'Chicago Cartel' Cannabis Monopoly Violates Antitrust Act, Lawsuit Claims

CHICAGO — The market for legal marijuana in Illinois is monopolized by the "Chicago Cartel," according to a federal antitrust lawsuit filed Monday by a group called True Social Equity in Cannabis.

As a result, a pound of legal marijuana in 2022 sells for more than $4,000 in Illinois, compared with $300 in California, according to the suit.

"The 'Chicago Cartel' can control prices in these markets because supply and demand can be reasonably predicted and forecast by the 'Chicago Cartel' members, who share price information and collude to charge monopolist prices," according to the complaint from attorney Mark Lavery.

The lawsuit alleges that the cartel dates back to a partnership in 2014 between Mike McClain, co-defendant in Mike Madigan's corruption case, former U.S. Capitol Police Chief Terrance Gainer and Green Thumb Industries CEO Benjamin Kovler, heir to the Jim Beam alcohol fortune.

That partnership evolved into a larger group, which includes Akerna, a publicly traded cannabis software company controlled by the Pritzker family, according to the suit.

"Akerna is a company that provides technology to 'Chicago Cartel' members to track prices, supply and demand in these state-protected marijuana markets," Lavery said in the nine-page complaint.

The lawsuit alleges the cartel also includes multi-state cannabis operators Verano Holdings, a Chicago-based firm that is publicly listed in Canada, and Surterra Holdings, Beau Wrigley's cannabis company, which is also known as Parallel and is facing a separate lawsuit from investors who claim it is a Ponzi scheme.

"Green Thumb, Verano and Surterra have worked together for years to keep marijuana prices high in Illinois in part through sharing supply, demand and price information," according to Lavery.

The suit also claims the companies violated the Clayton Antitrust Act's prohibition on "interlocking directorates" — having board members who sit on boards of competing companies.

Akerna spokesperson Georgia Jablon said the company's legal team is preparing a response to the allegations.

"The complaint has multiple inaccuracies, including but not limited to the fact that we are not a plant-touching operator," Jablon said. "As a public company, our shareholders and board of directors are a matter of public record."

Representatives of the other cannabis corporations did not immediately respond to a request for comment.

The plaintiff in the suit, True Social Equity in Cannabis, is described in the complaint as an "unincorporated association consisting of many members" who are opposed to cannabis monopolization and have protested the actions of the alleged cartel since October 2020.

"Members of True Social Equity in Cannabis consist of consumers of branded marijuana in Illinois, prospective consumers of branded marijuana in other states, workers in the branded marijuana industry, entrepreneurs in ancillary hemp-related ventures and competitors or potential competitors of [Akerna, Green Thumb, Verano and Surterra]," Lavery said in the complaint.

The Bannockburn-based attorney did not immediately respond to a request for more information about the group he represents.

According to its website, the group True Social Equity in Cannabis "started as a documentary" and "became a movement." It is directed by Anna Rose li-Epstein — co-founder of a Chicago theater company, actor, director, producer, licensed massage therapist and "energy worker." In a description on the documentary's online fundraising campaign, li-Epstein said she and four other women "devoted our time and savings" to apply for a cannabis dispensary license before state officials "mismanaged" the process.

While the law that legalized recreational cannabis in Illinois in January 2020 called for hundreds of additional licenses to be issued, a combination of delays from state regulators and legal challenges from unsatisfied applicants means the number of legal marijuana dispensaries remains capped at 110 — the same number as was permitted when the Cannabis Regulation and Tax Act took effect.

The suit asks a federal judge to block the group of cannabis corporations it describes as a cartel from selling or growing marijuana in Illinois and to issue "an order divesting Defendants of all assets."

Related: Constitutional Challenge To Illinois Cannabis Licensing Heads To Court