The Illusion of Competition, a report recently released by the Parabola Center for Law and Policy, chronicles brands and market concentration in the Illinois cannabis industry. Below are the report’s key findings and recommendations.

Key findings include:

1. Incumbents control the market. Seventeen incumbent companies hold 20 of the state’s 21 large-scale cultivation center licenses and captured nearly 79 cents of every dollar in statewide sales in Q4 2025. These are the multi-state operators (MSOs) and Illinois medical cultivators that controlled production before adult-use legalization began.
2. MSOs capture more value than their sales volume warrants. MSOs moved 42% of units in Q4 2025 but took in 69% of revenue. Independent craft growers moved 27% of units yet earned only 8.1%, converting each unit sold into revenue at one-fifth the rate of MSOs.
3. Out-of-state brands are outpacing Illinois independents. Out-of-state brands grew from 1.3% to 11.9% of market revenue between Q1 2022 and Q4 2025, most entering through contract manufacturing with in-state producers. IL-Independents grew from 0.2% to 8.1% over the same period. Between them, they account for nearly all the share incumbents lost.
4. More brands, fewer competitors. Active brands nearly tripled from 100 to 264 between Q1 2022 and Q4 2025, but the number of parent companies behind them peaked at 91 in Q1 2025 and fell to 79 by Q4 2025. Competitive intensity depends on the number of firms making independent pricing and production decisions, not the number of labels on the shelf.
5. Concentration is increasing. After ten consecutive quarters of year-over-year decline, the parent-level Herfindahl-Hirschman Index (HHI) reversed course and rose in Q3 2025. CR4, the combined share of the four largest firms, climbed from 45% to 47% over the same period. In Q4 2025, the market lost more brands than it gained for the first time in the dataset.
6. The equity gap the state identified in 2024 has not closed. The state’s own Disparity Study found that minority- and women-owned businesses held 59% of adult-use dispensary licenses between 2020 and 2023 but earned just 12.5% of dispensary revenue. Three additional years of statewide sales data show that the structural conditions producing that gap remain in place.
7. Six avenues of state action, detailed later in this report, would begin to address these conditions. The 2024 Disparity Study recommended most of them. None have been implemented.

The businesses that entered this market without capital, without incumbency, and without the structural advantages those early licenses conferred, now find themselves in a market whose terms were set before they arrived.

The report recommends six policy changes: The state’s 2024 Disparity Study identified many of the conditions identified in this report and recommended corrective measures. Six areas of state action, confirmed by both analyses, would begin to address them.

Consolidate regulatory oversight into a single department: Licensee testimony in the disparity study described uncoordinated inspections, communication failures, and bureaucratic complexity across five state departments. The concentration data revealed a deeper problem: fragmentation functions as a veto-point structure in which any reform requires coordinated action across departments with competing priorities. The canopy expansion, which took four years from proposal to implementation, and the processing licenses that remain unissued are both products of that architecture. A unified cannabis department with rulemaking and enforcement authority would give the state the capacity to act on what both reports have found.

Mandate parent-company-level data disclosure: The divergence between brand-level and parent-level HHI, a ratio of more than three to one, is invisible at the point of sale. Illinois requires cultivator names on product labels but not the parent company that controls the cultivator, and does not publicly disclose production volumes, wholesale transfer data, or brand-to-manufacturer linkages. The disparity study recommended unified data systems and expanded collection to address the same visibility gap. Mandatory parent-company disclosure at both the consumer label and regulatory reporting levels is where that effort should begin.

Issue standalone processing licenses: The value gap between IL-Independent unit share and revenue share persists because independent producers cannot access the product categories that generate the highest per-unit margins. Nerevu heard the same problem from the supply side: infusers reported that cultivators overcharge for distillate and favor existing relationships. The disparity study recommended that IDOA allow infusers to apply for processor licenses. IDOA has statutory authority. The licenses should be issued.

Scrutinize management agreements between retailers and producers: The CRTA’s 40% sourcing rule limits the share of inventory any dispensary may source from a single producer, a provision intended to prevent foreclosure of shelf access. That rule governs product sourcing but does not reach management and consulting agreements through which incumbents can influence dispensary purchasing, marketing, and operations without formal ownership. The disparity study documented licensee concerns about being “squeezed out” of controlling stakes by partners. Disclosure requirements and limits on operational control by entities holding cultivation or processing interests would close the gap the sourcing rule leaves open.

Restructure the Cannabis Business Development Fund: The disparity study found that the CBD Fund, financed solely through licensing fees, lacked both scale and a coherent allocation methodology, and recommended diversified funding weighted toward high-capital-intensive license types. The capital constraints confirm the finding. A recurring, statutorily mandated funding source tied to tax revenue, paired with allocation criteria that weight capital intensity and competitive position, would bring the fund closer to the scale the problem requires.

Close the canopy gap between craft growers and cultivation centers: The production concentration detailed in the preceding sections is a direct result of the licensing framework’s scale asymmetry. The 2024 canopy expansion produced immediate competitive effects, and the pace of IL-Independent entry confirmed the prior cap was the binding constraint. Further expansion, or the creation of a mid-tier cultivation license between the current craft grower and cultivation center thresholds, is the most direct remedy available.

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