Minnesota Cannabis Regulators Announce Plans to Launch Adult-Use Dispensaries by Summer 2024

By Jason Tarasek

Feb 2, 2024

Just when it appeared all hope was lost for adult-use cannabis dispensaries to open in Minnesota in 2024, the state’s cannabis regulatory agency announced an aggressive plan to open dispensaries as soon as this summer.

Through a report to the Minnesota Legislature and subsequent public meetings, Minnesota’s Office of Cannabis Management (OCM) announced its intent to introduce temporary regulations that could lead to a speedier-than-expected launch of the nascent adult-use cannabis market.

With a goal of ensuring a “minimally viable market” no later than the summer of 2024, OCM identified three goals:

  1. Providing an “early mover” advantage to social-equity applicants
  2. Ensuring an adequate product supply
  3. Launching a robust public education and regulatory enforcement program

Through its inaugural annual report to the Legislature, OCM outlined the status of cannabis regulation in Minnesota and offered broad recommendations for suggested legislative changes to last year’s legalization bill.

At present, the legal Minnesota market includes medical cannabis and non-smokable hemp-derived THC products. Much of the report, however, addresses the launch of Minnesota’s adult-use cannabis market.

Notably, despite rumors to the contrary, OCM Interim Director Charlene Briner indicated that she intended to remain in her position until at least May 2024. In other words, OCM will not have a permanent director in place until summer 2024 – at the earliest.

Nevertheless, in a recent public meeting, OCM assured stakeholders that rulemaking was underway and underscored OCM’s reliance upon a series of public surveys aimed at garnering information to inform the rulemaking process.

Among other findings in OCM’s report, the agency concluded that more than half of Minnesotans who currently use cannabis obtain it from an illicit source.

Under a heading titled “Improving the Structure of the Application and Licensing Process,” OCM recommended several significant changes to Minnesota’s adult-use cannabis legalization statute.

Among the suggested changes are:

  • Eliminating the need for premises to be secured at the point of initial application
  • Eliminating local government input as a factor in the licensing process
  • Creating a new social-equity licensing classification rather than relying upon a point system
  • Consolidating medical and adult-use cannabis into one supply chain from the point of cultivation
  • Issuing temporary licenses, particularly to social-equity applicants

Eliminating the need for premises to be secured at the point of initial application

Requiring a premise to be secured (even if just with a “letter of intent” or “LOI”) requires additional and often unnecessary expenses for applicants. Furthermore, litigation can and often does delay the issuance of the licenses, requiring applicants to hold onto property for far longer than initially anticipated without knowing if they can move forward with a project. Alternatively, a licensed applicant could lose access to the property because a landlord does not want to tolerate delays.

Eliminating local government input as a factor in the licensing process

By limiting a local government’s “approval” right to only confirming that a particular use is compliant with local land use rules, the licensing process could become drastically streamlined.

As currently written, the legalization bill would allow a local government to provide subjective input to OCM, which could breed litigation by subjecting local governments to claims that they are “playing favorites” or otherwise acting arbitrarily or capriciously.

Creating a new social-equity licensing classification rather than relying upon a point system

Loosening rules surrounding social-equity licensing could significantly enhance the likelihood that social-equity licensees might succeed in a capital-intensive industry. While it is laudable to distribute licenses to social-equity applicants, social-equity licensees in other states have struggled to access the millions of dollars of capital often necessary to successfully launch a cannabis business.

By loosening rules surrounding ownership of social-equity entities, social-equity applicants would likely have much greater access to capital through private investment and partnership opportunities.

Loosening restrictions on a social-equity licensee’s ability to transfer a license might increase the value of such a license, too.

Consolidating medical and adult-use cannabis into one supply chain from the point of cultivation

Other than the Minnesota Legislature’s antipathy toward Minnesota’s current medical cannabis license holders, there is no legitimate reason to keep these supply chains separate.

Operationally, it is far more burdensome and costly for operators to serve separate supply chains for medical cannabis and adult-use cannabis. Furthermore, such a dual system would impose additional burdens upon the regulators.

Issuing temporary licenses, particularly to social-equity applicants

The effectiveness of allowing provisional licenses depends a lot upon the details of such a proposal. Would these license applicants be subjected to a different evaluation process than other applicants? If so, that could foster litigation. While it does seem wise to provide licenses first to cultivators (to get the supply chain started), it would be unfortunate if an “early licensing” program devolved into a debacle similar to that in the State of New York, which was subjected to a wave of litigation that delayed the rollout of the adult-use cannabis program for years.

OCM’s report makes it clear that they are digging into the details and anticipating potential problems as Minnesota rolls out its new adult-use cannabis industry. As the Minnesota legislature reconvenes in mid-February, it will be interesting to watch how much change legislators are willing to make to a legalization bill that was already subjected to dozens of legislative hearings and intense scrutiny.

Follow this link to read the full report: OCM Annual Report to Legislature (2024) (state.mn.us)

Vicente’s Minnesota team is actively monitoring developments in Minnesota’s adult-use cannabis business, medical cannabis business, and hemp business program implementation. It is never too early to start preparing for licensing by building your team, forming your business, applying for trademark protection, performing community outreach, finding real estate, and more! Please contact us for assistance in achieving your goals in this new cannabis market.

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