By Jen Randolph Reise
The May 2023 legalization of adult-use (aka recreational) cannabis in Minnesota1 brought some dramatic changes quickly: personal possession and legal use! Home growing!
But the larger project of implementing the legislation—and creating a brand-new state agency, the Office of Cannabis Management (OCM), to regulate the market—was always going to be a multi-year process. Here’s where we stand following the conclusion of the 2024 legislative session.
2024 legislative changes
Adult-use licensing
This spring, Minnesota’s young OCM asked the Minnesota Legislature to make some important changes to the licensing structure. Ultimately, OCM got most of the changes to cannabis law it had asked for, in addition to a number of other changes pursued by advocates and industry participants. The 2024 bill changed not just Minnesota’s still-pending adult-use licensing regime, but also expanded its medical program and continued the delicate balance Minnesota is trying to strike with its regulation of hemp-derived edibles and beverages.2
First, in a move to prioritize social equity, the Legislature made two huge OCM-requested changes to the regulatory structure. The modified law:
- adds a special early licensing round of applications this summer for only “social equity applicants”; and
- moves to a “qualified lottery” with caps rather than a fully merit-based system, both for that early social equity round and for the later regular round (expected in the first quarter of 2025).
Minnesota’s definition of a “social equity applicant” ended up being fairly broad. It includes people with prior convictions for cannabis possession or sale and their family members, as well as all veterans and people who live in areas of Minnesota that fall below certain poverty standards.3 An effort to add to the social equity definition women who qualify under Minnesota law as the owners of women-owned businesses failed.
Most applicants are in fact teams of people organized into an entity, and the bill provided that an entity is a social equity applicant if it is at least 65 percent owned by individuals who qualify as social equity applicants.4
Initial application process
The 2024 legislation also dictated a timeline: OCM would open a first round of applications, for verified social equity applicants only, from July 24 to August 12 this summer. These applicants did not need to have identified the real estate on which they will operate in order to submit these applications, but would submit a fairly lengthy application describing their business plan, operating procedures, ownership, and more. Before that, applicants first had to go through a verification portal process, submitting proof of their status as equity applicants.5
After the August 12 application deadline, OCM will evaluate these applications for completeness against its minimum requirements, a process generally referred to as “qualification.” Assuming there are more qualified applications in a category than the caps set forth in the statute, OCM will then conduct a lottery to determine which applicants receive the coveted license pre-approvals. The change from a true merit-based approach (as originally passed in HF100) to a qualified lottery in the 2024 legislation was a controversial one, especially because of the limited number of licenses available. It remains to be seen just how many applications OCM may receive in the various categories, and how many will be approved as qualified applications that are entered into the lottery.
In an effort to limit the abuses of lotteries seen in other states, “true party in interest” rules limit any individual from being an owner or controlling person on more than one application (except for owners of 10 percent or less) and require significant disclosure.6
Additional provision was made for municipal cannabis stores (also known as “munis”). A city or county that wishes to open a cannabis dispensary must submit an application, but is not subject to the lottery process or the license caps.7 A muni also does not count against the license caps.
The 2024 bill also consolidated medical cannabis licenses into the other license types as endorsements, rather than treating them as wholly separate from the recreational licenses. Minnesota’s two current medical cannabis licensees will continue to serve patients in the medical program during this transition time, and are expected to apply for combination licenses allowing them to also serve the adult-use market when it launches. Unlike some states, Minnesota did not offer existing medical cannabis licensees a head start advantage in the adult-use market.
Overall, Minnesota’s regulatory structure continues to limit vertical integration for the large licenses, while making room for a “craft cannabis” industry through smaller, vertically integrated micro- and mezzo-licenses. A microbusiness license, for example, allows for a licensee to grow up to 5,000 square feet of flowering canopy, process it into edibles or other product, operate a retail location, and serve for on-site consumption.8 A mezzobusiness license allows up to 15,000 square feet, an equivalent increase in manufacturing capacity, and three retail locations.9 Inspired by Minnesota’s thriving microbrewery and microdistillery scene, the microlicense approach will, hopefully, foster a creative and dynamic craft industry, benefitting Minnesota entrepreneurs and consumers.
Industry efforts to provide for starting cultivation before dispensaries open mostly failed, in spite of testimony about the time, effort, and capital it takes to set up a successful commercial grow. Lawmakers did approve a small exception, however: Social equity applicants who are chosen in the qualified lottery in the micro, mezzo, and bulk cultivation categories will be able to begin cannabis cultivation at that time (the expected time frame is October 2024), so long as they also comply with local zoning ordinances and state fire and building codes.10
Otherwise, all applicants must wait to touch the plant, and no dispensaries may open, until a future date established by OCM, likely in summer 2025 and possibly later.
The uncertain timing is in part because OCM needs to go through rulemaking, generating both proposed and final rules. The process could also be slowed by litigation, as we have seen in many states, such as litigation over the fairness of the license selection process. Indeed, mitigating litigation risk was one reason OCM proposed the move to a qualified lottery rather than a full merit-based system.
