Minnesota’s Office of Cannabis Management is hoping to roll out adult-use cannabis retail licenses in time for summer after having to abandon its first attempt to hold a pre-approval lottery last month.
Starting on Feb. 18, both social equity and general applicants will be able to pursue 10 different licenses, with caps on only four types — mezzobusiness, cultivator, manufacturer and retail — requiring lotteries to determine winners.
Originally, nine license types were going to be capped, giving preference to social equity applicants. OCM has also added a new license type, hybrid medical and adult-use business, for the two existing medical operators in the state.
“Prospective business owners are eager to get started, and applying for a license sets them on a path to launching their business,” said OCM Interim Director Eric Taubel. “Getting licenses out the door and into the hands of qualified applicants is our priority as we approach the launch of Minnesota’s adult-use cannabis industry.”
OCM closed the 15-day application window for individuals seeking to have their social equity status verified on Jan. 30. The regulator received paperwork from 403 new aspiring operators, according to OCM spokesperson Josh Collins. This new verification process follows one held last fall in which 648 applicants had been approved to participate in the canceled lottery.
“We won’t know the exact timing of lotteries until we see application volume. Our hope is that we would begin them in May-June,” said Collins. “Generally, there will always be multiple lotteries — first for social equity verified applicants, and then a second that includes social equity applicants plus non-SE applicants.”
The license application window officially opens Feb. 18. At that time, all applicants, regardless of their social equity status, will be permitted to take part. The application window will close on March 14. Aspiring operators who were denied social enquiry status last fall will be able to cure their applications during this window as well.
Licensing will have to wait for the final approval of the state’s proposed adult-use regulations, which are currently in a public comment period that closes Feb. 12.
After the closure of the comment period, OCM will make changes based on the feedback before submitting them to a state judge for confirmation. The secretary of state and the governor will have 14 days to veto the rules before they are published in the State Register and go into effect. OCM hopes this can take place in March, according to Collins.
OCM will eventually be accepting applications for 13 different license types. Four types will be capped at least until July 1, 2026, when the state plans to evaluate market saturation to see if more licenses are warranted. Those four types and limits are 100 mezzobusinesses, 50 cultivators, 24 manufacturers and 150 retailers. The available licenses will be evenly split between social equity candidates and general applicants, and lotteries will be held for those licenses.
Six of the remaining license types — microbusinesses, wholesalers, transporters, testing labs, delivery services and hybrid business — have no limit and won’t require a lottery.
Of those six uncapped license types, 211 applicants who already qualified as social equity candidates during the state’s previous attempt at a lottery have opted to be included this time around. Barring any hold-ups with local government, applicants seeking non-capped licenses could have them as soon as March.
Microbusinesses are allowed to cultivate and sell products from a single site, while mezzobusinesses are allowed up to three retail sites, along with cultivation.
Licenses for event organizers will become available this summer, while lower-potency hemp edible manufacturers and retailers will have to wait until fall 2025.
A lawsuit, concerns about straw applicants derailed the first lottery
OCM originally planned to award 217 social equity license pre-approvals through a lottery that was scheduled for early December. Pre-approval licenses would have allowed the operators to work toward opening their business — and in the case of cultivators, put seeds in the ground — ahead of full licensure.
The pre-approval lottery was going to include 648 applicants, which was narrowed from 1,817. The lottery was sidetracked when some of the applicants deemed ineligible sued.
Spurned applicants sued the state in Aranguiz, et al v. Minnesota Office of Cannabis Management, et al, in Ramsey County District Court. Judge Stephen Smith ordered a temporary halt to the lottery after an emergency hearing on Nov. 25 and sent the case to the state appellate court.
Appellate Judge Jennifer Frisch filed an order on Jan. 29 setting the current timeline in the case with oral arguments scheduled for March 25.
Aside from the halt, the plaintiffs were seeking more time to cure their applications. Since the court order, OCM announced that it would be scrapping the pre-approval lottery and granting previously rejected social equity applicants an opportunity to cure their applications when applying for a license.
In court filings, the state alleged that plaintiffs Cristina Aranguiz and Jodi Connolly had entered into agreements with NXMN Partnership LLC, which is controlled by an individual who is not eligible for the lottery. As part of those agreements, the state says the plaintiffs planned to sell their businesses to NXMN for $100,000 if they were awarded licenses.
The state claimed that this was part of a larger effort from NXMN to flood the lottery process. NXMN, a Delaware-registered company, is associated with Tate Kapple. Kapple and Aranguiz are owners of the Iowa Cannabis Company. He is also associated with multiple licenses in Washington, Oregon and Iowa. Kapple applied for a retail and a delivery license in Minnesota using an MNcanna.org email address, the state said.
OCM was able to identify 120 retail applications and 120 delivery applications from Iowa that are linked to Kapple’s business and had the same $100,000 sale arrangement, according to a 60-page affidavit Taubel, who was then OCM’s general counsel, filed with the court.
Since then, OCM’s former interim director Charlene Briner stepped down from her position on Jan. 6 and Taubel was named as her successor.
Other plaintiffs included the limited liability companies Green Leaf MN, Wild Domain, Hendo Industries, Northern Illusion, Milstagrams, Better Bud Co. and Thrifties.
Legal possession of adult-use cannabis in Minnesota began on Aug. 1 following legislative action in May 2023. Since then, the state has been working on its commercial regulations and licensing.
Currently, the only adult-use shops are four dispensaries open in tribal territories.
The state is home to 15 medical dispensaries that are split between two operators, LeafLine Labs, which operates as RISE, and Green Goods. They are owned by multi-state operators Green Thumb Industries and Vireo Growth, respectively.
Those operators will have the chance to apply for hybrid licenses to access the adult-use market.
