Over the last half-decade, millions of Americans have seen their marijuana-related convictions expunged by state courts, according to a new report from the National Organization for the Reform of Marijuana Laws (NORML).

The findings highlight a byproduct of the legalization of recreational cannabis for adults, as states that have ended prohibition have also included a path toward pardons and expungements for those who have previously been busted for marijuana. Additionally, President Joe Biden issued pardons in 2022 to individuals with low-level federal marijuana convictions.

NORML’s report, based on publicly available information, revealed that “state and local courts have taken action on an estimated 2.3 million marijuana-related cases” since 2018. According to the report, the states “that have been most active in providing relief to those with past convictions include California, Illinois, Missouri, New Jersey, New York, and Virginia –– all states that have legalized recreational cannabis for adults. 

NORML said that it “estimates that state and local police have made more than 29 million marijuana-related arrests since 1965,” and that among those who were arrested, “some 90 percent were charged with low-level cannabis possession offenses.”

“Hundreds of thousands of Americans unduly carry the burden and stigma of a past conviction for behavior that most Americans, and a growing number of states, no longer consider to be a crime,” NORML’s Deputy Director Paul Armentano said in a statement on the report. “Our sense of justice and our principles of fairness demand that public officials and the courts move swiftly to right the past wrongs of cannabis prohibition and criminalization.”

NORML’s report details a number of examples of state governors and local officials issuing pardons for low-level pot convictions, including in Illinois, where Democratic Gov. J.B. Pritzker issued 11,017 pardons to those with low-level marijuana convictions in 2019.

In the report, NORML also breaks down the differences between pardons and expungements.

“While pardons provide a level of forgiveness for past crimes, these are not the same as expungements – which seal past convictions from public view. To facilitate the latter, lawmakers in many states in recent years have enacted laws providing explicit pathways to expunge the records of those with low-level marijuana convictions. In some cases, those eligible for expungement relief are not required to take any action. Instead, state officials automatically review past records and notify those who meet the state’s criteria for expungement. In other cases, state law requires those seeking to have their records expunged to petition the courts in order to have their records reviewed and vacated,” the report said. “Predictably, states that have automated the review and expungement process have seen a massive uptick in the processing of marijuana-related expungements.”

Despite all the sweeping reforms at the state and local level, cannabis remains prohibited under federal law. But Biden’s actions were significant, affecting around 6,500 United States citizens.

“As I often said during my campaign for President, no one should be in jail just for using or possessing marijuana.  Sending people to prison for possessing marijuana has upended too many lives and incarcerated people for conduct that many states no longer prohibit. Criminal records for marijuana possession have also imposed needless barriers to employment, housing, and educational opportunities.  And while white and Black and brown people use marijuana at similar rates, Black and brown people have been arrested, prosecuted, and convicted at disproportionate rates,” Biden said in 2022 after issuing the pardons. 

In addition to the pardons, Biden also urged “all Governors to do the same with regard to state offenses.”  

“Just as no one should be in a Federal prison solely due to the possession of marijuana, no one should be in a local jail or state prison for that reason, either,” the president said, adding that he had asked “the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”

“Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act, the classification meant for the most dangerous substances.  This is the same schedule as for heroin and LSD, and even higher than the classification of fentanyl and methamphetamine – the drugs that are driving our overdose epidemic,” he said.

A year later, President Biden issued a second pardon proclamation that “will pardon additional offenses of simple possession and use of marijuana under federal and D.C. law.” 

“Criminal records for marijuana use and possession have imposed needless barriers to employment, housing, and educational opportunities. Too many lives have been upended because of our failed approach to marijuana.  It’s time that we right these wrongs,” Biden said in 2023. “Just as no one should be in a federal prison solely due to the use or possession of marijuana, no one should be in a local jail or state prison for that reason, either. That’s why I continue to urge Governors to do the same with regard to state offenses and applaud those who have since taken action.”

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If you’re facing sticker shock in Illinois, you’re not alone and your suspicions have been confirmed: Illinois ranked among the states with the most expensive retail cannabis markets in America, according to a new report by Headset.

