Since Governor Tim Walz signed HF 100 into law in May 2023, making Minnesota the 23rd state to legalize the adult use of cannabis, the state’s legislature has been diligently working in the 2024 session to ensure the program launches as quickly as possible.
As a result of their negotiations, the Minnesota House and Senate crafted a 140-page agreement known as HF 4757. From the selection of licensees through a vetted lottery to implementing a more up-to-speed timeframe for cultivators, mezzo- and micro-businesses to begin growing ahead of the 2025 launch, several changes have been made that drastically affect the program’s overall structure.
Prioritization of Social Equity Applicants
With the enactment of HF 4757, applicants who meet one of the eligibility requirements to qualify as social equity applicants will get a leg up on competitors, as they will be allowed to apply for preapproval of a license before the program’s launch.
From June 24 through July 10, interested applicants must submit all requisite information to be verified by the Office of Cannabis Management (OCM) as social equity applicants. Once verified, the OCM will open a preapproval application period from July 24 until August 12 for only verified social equity applicants.
Moreover, HF 4757 significantly expanded the eligibility requirements to qualify as a social equity applicant. According to the Minnesota Reformer, the new social and economic criteria provisions, such as allowing all military veterans to qualify, can allow between 30% to 40% of Minnesota adults to qualify for such preapproval.
Further, eligible applicants who obtain a cultivator, mezzo- or micro-business license through the preapproval application process will now be able to start growing ahead of the program’s launch. This new provision is key to ensuring there is an adequate supply of products to meet market demands come early 2025.
From Point-Based System to Vetted Lottery
One of the most significant changes made to Minnesota’s adult-use program is the removal of a strictly point-based system to a vetted lottery to select licensees. Throughout the country, the industry is seeing a shift from states utilizing merit-based scoring procedures to using lottery-type systems to select applicants for licensure.
Although many overseeing state agencies stress the importance of using a lottery-based system to avoid future lawsuits that push back the program’s launch, it does not prevent such lawsuits from occurring, as the industry has seen in states such as Illinois and Maryland.
Moreover, several local industry leaders, who qualify as social equity applicants, opposed this modification to the law as they have been preparing for the past year to enter Minnesota’s market. Now, they are on the same playing field as those who have not dedicated as many resources to such endeavors. This opposition is further cemented as the provisions of HF 4757 now enlist limits on the number of preapproved licenses that will be granted in the first issuance period.
Safeguards to Prevent Financial Predators
A new addition to Minnesota’s program stems from the inclusion of “true party of interest” provisions in Section 76 of HF 4757, which now impact the number of applications that may be submitted and the number of licenses that may be held by a true party of interest.
Many have heard this term from New York’s adult-use program, and it appears that Minnesota has drafted its own to try to prevent larger operators from submitting multiple applications to flood the process. In accordance with the amendment, a true party of interest can only submit one application for any single type of license or multiple licenses if the licenses may be held together.
Moreover, a true party of interest cannot hold more than one license unless permitted by Minnesota law. For example, a retailer can hold a delivery service or cannabis event organizer license. However, such limitations are not extended to an individual or entity that has 10% or less of a controlling interest. For lenders interested in being a part of the Minnesota market, one must note that those funding the applicant applying for licensure will need to be disclosed as a true party of interest.
From the earlier transition timeframe from the Office of Medical Cannabis to the OCM this July to expanding caregivers’ ability to conduct home cultivation for their patients, HF 4757 has greatly impacted Minnesota’s adult-use program.
