Minnesota cannabis regulators ditch initial lottery for early business licenses
MINNEAPOLIS — Minnesota cannabis regulators are pushing a plan for the initial rollout of the state's legal marijuana market to spring of next year following a judge's decision to halt a planned lottery last month to choose the first business license holders.
Because of that legal fight, the Office of Cannabis Management — the regulatory agency tasked with oversight of the budding industry — on Wednesday said they are ditching the license "preapproval" process that would've fast-tracked some businesses so they could get a head start to be ready for market launch.
Now the focus shifts to a general licensing period that will begin early next year. Charlene Briner, the interim cannabis chief, told reporters that after the agency reviewed its options, proceeding this way is the best path forward to ensure there are no other delays to market launch.
"The decision to end the license preapproval process and move forward with standard licensing shortly after the new year has two primary benefits. It preserves, at least in part, some of the early mover advantages for social equity applicants that were envisioned by the legislature in that preapproval process. And secondly, it also keeps us moving forward towards a timely market launch in 2025," Briner said.
Individuals who meet social equity applicant criteria were allowed to apply for license preapproval. Cannabis regulators reviewed all applications and ultimately dismissed two-thirds of them for failing to provide proper documentation running afoul of the law, prompting some prospective business owners to sue. A judge then issued a stay on the lottery, planned for Nov. 24.
The 648 people the office approved for that drawing will automatically move forward to the general licensing period and without having to re-apply or pay additional fees, Briner said.
"While this announcement today does not fully address the disappointment of the 648 qualified applicants who expected to be entered into a lottery on Nov. 26, our commitment to the principles of social equity is undiminished, and those principles are central to this new path forward," Briner said.
Skipping the early license process means market launch could be delayed at least a few months after initial estimates. The goal initially was for "early 2025." But that's the latest timeline for the licensing period, which could extend into June.
And a key feature of license preapproval was to allow authorized cultivators to begin growing, so there is enough supply to meet demand.
Applications for general licenses will open in mid-February. Those who applied for license preapproval but were denied entry into the lottery will have another chance to get the greenlight to operate a cannabis business.
There are more than a dozen license categories, but state law caps the number of licenses for four different types: cultivators, manufacturers, retailers and mezzobusinesses. The latter will allow operators to control multiple parts of the supply chain on a smaller scale.
If there are more applications for those four categories of licenses than actual licenses available, regulators will choose who gets one through a lottery.
And there will be two separate lotteries, Briner said: one for social equity applicants and another for everyone else who doesn't fit that criteria.
Choosing who gets a license in those categories, if a drawing is needed, will happen in May or June of next year.
The lead authors of the cannabis law in a statement said they were disappointed by the judge's order pausing the license preapproval process for social equity applicants, which they characterized as a setback.
"While this significant shift in the licensing timeline and social equity process is certainly a setback, it is not the final word on inclusivity and equity in our process," said Sen. Lindsey Port, DFL-Burnsville, and Rep. Zack Stephenson, DFL-Coon Rapids. "Those who were approved for social equity licenses can still earn their licenses this spring in the general lottery, and approved applicants for microbusiness license status in the general lottery will be able to begin cultivation as soon as rulemaking is completed."
Concerns about cultivation amid delay
Any businesses awarded an early license allowing cultivation — from commercial growers to smaller operators — would have been able to start planting cannabis before market launch.
They would have followed existing agency rules for growing medical cannabis until new rules are set by the Office of Cannabis Management for the adult-use market.
Lawmakers this year signed off on this change because growing cannabis takes time and there was concern about not having flower and other cannabis products ready to stock store shelves when dispensaries are ready to open their doors.
Shaun Tetreault, president and owner of Kind Bud Inc., was among those approved for the initial social equity lottery put on hold by the courts. He has detailed plans for a large-scale growing facility northeast of the Twin Cities, but needs the license to move forward and start building it.
Not having that preapproved license will set him back, he said, and he believes other would-be cultivators will face similar delays.
"There are not enough cultivators in the position to be ready to start producing product for anybody next year," Tetreault said. "The supply will definitely not be there for the demand."
In a follow-up email following Briner's virtual press conference with reporters Wednesday, Josh Collins, a spokesperson for the Office of Cannabis Management, said early cultivation "was always unlikely to provide sufficient supply to meet market demand."
He also noted that the state is working on compacts with tribal nations in Minnesota — some of which are already growing and selling cannabis on the reservation — which will expand cultivation capacity.
Tetreault said he hopes regulators will consider prioritizing growers when reviewing applications next year.
"Nobody else can operate without cultivators fully functioning," he said. "So those should be the first businesses that are awarded licenses and allowed to get underway."