During the first six months of 2023, Illinois sold over $950 million in total cannabis sales, making Illinois home to the third largest cannabis market in the U.S., with only California and Michigan with larger markets. Population-wise, Illinois is the sixth largest state in the country, however a limited number of brands pose several challenges to the state.

The report, “A Deep Dive into the Illinois Cannabis Market,” is designed to examine the state’s cannabis market with analytical data on thousands of products to determine how it compares to other states. Headset focused on a few key areas, including sales growth, product category popularity, pricing, basket analysis, and demographics.

Since Illinois is home to only 118 brands, the state is home to high market consolidation with 68% of sales coming from only 10 top brands. Illinois will soon be issuing 55 new retailer licenses to expand access to its domestic market. Currently, the state is home to 120 licensed retailers—very low compared to other states.

Headset reports that the category of pre-rolls—typically one of the fastest-growing categories—is the most underrepresented category in this market, clocking in at over four percentage points lower than the national average. “The category represents an area of opportunity in Illinois as Pre-Rolls in the state have seen sales increase 5.6% in the last year,” Headset reports. “In Illinois, 27% of total sales come from vertically integrated products. This is the third highest of any currently tracked state behind only Colorado (28%) and Massachusetts (44%).

“Prices in Illinois are among the highest in the country,” Headset reports. “The average item price in Illinois is currently 89% higher than the rest of the US market. Consumers over the age of 41 typically account for 36.4% of sales, however, in Illinois they capture 42.1% of total sales.”

The data was collected from real-time sales reporting by participating cannabis retailers via their point-of-sale systems. Headset stipulates, however, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or human error.

State leaders, however, are taking action to fix some of the problems that are evident in the Illinois market. For example, Illinois is the next state to allow licensed cannabis businesses to take tax deductions under Section 280E.

Illinois Gov. J.B. Pritzker recently signed a budget bill on June 7 that includes provisions for the cannabis industry, specifically regarding establishing funds dedicated for cannabis businesses and allowing them to take tax deductions.

The Fiscal Year 2024 State Budget bill includes the Cannabis Regulation and Tax Act which addresses issues with cannabis businesses not being allowed to make tax deductions under Section 280E.

The budget bill also includes a provision that creates the Cannabis Business Development Fund that is aimed at helping cannabis business owners in Illinois, a fund would “provide low-interest rate loans to Qualified Social Equity Applicants” to pay for expenses such as “starting and operating” a cannabis business (and compensate the Department of Commerce and Economic Opportunity for costs related to those low-interest loans or grants). 

The fund would also pay for outreach “targeted to attract and support” social equity applicants, as well as research involving “minorities, women, veterans, or people with disabilities in the cannabis industry.” 

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Illinois Gov. J.B. Pritzker recently signed a budget bill on June 7 that includes provisions for the cannabis industry, specifically regarding establishing funds dedicated for cannabis businesses and allowing them to take tax deductions.

The Fiscal Year 2024 State Budget bill includes the Cannabis Regulation and Tax Act which addresses issues with cannabis businesses not being allowed to make tax deductions under Section 280E. Through the newly signed state budget, any licensed cannabis business will be permitted to take tax deductions on their business for “…an amount equal to the deductions that were disallowed under Section 280E of the Internal Revenue Code for the taxable year…” This new provision applies to taxable years from Jan. 1, 2023 and onward.

According to the National Cannabis Industry Association, Section 280E originated from a 1981 court case involving a cocaine trafficker who “asserted his right under federal tax law to deduct ordinary business expenses. By the following year, Section 280E was created to prevent anyone from making tax deductions if their trade involves controlled substances.

An Internal Revenue Service article written by Small Business/Self-Employed Examination Commissioner De Lon Harris in September 2021 reviewed the challenges that 280E poses for cannabis businesses in Illinois and elsewhere. “While IRS Code Section 280E is clear that all the deductions and credits aren’t allowed for an illegal business, there’s a caveat: Marijuana business owners can deduct their cost of goods sold, which is basically the cost of their inventory,” Harris wrote. “What isn’t deductible are the normal overhead expenses, such as advertising expenses, wages and salaries, and travel expenses, to name a few.”

