Early tomorrow morning, representatives from marijuana companies will huddle in a room at Chicago City Hall for a lottery drawing that could determine the early winners of the expected bonanza that begins Jan. 1, when recreational weed sales become legal in Illinois.

The city, seen as the state's biggest market for recreational marijuana, is limiting the number and location of retail dispensaries, creating a supply-demand imbalance that will get resolved with the luck of the draw.

“We’re all kind of resigned to it,” said Jeremy Unruh, director of regulatory and public affairs for PharmaCann. "The city had to figure out some way to allocate them.”

Nineteen companies, which hold 31 licenses, are competing for the right to apply for zoning approval for new dispensaries. Companies get one pick for each license they hold. Five companies have multiple picks.

Mayor Lori Lightfoot divided the city into seven zones and capped the number of dispensaries in each zone at seven. The number could increase later.

Downtown, seen as the plum location for retailers, is in the Central District. But a significant chunk of downtown is off-limits. Another hot area is likely to be the West District, which includes Fulton Market.



Once the picks are announced, it will set companies into motion to figure out where to locate their dispensaries.

With the start of recreational sales just six weeks away, it’s unlikely any of the new dispensaries will be open Jan. 1. But they’ll be crucial to the success of the companies in the near term and over the long run.

Since it became apparent earlier this year that the marijuana law could pass, cannabis companies have been looking at potential locations. But the calculus changed when Lightfoot decided to limit the number and location of dispensaries in an effort to spread the expected weed wealth to neighborhoods throughout the city.

Geography is a two-way street. Cannabis licenses awarded by the state are good in the city and suburbs. Some companies that end up with lottery picks in parts of the city that have weaker retail demographics might look to the ’burbs.

“It comes down to population density, economics and median income,” says Mark de Souza, CEO of Revolution Global, which has a dispensary in Mount Prospect and is entitled to one pick in the city. “At the end of the day we’re in the manufacturing and consumer packaged goods space, so want to be in a commercial area that supports sales. That’s the perspective we have to have as a business.”

Cresco Labs has the right to open five dispensaries, including three in Chicago. It’s already planning one location in South Beloit, along the Illinois-Wisconsin border, outside the Chicago metro area. Other plans are in flux.

"After the city lottery, where we have three eligible, and a couple more suburban zoning hearings, we’ll start putting pins on a map and locking up locations," said spokesman Jason Erkes.

Companies have been kicking tires on multiple locations, because of zoning restrictions that prohibit dispensaries opening within 1,500 feet of each other or within 500 feet of schools. But until the lottery is decided, companies really can’t act.

“We’ve got our strategy down,” Unruh said. “It’s sort of game theory. We have four selections. We’ll see what happens if we get first the four selections or the last four.

“There will be a feeding frenzy after these lottery picks,” he added. “Every real estate broker in the city will be calling all of us.”

The lottery will be done live, in front of representatives from the companies, adding a bit more drama to an already high-stakes process.

“I’m thrilled they’re doing the draw live rather than prior” to the announcements, de Souza said. “That speaks to the integrity to how the mayor is going to handle it. They’re doing the best that they can for transparent and random allocation.”