Minnesota OCM Bill Makes Significant Changes to the Regulated Cannabis Program

By Colleen Mitchell, Yolanda Clarke

May 20, 2024

Passing out of the House and Senate just under the deadline for the end of the Minnesota legislative session on May 20, 2024, the long-awaited “OCM Bill” now heads to Governor Tim Walz’s desk for signature, which he is expected to sign shortly. Based on the Minnesota Office of Cannabis Management’s (OCM) 2024 Annual Report to the Legislature, the OCM Bill makes significant changes to the state’s regulated cannabis program.

Minnesota Cannabis Business License Caps

A key update from the OCM Bill is the addition of license caps for certain adult-use license types, at least half of which are now reserved for qualifying social equity applicants. License caps apply to general and social equity applicants alike, but separate caps exist for the new social equity license classification.

The same caps apply for general licensing and social equity licensing:

Cultivator: 25 (50 total)
Manufacturer: 12 (24 total)
Retailer: 75 (150 total)
Mezzobusiness: 50 (100 total)

There are currently no overall limits associated with the other license types, such as microbusiness, transporter, delivery, testing lab, and wholesaler licenses. However, these license types will be limited during the upcoming social equity pre-licensing process, set for Summer 2024.

Cannabis License Application Process – Qualified Lottery

In a major shift from the previous statute, applications for limited license types will be issued according to a qualified lottery, whereby all applicants satisfying minimum criteria will be entered into a random drawing to select the winning applicants. Importantly, applicants are no longer required to secure property prior to applying for a license. Any applicants not selected in the lottery will have the option to have their application retained and automatically entered in any subsequent application lotteries that occur over the next year.

Social Equity Pre-Approval Licensing Process – Summer 2024

The OCM Bill outlines the timeline and procedures for a license pre-approval application period to be conducted in Summer 2024 before adopting the OCM rules and limited to qualifying social equity applicants. This pre-approval is intended to provide social equity applicants with a head start on getting their businesses operational, including securing property, raising capital, and other start-up tasks.

Aside from early-start cultivators, detailed later in this article, pre-approval licensees will not be able to begin conducting cannabis activities until the OCM rules are adopted and additional documentation and fees are provided to the OCM.

The OCM is required to begin accepting pre-approval applications no later than July 24, 2024, with the application period closing by August 12, 2024. The license caps for the upcoming social equity pre-approval licensing process are established as follows:

Microbusiness: 100
Mezzobusiness: 25
Cultivator: 13
Manufacturer: 6
Retailer: 38
Wholesaler: 20
Transporter:20
Testing facility: 50
Delivery service: 10

Licenses issued under this pre-approval process will count against the overall license caps if successfully converted to full licensure.

Addition of Early Cultivation for Minnesota Social Equity Cannabis Licensees

Another significant aspect of the OCM Bill is the addition of early-start cultivation for certain pre-approval licensees. Social equity licensees with license pre-approval for a microbusiness, mezzobusiness, or cultivator license may begin cultivation once they have provided the OCM with documentation from the local unit of government where their business is located that their facility complies with all local zoning, building, and fire codes and their operations comply with the current administrative rules for medical cannabis cultivation.

Social Equity Criteria Updates

Criteria to qualify as social equity applicants have also been updated. While existing social equity criteria based on certain convictions involving cannabis prior to May 1, 2023, remain in effect, the OCM Bill updates other requirements as follows:

ALL military veterans, including service-disable veterans, current or former members of the National Guard, and military veterans or current or former members of the National Guard, who lost honorable status due to an offense involving the possession or sale of cannabis or marijuana.
- This replaces a more limited inclusion for veterans and other service members.
Farmers who have participated in the business operation of a farm for at least three years and currently provide the majority of the day-to-day physical labor and management of a farm that had gross farm sales of at least $5,000 but not more than $100,000 in the previous year.
- This replaces the previous “emerging farmer” criteria, which was not clearly defined.
In addition to existing qualifications based on poverty rates which remain in place, applicants may also qualify if they can demonstrate they have resided for the last five years in an area where at least 20% of the households receive assistance through the Supplemental Nutrition Assistance Program (SNAP) or the population has a high level of vulnerability according to the Centers for Disease Control and Prevention and Agency for Toxic Substances and Disease Registry (CDC/ATSDR) Social Vulnerability Index.
- These updates are in addition to prior criteria based on residency, not replacing those criteria.

New language clarifies that at least 65% of an applicant's controlling ownership must meet the social equity criteria, as opposed to 100%.

Conclusion

The OCM Bill is almost 150 pages long and features ample pertinent updates not covered here. From new ownership and disclosure requirements to changes to the role of local governments and alterations to the state’s hemp and medical cannabis programs, interested stakeholders have an abundance of opportunities in this quickly evolving state.

Please reach out to our Minnesota Team to guide you through these impactful updates and help you plan your next steps to reach your business goals. We will host a webinar to cover these updates on May 30, 2024. Register here!

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