Harris included tips such as knowing and trusting investors, filing and paying taxes on time, reporting cash transactions, and keeping accurate records, as ways to stay compliant. Later in December 2021, Harris participated in a webinar further explaining how to take advantage of the IRS as a resource to navigate the law. “It’s really our mission at the IRS, not just with marijuana and cannabis industries, but with all taxpayers, to promote voluntary compliance,” Harris said. “And that can happen in different ways. When most people think of the IRS, they think of examinations or audits and they think that’s the only way that we interact or try to promote voluntary compliance with taxpayers, but we do our fair share of outreach and education as well.”

The Fiscal Year 2024 State Budget bill also includes a provision that creates the Cannabis Business Development Fund that is aimed at helping cannabis business owners in Illinois. The fund would “provide low-interest rate loans to Qualified Social Equity Applicants” to pay for expenses such as “starting and operating” a cannabis business (and compensate the Department of Commerce and Economic Opportunity for costs related to those low-interest loans or grants). The fund would also pay for outreach “targeted to attract and support” social equity applicants, as well as research involving “minorities, women, veterans, or people with disabilities in the cannabis industry.” The provision ends by adding that by July 1, 2023, the State Controller will transfer $40 million from the Compassionate Use of Medical Cannabis Fund to the Cannabis Business Development Fund.

Illinois isn’t the only state attempting to enact legislation to assist cannabis businesses with their tax situations. On May 8, New Jersey Gov. Phil Murphy approved legislation to “decouple state tax provisions from federal prohibition on cannabis business deductions.” On June 12, Connecticut Gov. Ned Lamont also signed off on a biennial state budget that included provisions for tax deductions under 280E. 

The New York Senate also recently approved a bill to provide tax relief to cannabis businesses. “This modification to income is appropriate because, while the expenses of cannabis-related business cannot be deducted for federal purposes, New York law permits and encourages these businesses akin to any other legitimate business occurring in the State,” states a bill memo. “The City’s business taxes should similarly encourage these business activities.”

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Regulators in Illinois have extended the operational deadline for some craft cannabis growers in the state. 

The state’s Department of Agriculture said that its administrative rules “allow for craft growers to receive an operational extension for good cause shown, at the Department’s discretion,” and as such, it “has granted an operational extension to all craft grower license holders due to a number of factors, including ongoing Covid-19 impacts and supply chain issues.”

Under the state’s adult-use cannabis program, a “craft grower license allows the holder to cultivate, dry, cure and package cannabis,” according to Illinois Cannabiz Attorneys, which offers a primer on the license:

“To apply for this license, one must submit a completed application to the Department of Agriculture. The amount of cannabis a license holder can grow is limited by square footage. A craft grower may have up to 5,000 square feet of canopy space for marijuana plants in the flowering stage. It should be noted that this space only includes the space occupied by the plants and does not include any aisles or walkways in between the plants. This amount may be increased over time in increments of 3,000 square feet based on the department’s determination of market need, capacity, and the license holder’s history of compliance. The largest space that will be allowed by the Department will be 14,000 square feet for plants in the flowering stage.”

The Department of Agriculture said that it had “previously authorized an operational deadline extension for 2021 Craft Growers which required them to become operational by March 1, 2023,” but that it “is now authorizing an additional extension applicable to all 2021 Craft Growers, extending their operational deadline to February 1, 2024.”

Legal adult-use cannabis sales took effect in Illinois in 2020, the result of a bill signed by Democratic Gov. J.B. Pritzker the previous year.

“As the first state in the nation to fully legalize adult-use cannabis through the legislative process, Illinois exemplifies the best of democracy: a bipartisan and deep commitment to better the lives of all of our people,” Pritzker said at the time. “Legalizing adult-use cannabis brings an important and overdue change to our state, and it’s the right thing to do. This legislation will clear the cannabis-related records of nonviolent offenders through an efficient combination of automatic expungement, gubernatorial pardon and individual court action. I’m so proud that our state is leading with equity and justice in its approach to cannabis legalization and its regulatory framework. Because of the work of the people here today and so many more all across our state, Illinois is moving forward with empathy and hope.”

The state hasn’t looked back ever since. In his “state of the state” address last month, Pritzker said that marijuana legalization “has created more than 30,000 jobs since 2020, and Illinois is home to the country’s most diverse cannabis industry and some of the largest companies.” 

