Minnesota’s Governor has indicated he will sign an adult use cannabis legalization bill. HF 100 (the “Final Bill”) emerged from reconciliation and was passed on May 19th.
The Final Bill combines Minnesota’s existing medical cannabis law with provisions allowing for adult-use cannabis into a single statute.
Previous versions of the bill included a requirement that any applicants who are business entities must have at least 75% of the business owned by Minnesota residents. This language has been dropped from the latest version of the bill. A similar residency requirement under Maine’s cannabis law was struck down as unconstitutional by a federal court.
The Final Bill creates a Cannabis Advisory Board and an Office of Cannabis Management (“OCM”). OCM will issue licenses for cultivators, processors, distributors, transporters, and dispensaries to grow, manufacture and sell recreational and medicinal cannabis and cannabis products.
Under the Final Bill, Minnesota will not have a total cap number of licenses that it may issue, but likely will set a cap on each license type for an initial competitive application licensing period sometime in the upcoming months. Specifically, OCM is allowed to issue the “necessary number of licenses in order to ensure the sufficient supply of cannabis flower and cannabis products to meet demand, provide market stability, ensure a competitive market, and limit the sale of unregulated cannabis flower and cannabis products.”
There also are limits on how many licenses an entity or its owners may hold, and on who may hold specific license types. The upshot is that the Final Bill prohibits vertically integrated cannabis operations where a single entity grows, harvests, processes, and sells cannabis.
The Final Bill creates a regime where there are 16 total licenses for the following types of operations (which are subject to further regulation by OCM):
- Cannabis microbusiness
- Microbusiness licensees are authorized to hold only one retail license and operate a single retail location
- Limited to an indoor canopy of no more than 5,000 square feet, or an outdoor canopy of no more than a half-acre
- A cannabis microbusiness license holder may also hold a cannabis event organizer license
- May not own or operate any other cannabis business or hold more than one cannabis microbusiness license
- Cannabis mezzobusiness
- May hold one retail license and operate up to three retail locations
- Limited to an indoor canopy of no more than 15,000 square feet, and an outdoor canopy of no more than one acre
- A cannabis mezzobusiness license holder may also hold a cannabis event organizer license and a medical cannabis retailer license
- May not own or operate any other cannabis business or hold more than one cannabis mezzobusiness license
- Cannabis cultivator
- Limited to an indoor canopy of up to 30,000 square feet, or an outdoor canopy of up to two acres
- A cannabis cultivator license holder may also hold a cannabis manufacturing license, medical cannabis cultivator license, medical cannabis producer license, license to grow industrial hemp, and cannabis event organizer license
- May not own or operate any other cannabis business, and OCM may limit the number of cultivator licenses a business may have
- Cannabis manufacturer
- A cannabis manufacturer license holder may also hold a cannabis cultivator license, a medical cannabis cultivator license, a medical cannabis processor license, and a cannabis event organizer license.
- May not own or operate any other cannabis business
- Cannabis retailer
- A cannabis retailer license holder may also hold a cannabis delivery service license, a medical cannabis retailer license, and a cannabis event organizer license
- No entity may hold a license to own or operate more than one cannabis retail business in one city and three retail businesses in one county
- Cannabis wholesaler
- Cannabis transporter
- Cannabis testing facility
- Cannabis event organizer
- Cannabis delivery service
- Lower-potency hemp edible manufacturer
- Lower-potency hemp edible retailer
- Medical cannabis cultivator
- Medical cannabis processor
- Medical cannabis retailer
- Medical cannabis combination business
The Final Bill directs OCM to score applicants on a point system based on their:
- Status as a social equity applicant (or applicant who is “substantially similar” to a social equity applicant). Included as “social equity applicants” are applicants where 100% of the members/stockholders and managers/directors:
- Were convicted of an offense involving the possession or sale of cannabis or marijuana
- Are a service-disabled veteran
- Have been a resident for the last five years in a subarea that experienced a disproportionately large amount of cannabis enforcement
- Have been a resident for the last five years of one or more census tracts where the poverty rate was 20% or more
- Are an emerging farmer
- Defined as farmers or aspiring farmers who are women, veterans, persons with disabilities, American Indian or Alaskan Natives, members of a community of color, young, and urban, and any other designation as determined by the Minnesota Department of Agriculture. It is not clear if proof of licensure in the State of Minnesota or otherwise will be required for this.
- Status as a veteran or retired national guard
- Security and recordkeeping plan
- Employee training plan
- Business plan and financial situation
- Labor and employment practices
- Knowledge and experiences
- Environmental plan
Social equity applicants may not transfer their license to any entity other than another qualifying social equity applicant.
There is currently no set date for when OCM will request applications or issue licenses, thought it is expected to be soon. OCM is further directed to establish procedures and guidelines for the application review process, specifically on how OCM will score each category and assign points. While the Final Bill appears to favor smaller businesses, OCM has substantial discretion when awarding licenses. Any business looking to break into Minnesota’s new adult-use cannabis market will want to stay up to date on OCM’s soon-to-come regulations.
Please contact a member of Foley Hoag’s Competitive Application Team to learn more.