Many thanks for today’s guest post on Cannabis Law from Jen Randolph Reise. Jen is an attorney, teacher, and entrepreneur and heads Business and Cannabis Law at the North Star Law Group in St. Paul, Minnesota. Today Jen discusses the new Adult Use Law in Minnesota.
Exciting times in the North Star State: Minnesota is poised to become the 23rd state to legalize recreational adult-use cannabis.
At the same time, Minnesotans are already enjoying the hemp-derived THC beverages widely served at restaurants and breweries – pioneering a social consumption model unique in the nation.
This article addresses:
- Expected timing and implementation in Minnesota
- Licensing structure
- The future of the hemp-derived THC beverage market
- Other points of interest
Timing
Similar versions of a very comprehensive omnibus cannabis bill passed the Minnesota House and Minnesota Senate on April 25 and 28, respectively, and are now in conference committee. Insiders expect that the bill will be passed out of committee and approved by both the House and the Senate before the end of session on May 22, and Governor Walz has said he will sign it.
At the same time, many steps remain before Minnesotans (aged 21+) can walk into a legal dispensary. The bill creates a new regulator, the Office of Cannabis Management (OCM), which will be promulgating important rules and granting licenses. Currently, the Senate bill directs license applications to be available Jan. 1, 2024. The OCM will need some time to review those applications and grant licenses. Then, applicants who receive a cannabis business license must build out their facilities and pass inspection by OCM and/or the local municipalities to ensure regulatory compliance. Only then can Minnesota growers legally plant seeds. From seedling to harvested flower, cannabis production can take three to eight months, depending on the plant’s strain, genetics, and environmental factors. All in all, insiders do not expect adult-use legal sales to start until summer to fall of 2024.
Licensing structure
The bill creates a roster of different types of licenses for businesses looking to participate in the adult-use cannabis market:
- Cannabis microbusiness
- Cannabis mezzobusiness
- Cannabis cultivator
- Cannabis manufacturer
- Cannabis retailer
- Cannabis wholesaler
- Cannabis transporter
- Cannabis testing facility
- Cannabis event organizer
- Cannabis delivery service
The authors are trying to create a craft cannabis market and minimize the influence of big cannabis companies eager to come into Minnesota. Thus, there are strict limits on vertical integration, especially for larger businesses.
However, the micro and mezzo licenses offer more flexibility. A licensed cannabis mezzobusiness, for example, may legally conduct a range of activities including growing up to 5,000 feet of canopy, manufacturing concentrate and other adult-use cannabis products (as well as hemp-derived THC products), and packaging and selling the whole range of products and immature plants at up to three retail locations. They may also hold a cannabis event organizer license.
A licensed cannabis retailer, on the other hand, may operate up to five retail locations but cannot grow or manufacture product. They may, however, also hold a cannabis delivery service license, a medical cannabis retailer license, and a cannabis event organizer license.
Insiders do not expect the kind of limited, high-priced licensing seen in some states. Instead, this is a licensing scheme designed to encourage entrepreneurship. Cities cannot entirely prohibit cannabis businesses, and license fees are moderately priced compared to some states, at $500 – $10,000 depending on the license.
Other points of interest
Expungement: The bill also includes comprehensive expungement provisions: automatic expungement of petty misdemeanor and misdemeanor marijuana convictions, and creation of a Cannabis Expungement Board to review other convictions.
Firearms: Gun owners in Minnesota have been reluctant to apply to the medical marijuana program over concerns that it would prevent them from getting a permit to carry. The new bill fixes that and goes beyond, providing that being a patient in the medical cannabis program or use of adult-use legal cannabis does not disqualify a person from possessing firearms.
Drug testing: Employer drug testing for cannabis is largely prohibited by the new bill, though employers are allowed to test for certain “safety-sensitive” and medical positions and those tied to federal regulation.
Taxes: The authors are keeping taxes relatively low in an attempt to replace the black market. The House bill says 8%; the Senate bill says 10%. Medical cannabis receives exemptions and other favorable tax treatment.
Home Grow: The bills allow Minnesotans to home grow for the first time, up to 8 plants (4 mature at once).
Medical: Minnesota has had a fairly restrictive medical program since 2014. The omnibus bill transfers management of it to the new OCM, but makes few changes.
Local ownership: The House bill also includes a requirement of 75% ownership by Minnesota residents.
Hemp-derived THC
Since July 1, 2022, Minnesota has been participating in an experiment of sorts: a definitional change last year allowed the sale of beverages and edibles with 5 mg per serving of hemp-derived delta-9 THC. Without further regulation on who can produce or sell, the industry has rapidly advanced, led by Minnesota’s craft breweries. It feels like almost every brewery has its own craft seltzer, and they are widely sold in restaurants and bars for on-site consumption right alongside alcoholic choices. People bring them to potlucks.
In other words, Minnesota is experiencing low-key social consumption far ahead of “consumption lounge” efforts in Colorado, Nevada, or elsewhere. In addition, as these products are federally legal under the 2018 Farm Bill (as they are all derived from hemp with less than 0.3% THC), they can be manufactured and shipped with minimal regulation and legal risk, purchased with credit cards, and avoid 280E taxation issues.
After intensive conversation about how to move forward with legalization of adult-use cannabis in light of this unique market, the pending bill includes integrated but parallel regulation of what it terms lower-potency hemp edible products. It creates two additional new licenses, low-potency hemp edible manufacturer and retailer, and imposes labeling and testing restrictions that kick in over time.
As hemp-derived products may be sold without interruption as the full adult-use regulations roll out, some entrepreneurs are planning to launch with hemp-derived THC and then apply for licenses and transition to the full adult-use market. Others may stay in the hemp-derived market to avoid the heavier regulation and risk.
It is, and will be, a complex and dynamic time in Minnesota!
Finally, a disclaimer: The bill is not yet final, and there is much more detail to come as the Office of Cannabis Management is formed and promulgates rules, forms, and policies under the statute. Please do not rely on this article as legal advice; consult an attorney who can provide those updates and advise you on your specific circumstances.
Jen Randolph Reise is the Head of Business and Cannabis at North Star Law Group in St. Paul, Minnesota.