In January, Pritzker’s administration touted a record-setting year for cannabis sales in 2022, saying that “adult use cannabis dispensaries sold $1,552,324,820.37 worth of product, an increase of more than 12% from 2021 and 131% from 2020, the first year cannabis sales were first legally allowed in Illinois.”

“When I signed the Cannabis Regulation and Tax Act into law in 2019, we set out on an ambitious goal: to create the most equitable and economically prosperous cannabis industry in the nation. Our data from 2022 shows that we are well on our way towards making that idea a reality,” Pritzker said in a statement in January. “Not only did we break our previous sales record by more than 12% with a total of more than $1.5 billion, we also saw the first of our social equity adult use cannabis dispensaries open their doors for business—paving the way for an even stronger 2023.”

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The Illinois Cannabis Regulation Oversight Office (CROO) announced on Feb. 7 that it launched its Cannabis Disparity and Availability Study, which tasks a contract group to find examples of discrimination within the local cannabis industry.

According to CROO, the study “will collect and analyze data and report on whether discrimination exists in the Illinois cannabis industry,” CROO states on its website. “If there is a finding that discrimination exists, the Disparity Study will evaluate the impact of the discrimination on the State and its residents regarding entering and participating in the State’s cannabis industry. The Disparity Study will include recommendations for reducing or eliminating any identified barriers to entry.“

The study will examine laws and court cases that involve cannabis and cannabis and disparity studies, conduct interviews and create focus groups for public input, and compile data in relation to the state’s cannabis application process and business information.

A final report is required to be sent to the General Assembly and governor within 12 months, including any “potential remedies” to amend current cannabis regulation. “This effort is a vital assessment of the state’s cannabis social equity licensing system,” said Acting CROO Officer Erin Johnson. “We look forward to seeing a final report that truly incorporates the voices of Illinois social equity applicants and our new cannabis businesses.”

This comes nearly one year since the state issued a request to find someone to conduct the Disparity Study in Feb. 2022. This led to the hiring of the Nerevu Group, which is a minority- and women-owned contractor group based throughout Illinois, as well as some out-of-state locations.

“Along with our partners, Nerevu is honored to support CROO, IDFPR and IDOA in building an even more inclusive and equitable cannabis industry,” said Nerevu Group Founder and President Reuben Cummings. “This study is essential in identifying potential disparities and suitable remedies. We are excited to initiate this project and look forward to connecting with the greater cannabis community.”

Legal adult-use cannabis sales began in 2020, and in July 2022, Gov. J.B. Pritzker announced that 149 condition state licenses would be issued and available for social equity applicants. “Illinois is leading the way in addressing the War on Drugs as no state has before, and dispensary ownership that reflects our state’s diversity is a product of that commitment,” said Pritzker. “These licenses represent a significant step toward accountability for the decades of injustice preceding cannabis legalization. Illinois will continue to deliver on the promises of putting equity at the forefront of this process.”

Just a few months later, two of the state’s first social equity cannabis dispensaries, Ivy Hall Damen and Green Rose Dispensary, opened in November 2022 in Chicago.

According to Nigel Dandridge, the co-founder of Ivy Hall Damen, it’s taken a long time for his business to open up. “We’ve been working to get a seat at the table for a while now, and we’re finally able to do that,” said Dandridge. “When this industry first opened up, we didn’t see anyone in our community benefiting, or even being able to participate. So it was kind of hypocritical. I think it’s important that we can show you what we’re doing. We want everyone to benefit. Our staff’s been working hard, and we’re just excited to share it with everyone.”

Falling in line with other states in the U.S., Illinois Rep. La Shawn Ford recently introduced House Bill 1 to legalize psychedelics in January. Ford’s bill would allow residents 18 years and older to seek out supervised psychedelic therapy. “I want to be clear that this is a health measure. My proposal does not allow retail sales of psilocybin outside of a regulated therapeutic setting and ensures that medicines purchased for therapeutic use at a service center must be used under medical supervision, and cannot be taken home,” Ford said. “Only licensed facilitators will be allowed to provide treatment at closely regulated and licensed healing centers, approved health care facilities, in hospice, or at a pre-approved patient residence.”

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