Regulation of hemp-derived THC beverages and edibles
Other interesting provisions in the new legislation massage the regulation of Minnesota’s thriving industry in beverages and edibles containing hemp-derived THC. This year’s legislative changes included allowing hemp-derived THC beverages to be served out of the packaging for the first time,11 opening up opportunities for serving them on tap and in mocktails. It also softened the requirements for establishments that sell both alcohol and THC, replacing the much-criticized five-hour rule with a requirement not to serve an “obviously intoxicated” person.
Medical cannabis program expansion
The 2024 bill also made important updates to Minnesota’s medical cannabis program, making it much easier to access. In addition to the relatively limited list of qualifying conditions allowing someone to become a medical patient, qualifying conditions now include “a medical condition for which an individual’s health care practitioner has recommended, approved, or authorized the use of cannabis by that individual to treat the condition,” which opens the medical program up to anyone who needs it.12 Veterans will have even easier access, as they may attest that they have been diagnosed with a qualifying medical condition.13
Minnesota also added caregiver grow: A registered medical patient who does not want to or cannot grow their legally allotted eight homegrown cannabis plants can delegate those eight plants to be grown by their registered designated caregiver. One caregiver may cultivate up to the maximum of eight plants on behalf of one patient household, as well as up to eight plants for themselves.14 Especially in the absence of fully licensed dispensaries, caregiver growing increases access to quality medical cannabis for disabled people and apartment dwellers.
Criminal law changes
Minnesota law now provides that a police officer’s “perception of the odor of cannabis” cannot serve as the “sole basis” to search a vehicle.15 This codified the Minnesota Supreme Court’s ruling in State v. Torgerson that the odor of cannabis, alone, does not justify the search of a vehicle.16
Other updates and continuing issues
Expungements
In 2023, HF100 provided for a broad, two-part approach to expunging past convictions of cannabis-related crimes.17 For misdemeanor cannabis charges, the Bureau of Criminal Apprehension (BCA) must identify eligible records and bring them to the court for expungement, without requiring a petition from record holders. The court must then dismiss the charges and expunge records within 60 days of receiving them from the BCA.18
Felony cannabis charges, on the other hand, require a different process: The BCA brings eligible offenses to the newly created Cannabis Expungement Board (CEB) for review.19 Under this regime, an individual is eligible if they were charged for a nonviolent felony cannabis offense or any felony cannabis-related activity that is now associated with a lesser charge by means of the new legislation.
These broad expungement provisions were designed to undo some of the harm of the years of cannabis prohibition and unequal enforcement. The BCA announced in May 2024 that it had expunged 57,780 low-level marijuana-related convictions, ahead of schedule.20
Meanwhile, however, the process of considering more serious crimes for possible expungement or resentencing has proceeded much more slowly. The recently established Cannabis Expungement Board hopes to begin reviewing cases before the end of 2024 and has stated that it will deny expungement to cases involving a dangerous weapon or the infliction of (or attempt to inflict) bodily harm on another.21
City zoning and policies
Under HF100, cities have the important task of determining zoning requirements for the different categories of cannabis business licenses and setback rules.22 To my knowledge, only St. Paul has released its zoning map;23 Minneapolis24 and Brainerd,25 among others, have released discussion drafts. At the same time, many entrepreneurs are attempting to select real estate for their businesses, and the uncertainty about where a business may legally operate, combined with the still-pending operational and security rules, makes that very difficult.
Under HF100, cities or local government units must allow at least one retail location (dispensary or micro or mezzo with a retail endorsement) per every 12,500 residents,26 in an effort to ensure that all Minnesotans have access to safe, legal cannabis. A city may allow many more. I expect that we will see a continuation of disparate approaches, between the cities who set reasonable regulations and welcome the canna-tourism revenue (especially in border cities), and those that attempt to limit and discourage this new industry.
Finally, cities have also been working to regulate by ordinance whether people may legally use cannabis in public spaces such as sidewalks, parks, and trails. Doing so requires balancing the needs of all users of these spaces, as well as directing police resources appropriately. A common compromise is to allow smoking of cannabis where smoking of cigarettes is allowed, which is relatively easy to achieve and to enforce. In any case, privately owned spaces such as bars and restaurants may allow use at the property owner’s discretion, though smoking is generally prohibited indoors by the Minnesota Clean Air Act.27
Employment & testing
HF100 added strong protections for employees who use cannabis in their off hours. Since testing reveals whether someone has used cannabis in the past 30 days (approximately), and consumption of legal hemp-derived THC products as well as medical and adult-use cannabis will trigger a positive test, Minnesota generally prohibits employers from doing pre-employment testing for cannabis as a condition of employment except in specified cases, including “safety-sensitive” jobs and instances in which testing is required by federal law.28
Anecdotally, many employers in Minnesota have not adjusted their approaches to comply with this change, and have fired or refused to hire workers who tested positive for THC. Employers should, instead, update policies to clearly prohibit using cannabis at work or coming to work impaired (just as they do for alcohol), and discipline employees who come to work functionally impaired (just as they would for alcohol).
