Just how big will Illinois’ marijuana business become?

Chicago’s Green Thumb Industries has high hopes, not only for itself but others in the legalized cannabis industry in Illinois. But while GTI may grow into one of the largest marijuana growers and distributors, the state’s odds of becoming a weed capital are long at best.

GTI holds licenses to grow and distribute marijuana in Illinois and five other states, including two potentially big markets that have legalized recreational use. It announced May 14 that it will go public in Canada to provide the capital for further expansion, and it expects to increase its headcount to 500 by year-end. “We can be one of the biggest players in the industry,” says CEO Pete Kadens. “We hope Chicago becomes an opportunity for other cannabis companies.”

Another big player, Chicago-based Cresco Labs, also holds licenses in five states, and PharmaCann in Oak Park has licenses in six states. A cannabis-focused venture-capital fund, Salveo Capital, also calls Chicago home. There are even product companies, such as Mindy’s Edibles.‚Äč

Cresco CEO Charlie Bachtell says Cresco, GTI and PharmaCann are among the largest companies in the industry that hold licenses to grow and distribute in multiple states, and there are two other large Chicago-based investor groups that own stakes in cannabis companies. “If I were betting on a region that’s going to be successful, I’d put money on Chicago,” he says.

Illinois is getting its fair share of the cannabis business, by virtue of its size and being among the 20 states that have legalized medical use. It’s legal for recreational use in nine states plus the District of Columbia. But Illinois is unlikely to become a Silicon Valley for weed, experts say. Colorado and Washington had first-mover advantage as the pioneers in legalizing cannabis use with votes in 2012. California, which recently legalized recreational use, has unmatched size, with a population of 39.5 million, more than three times Illinois’.

“Illinois is a great state population-wise, and when it goes recreational, it will be one of the great markets to hold a license in,” says Tim McGraw, a former Illinois real estate developer who previously ran Revolution Enterprises, one of the first growers licensed in the state. He’s now CEO of Canna-Hub, a real estate firm that’s developing industrial parks for cannabis-related companies in California. “California is the largest market in the world. No state will be able to catch up to it.”

STATES WITH AN EDGE

Other states have an edge over Illinois, too. Flowhub, which makes compliance software for cannabis companies to deal with various state and federal regulations, is based in Denver. Headset, which provides Big Data to growers, is based in Seattle.

Tilt Holdings, a planned roll-up announced just days after GTI said it would go public, has plans for a four-way deal: It would merge a new Toronto-based marijuana grower with Baker Technologies, a Denver company that makes software for the cannabis industry; Briteside Holdings, a marijuana delivery company in Bend, Ore.; and Sea Hunter, a Boston-based marijuana facilities operator. Like GTI, it hopes to go public in Canada.

Because federal law technically prohibits marijuana use, cannabis companies generally have listed in Canada, which has legalized cannabis. That might also change. Canopy Growth, a cannabis company based in Ontario, where it’s already publicly traded, announced plans to list on the New York Stock Exchange by the end of the month. Constellation Brands, whose beer operations are headquartered in Chicago, owns 10 percent of the company.

One of the few U.S. companies to go public at home is Terra Tech of Irvine, Calif., which trades over the counter.

Illinois approved medical use five years ago, but it has rolled out very slowly, says John Downs, director of business development at Arcview, a research firm in Oakland, Calif., that tracks the industry. “The cannabis industry in Illinois has been hamstrung by regulators and politicians. I don’t see anyone coming to Illinois from other states.”

SLOW PROGRESS

Robert McVay, a Seattle-based partner at Harris Bricken, a law firm that developed an early marijuana-focused practice, says the firm opened a small office in Chicago after Illinois passed its medical-use law but quickly shuttered it. “The law was so limited and the market so small, it was hard for people to do any business,” he says. “It’s changed a little since then, but it’s slow.”

The state law was deliberately restrictive, acknowledges Rep. Lou Lang, D-Skokie, its sponsor. Gov. Bruce Rauner has been reluctant to expand medical use, but J.B. Pritzker, his Democratic challenger in the November election, supports legalization of marijuana for recreational use.

“Sometime in the future, there will be recreational use of cannabis,” Lang says. “But that’s like saying sometime in the future there will be a casino in Chicago. The question is, when? I do think there’s opportunity to create a huge cannabis industry in Illinois. New growth opportunity for the industry is good. But my first and only consideration is, who are you treating? Patients who are already using the product have to come first.”

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