Article by: Partner Christopher Parrington

In 1964, Minnesota music legend Bob Dylan warned the world that “the times they are a-changin.”
Sixty years later and this lyric is true with regard to Minnesota’s cannabis industry.  Within the first few days of the 2023 legislative session, a bill was introduced for the legalization of recreational cannabis in Minnesota (the “Bill”).  Although a lot still needs to be done, recent comments from Governor Walz along with the democratic control of the legislature means legalization is no longer a question of “if,” but “when,” with months being the most likely answer. The Bill serves as a great guide to what legalization will look like in Minnesota even though it will definitely undergo plenty of changes before it becomes law.

The Bill proposes the issuance of 13 cannabis-related licenses including recreational and medical cultivation and manufacturing; recreational, medical and lower potency edible[1] retail sales; wholesale; transportation; testing; delivery; event organizing; and microbusinesses.  Cultivation licenses are broken down into 2 categories:  craft cultivators limited to 10,000 square feet of plant canopy; and bulk cultivators limited to 30,000 square feet of plant canopy.  Anyone holding a cultivator license would also be able to hold a manufacturing and event license, but not a license for retail sales.  Anyone holding a manufacturing license would also be restricted from holding a retail sales license, but not cultivation. Manufacturers will have to obtain a separate endorsement for extraction or an “edible cannabinoid product handler endorsement” for edible products. Anyone who holds a retail license would be banned from holding cultivation and manufacturing licenses as well. The Bill provides for the separate licensing of retailers of lower potency edible products, but does not allow for them to hold any other cannabis licenses; however, anyone holding such a license may also hold liquor licenses and sell lower potency edible products including beverages intended for on-site consumption, thereby opening the door for the sale of cannabis products in bars and liquor stores.

The Bill is clearly against vertical integration in Minnesota’s cannabis industry unless the Office determines that the issuance of multiple licenses to a single applicant is “necessary to ensure a sufficient supply of cannabis flower and cannabinoid products” during the first year of cannabis sales.  The Bill’s clear intent is to separate cultivation and manufacturing from retail sales, requiring owners to decide their level of involvement in the cannabis industry prior to applying.  However, the Bill does provide for some limited vertical integration under a cannabis microbusiness license that allows for limited cultivation, product manufacturing, retail sales, and operation of an on-site edible consumption establishment.

Under the Bill, there will be a competitive application process for licenses with minimum requirements such as disclosure of entity ownership and control; bankruptcy and criminal background checks; proof of legal possession of the premises for the business’s operation; adequate security measures; trade name registrations; a detailed business plan; and labor organization attestation.  The Bill requires that at least 75% of the licensed businesses be owned by Minnesota residents.  The Office will be responsible for establishing the application process and required materials, with points being awarded for social equity applicants; veteran applicants; security and record keeping; employee training; business plan and financial situation; diversity; labor and employment practices; cannabis knowledge and experience; and environmental plan.  Additional points may be awarded if the license holder would expand to an underrepresented market such as Minnesota’s medical cannabis program and social equity status must account for at least 20% of the total available points, which will take into consideration “the number or ownership percentage of cooperative members, officers, directors, managers, and general partners who qualify as social equity applicants.”

Local governments will not be allowed to prohibit the operation of a licensed cannabis business under the Bill, but could adopt reasonable restrictions on the time, place, and manner of the operation of a cannabis business.  More significantly, the Bill that provides that “[a] city or county may establish, own, and operate a municipal cannabis store” subject to the same restrictions as commercially owned cannabis retailers, creating a model similar to Minnesota’s municipal liquor stores.

The Bill recognizes that entry into the cannabis industry contains numerous financial barriers and, therefore, proposes the establishment of numerous financial ways to assist businesses in the cannabis industry.  Specifically, the Bill proposes the establishment of cannabis grant and financial assistance programs as follows:

• CanRenew: designed to award grants to eligible organizations including educational institutions, nonprofits, private businesses, community groups, local governments and partnerships, for investments in communities where long-term residents are eligible to be social equity applicants.
• A program for the issuance of substance use disorder treatment and prevention grants.
• CanGrow: establishing a revolving loan account for loan financing of cannabis grower grants designed to help farmers expand into the legal cannabis industry.
• CanStartup: designed to award grants to nonprofit corporations to fund loans to cannabis businesses focused on job creation in communities consisting of social equity eligible applicants.
• CanTrain: designed to award grants to organizations training people for work in the cannabis industry and individuals eligible to acquire such training.

Finally, the Bill is also focused on correcting the wrongs that have occurred as a result of prior cannabis prohibition through an expungement and felony resentencing section that includes automatic expungement of certain cannabis offenses as well as implementation of cannabis and substance use education programs directed at youth, pregnant and breastfeeding women, and home visiting programs for homes with infants and young children.  The future of cannabis legalization is here and the Bill gives existing medical and potential cannabis businesses and their owners a great insight into what that future may look like in Minnesota.

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[1] Under the Bill, “lower potency edible products” are defined as servings that contain no more than 5 milligrams of Delta-9 THC per serving, 25 milligrams of cannabidoil per serving, and not more than a combined total of 0.5 milligrams of all other cannabinoids.  Id. § 342.01, subd. 45.