In addition, registered medical patients have further protections against termination for a positive test under Minnesota law,29 and employers should keep in mind that medical patients may need access to cannabis to be effective workers (for example, to prevent seizures). Again, functional impairment versus being ready to work are appropriate standards, not prohibition.
Conclusion
The stigma of being a cannabis user and the long shadow of Reefer Madness are easing in Minnesota, both by law and by policy. We have another year before legal dispensaries and other regulated businesses open, and Minnesotans have much to do in that time as prospective business owners, employers, regulators, and service providers. I’m looking forward to the challenge.
JEN RANDOLPH REISE is a leading Minnesota cannabis lawyer who represents many social equity applicants and entrepreneurs seeking to launch craft cannabis businesses. She leads the business and cannabis law groups at North Star Law Group PLLC in St. Paul, Minnesota (www.northstarlaw.com) and frequently speaks on podcasts, CLEs, and panels on cannabis law and policy.
Disclaimer: This article constitutes a summary of selected provisions and does not purport to be comprehensive or constitute legal advice. Furthermore, cannabis law in particular changes rapidly. Statements herein are the point of view of the author, not Bench & Bar, and speak only as of the time they are made.
Notes
1 2023 Minn. Stat. 342.09 (commonly referred to as HF100).
2 2024 Minn. Session Laws, Ch. 121.
3 Id. at Section 71, amending Minn. Stat. 342.17(a).
4 Id. at Sec. 71, amending Minn. Stat. 342.17(b).
5 Id. at Sec. 65, amending Minn. Stat. 342.14 subd 4; see also https://mn.gov/ocm/businesses/equity-applicants/overview.jsp
6 Id. at Sec. 76, amending Minn. Stat. 342.185.
7 Id. at Sec. 65, amending Minn. Stat. 342.14.
8 Minn. Stat. 342.28 (2023).
9 Minn. Stat. 342.29 (2023).
10 2024 Minn. Session Laws, Ch. 121, at Sec. 151.
11 Id. at Sec. 6, amending Minn. Stat. Sec. 151.72 subdiv 3, effective 7/1/2024.
12 Id. at Sec. 13, amending Minn. Stat. Sec. 152.22, effective 7/1/2024.
13 Id. at Sec. 103, amending Minn. Stat. Sec. 342.52, effective 7/1/2024.
14 Id. at Sec. 106, amending Minn. Stat. 342.52 subd. 9, effective 7/1/2024.
15 Id. at Ch. 123, Sec. 5.
16 State v. Torgerson, 995 N.W.2d 164 (Minn. 2023).
17 HF 100, Sec. 609A.055.
18 Bureau of Criminal Apprehension, Expungements, https://dps.mn.gov/divisions/bca/expungements/Pages/default.aspx
19 HF 100, Sec. 609A.06.
20 Ryan Faircloth, Minnesota expunges nearly 58,000 misdemeanor cannabis records, Star Tribune, 5/13/2024, https://www.startribune.com/minnesota-expunges-nearly-58000-misdemeanor-cannabis-records/600365603.
21 Minnesota Cannabis Expungement Board, https://mn.gov/ceb
22 Minn. Stat. 342.13 (Section (c): “a local unit of government may adopt reasonable restrictions on the time, place, and manner of the operation of a cannabis business provided that such restrictions do not prohibit the establishment or operation of cannabis businesses. A local unit of government may prohibit the operation of a cannabis business within 1,000 feet of a school, or 500 feet of a day care, residential treatment facility, or an attraction within a public park that is regularly used by minors, including a playground or athletic field.”) Also see “A Guide for Local Governments on Adult-Use Cannabis” by the Minnesota Office of Cannabis Management (June 2024), available at https://mn.gov/ocm/assets/Minnesota%20OCM%20LG%20Guide_tcm1202-627967.pdf.
23 See Adult-Use Cannabis Ordinance Amendment, https://stpaul.granicus.com/DocumentViewer.php?file=stpaul_a5c5ccfb9329f4e3acc7c05f0e0d7226.pdf&view=1
24 See Proposed Zoning Code Text Amendments: Adult-Use Recreational Cannabis, https://lims.minneapolismn.gov/download/Agenda/6117/4658/CoWmemo-AdultUseCannabisTextAmendment.pdf
25 See Proposed Cannabis Ordinance, https://brainerdmn.portal.civicclerk.com/event/37/files/attachment/2234.
26 Minn. Stat. Sec. 342.13(i)-(k).
27 Minn. Stat. Sec. 342.09; Minn. Stat. 144.414.
28 Minn. Stat. Sec. 181.951; also see Minn. Stat. Sec. 181.953 (requiring written policies, confirmatory tests, and offering drug counseling before termination is appropriate). Similarly, random drug testing for cannabis is only allowed for safety-sensitive positions or professional athletes. Minn. Stat. Sec. 181.951 subd. 4.
29 Minn. Stat. Sec. 342.57 subd. 5.