Illinois Regulators Investigating Violations of Cannabis Stockpiling Rule

In a matter of a couple weeks, Illinois’ recreational cannabis consumers have all but depleted the state’s stock of cannabis products. The widespread disequilibrium between supply and demand has made it tough for dispensaries to serve customers. And some shops, Illinois regulators say, have started breaking the rules in order to put products on their shelves.

Since issuing a formal warning to Illinois dispensaries last week, regulators have begun investigating violations of rules against stockpiling cannabis and selling medical cannabis reserves to non-patients. The scope and extent of these violations is still unknown, but officials say persistent offenders could face fines and potentially, antitrust investigations.

Dispensaries Are Breaking the Rules to Source Products for Their Customers

Cannabis shops in Illinois are running out of weed. And that’s a problem, not just for eager recreational consumers, but for medical cannabis patients who depend on the products they need being available.

Illinois’ new cannabis law, which took effect January 1, mandates that dispensaries keep a 30-day supply of a full range of medical cannabis products on hand to sell to patients. To comply with this rule, several dispensaries had to close down as they replenished their stocks, or only sell to medical cannabis patients. But some stores, regulators said, have been dipping into their medical cannabis reserves to make products available for retail customers.

Regulators also said that some dispensaries are breaking another rule to deal with the supply shortage. They’re sourcing more than 40 percent of their products from a single cultivator.

The rule is an anti-stockpiling measure designed to prevent certain businesses from attempting to control the market by controlling supply. Illinois law does permit vertical integration in the cannabis industry, meaning a cannabis company can own and operate both dispensary sites and cultivation sites.

During a supply shortage, such companies have a major advantage over retailers who source products from other companies’ cultivators. No wonder several Illinois cannabis companies have already brought their concerns to the state attorney general, Kwame Raoul. Raould has the authority to open antitrust violations against cannabis firms that attempt to illegally control the market.

Violations Could Spark Antitrust Investigations

The rule against stores stockpiling more than 40 percent of their product from a single cultivator also aims to ensure consumer choice. By blocking cultivators from entering into exclusive agreements with dispensaries, stores necessarily have to stock a wider range of products and brands from different suppliers.

But in the face of a surge in demand for cannabis products, some dispensaries are violating the cannabis stockpiling rule. The Illinois Department of Financial and Professional Regulation sent a letter to dispensaries last Friday, stating that the agency knew of potential violations and would begin investigations into how widespread the issue is.

Despite referencing suspected offending dispensaries—the names of which officials declined to share—the letter is just an initial warning. Regulators are launching an investigation, but they’ve also given shops the chance to stop violating the stockpiling and medical supply rules. Dispensaries that continue to violate the rules, however, face fines and penalties up to $20,000.

“The department is currently investigating the scope and extent of those potential violations,” said deputy director of the state agency’s cannabis control section, Bret Bender.