Minnesota Lawmakers Seek Fairness in Its Coming Cannabis Market

    Minnesota’s legislature legalized cannabis in 2023, but it’s not yet certain what the new legal market will look like. Lawmakers are proposing new legislation to govern how cannabis is bought and sold. This reflects concerns over whether small businesses, and particularly entrepreneurs from underrepresented communities, will have a fair shot.

    Minnesota Governor Tim Walz (D) is aiming to get cannabis dispensaries open in early 2025. As Minnesota Public Radio reported, the state’s newly created Office of Cannabis Management is currently working with a contractor to develop an online licensing application system. In a January interview with MPR, Walz reaffirmed the projected deadline to open dispensary doors, adding that a goal is “to get the illicit stuff off the street” in favor of regulated products.

    In the big picture, the OCM aims to license 381 dispensaries statewide, and to reserve at least 51 percent of licenses for “social equity” applicants. The multiple criteria for social-equity eligibility include having been convicted on a marijuana charge; living in an area with high rates of marijuana arrests or poverty; or being a military veteran.

    But a new bill would offer more prioritization to social equity applicants in this process, making significant changes to 2023’s legalization measure. Bill 4782 is being proposed by Representative Zack Stephenson (D) and Senator Lindsey Port (D), two lawmakers who also led the legalization effort.

    The bill also makes clear that a license applicant would not need to buy or rent a commercial property before obtaining a license.

    Under Bill 4787, people who qualify would get a head start with the first set of licenses. They could apply for and receive temporary dispensary licenses later in 2024, enabling them to plan and build their businesses prior to beginning sales in 2025. Having evidence that they will be able to move forward with their plans could help these business owners to fundraise from other investors. The bill also makes clear that a license applicant would not need to buy or rent a commercial property before obtaining a license.

    At the same time, the bill would somewhat expand what qualifies as a social equity business. Under current law, 100 percent of a business must be owned by people who meet the social equity criteria. The proposed bill would lower that to 65 percent, again raising the possiblity of outside investment.

    The bill, introduced March 7, mirrors a number of proposals put forth by the OCM during a public presentation on January 30. Interim OCM Director Charlene Briner described a wishlist to “expedite the 2025 market launch and provide early advantages to social equity participants,” while preventing a “licensing bottleneck,” as Marijuana Moment reported.

    This included both issuing temporary licenses to social equity applicants in 2024, and lowering the ownership requirement, as a way to let applicants raise funds by selling stakes in their businesses. Briner also cited financial hardship for many would-be cannabis businesses in other states as a reason not to require applicants to rent a property before obtaining a license.

    Debate over points-based versus lottery systems has arisen around the country.

    The new bill would additionally change the process for awarding licenses from a “points” system, based on applicants’ scores for meeting different criteria, to a “lottery” system, where the state randomly selects from the pool of eligible applicants.

    Under Minnesota’s existing points system, all applicants can score on measures like labor fairness, environmental protection and security, but social equity applicants get an extra 20 points.

    However, debate over points-based versus lottery systems has arisen around the country as more states legalize. According to an analysis by New York State Cannabis Connect, most states have used a points system in recent years, while notable examples of lottery systems include Illinois, Connecticut and Washington. Lottery systems vary according to how high a bar is required for entry.

    “As cannabis has shown to be a profitable industry, competition is high … However, the lottery process may not always be the best option for the social equity goals of state legislation on cannabis,” NYS Cannabis Connect staff wrote. “Any effect on equity would depend on how the lottery system is designed, how the criteria is adopted, how many lotteries will be held, and how many licenses will be issued in each one.”

    They also noted that lottery licensing processes have invited legal challenges in different states. For example, Illinois has been sued multiple times over difficulties facing social equity applicants in its new market. New York State has seen separate lawsuits and even a temporary court injunction over claims that its lottery licensing system discriminated against out of state applicants or veterans.

    On the other hand, points systems have also brought up lawsuits against jurisdictions—New Jersey, Missouri, and the city of Pasadena, California are among many governments that have faced court battles over their cannabis license scoring processes.

    Other grants are intended to help applicants to better understand rules and regulations; to grow their businesses and hire people; and to support professional training.

    But what about Minnesota’s two existing medical marijuana companies, LeafLine Labs and Vireo Health/Green Goods? Another change proposed by the new bill, and by the OCM, is to “streamline” the cannabis supply chain by allowing any cannabis cultivator to sell to both adult-use and medical products, which is not allowed under current law. First-mover advantage to medical companies over startups has been controversial in other states. But the measue may help ensure that Minnesota has an adequate supply of cannabis before stores open, when its two medical companies already have established grow operations.

    Besides priority licensing, social equity applicants could benefit from other provisions of the 2023 legalization bill. Separate from the OCM, the state’s economic development agency will offer three different programs granting cash awards and loans: Cannabis Industry Startup Financing Grants ($3 million annually), Cannabis Industry Navigation Grants ($1 million annually), and Cannabis Industry Training Grants ($2 million annually).

    As the programs’ names imply, these grants are intended to help applicants to better understand the rules and regulations of the cannabis market; to grow their businesses and hire people; and to support professional training. Separately, the state will also launch its CanRenew and CanGrow programs, which will award additional grants and loans to support farmers and other goals.



    Photograph (cropped) by Cannabis Tours via Wikimedia Commons/Creative Commons 4.0

    • Alexander is Filter’s staff writer. He writes about the movement to end the War on Drugs. He grew up in New Jersey and swears it’s actually alright. He’s also a musician hoping to change the world through the power of ledger lines and legislation. Alexander was previously Filter‘s editorial fellow.

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