles?  It must be a service because only dispensaries may sell pre-packaged cannabis. However, the municipality can charge a permit fee for such use and perhaps regulate the amount of THC in the pain reliever. In the future, on-site consumption lounges will bring the municipality additional permitting revenue and sales tax.

Conclusion and Implications

Those citizens who rejoice in their state’s legalization of cannabis perhaps celebrate too soon—depending on where in the state they reside. Municipalities often play a crucial role as gatekeepers and regulators of retail sales. Maybe, one day the taxes will be the most expensive ingredient in cannabis, just like for beer before it. That day may be here sooner than people think with creative social use licensing set by the municipal governments. Of course, confusion over the new Illinois law is fueling calls for a trailer bill in the veto session at the end of the year to help resolve certain technicalities. We will have to wait and see what that entails.

(Thomas Howard)