Dabney: Will tribes have an unfair advantage in Minnesota’s cannabis market?

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Tribal compacts first landed on my radar several years ago when I served as director of medical cannabis for Red Lake Nation, building policies that guided the establishment of its medical cannabis production facility now known as NativeCare. As a person of Choctaw heritage myself, I’ve always felt a deep personal commitment to supporting Indigenous communities and their economic sovereignty.

In discussions with state lawmakers, I championed the inclusion of tribal compact language in Minnesota’s 2023 cannabis legalization bill, believing strongly in its potential to empower tribes. Yet as Minnesota inches closer to fully launching its recreational cannabis market, I find myself increasingly concerned. Our state’s approach to tribal compacts, while well-intentioned, is unlike any other in the nation.

Other states, like Washington, created balanced agreements after their cannabis markets were already well-established, ensuring fairness through strict compliance and equitable taxation. Minnesota, however, is integrating tribal compacts from the outset, granting tribal businesses significant competitive advantages such as early market entry, regulatory exemptions and potentially favorable tax rates.

Now, as entrepreneurs — especially social equity applicants — voice anxiety about fairness and competition, I feel caught between two crucial truths: Tribal sovereignty must be respected and empowered, yet it should never come at the expense of other historically marginalized groups’ fair shot at success.

Minnesota’s Office of Cannabis Management (OCM) is in the process of finalizing these tribal compacts. On the surface, the compacts seem progressive: They promise economic opportunities for 10 of Minnesota’s 11 federally recognized tribes, which are negotiating agreements that would allow them to launch dispensaries and large-scale cultivation facilities outside of tribal lands ahead of state-licensed businesses. Although Minnesota tribes already cultivate and sell cannabis independently on their reservations under tribal sovereignty, a state compact is required if tribes wish to participate in Minnesota’s broader cannabis marketplace beyond reservation boundaries.

OCM Interim Director Eric Taubel has downplayed concerns about market domination, saying that Minnesota’s cannabis market will have room for lots of players.

But critics argue these compacts will create an uneven playing field, especially given the slow rollout of the state’s licensing system for everyone else. Tribes will be able to enter the market first and have already started securing prime retail locations. They will be able to establish customer loyalty and strong brand recognition as well as build substantial cultivation capacity while non-tribal businesses are still navigating the bureaucratic licensing maze. This first-mover advantage will make it considerably more challenging for state-licensed businesses to compete once they eventually enter the market.

Because Gov. Tim Walz’s administration negotiates these compacts privately, details remain unclear apart from leaked drafts revealing substantial potential advantages for tribal businesses.

Perhaps the most contentious issue involves taxation. State-licensed cannabis businesses must collect a mandatory 10% cannabis tax on top of local sales taxes. In contrast, tribal enterprises, according to the draft compact language, will be able to negotiate their tax rates directly with the state, potentially allowing them lower rates. If tribes secure the right to pay significantly lower taxes — or none at all — tribal dispensaries could undercut state-licensed competitors, creating price disparities that threaten the viability of emerging, smaller businesses.

Other states have taken different approaches on tribal compacts with mixed success. In California there are no state-tribal cannabis compacts, so tribes operate independently under their sovereignty. The result: The state has two parallel cannabis economies — one state-regulated, one tribal — creating consumer confusion, competition concerns, and regulatory gray areas.

Washington state took a different path, integrating tribes after the market was already stable. It requires compliance checks, taxation parity and clear regulatory oversight. In Washington, tribal cannabis businesses must adhere to state regulations when operating off tribal lands, preventing unfair competitive advantages. Joint compliance checks are required to ensure that both state and tribal authorities oversee cannabis operations fairly.

Justin Nordhorn, director of policy and external affairs for Washington state’s liquor and cannabis board, explained to me how Washington ensures fairness in its compact system.

“If a tribe operates a business not on tribal and trust land, they must get a state-issued license and follow all state laws and rules off of tribal lands,” he said. “Cannabis sales on 23 of 29 federally recognized tribes have signed compacts. Sales made on state lands must pay an equal 37% excise tax at the point of sale, and those taxes go to the state. If the sale is made on tribal lands, they charge the same 37% tax, but that tax is kept by the tribes.”

Minnesota’s proposed compacts, by contrast, offer tribes more autonomy, less oversight and fewer tax obligations than those in Washington. Without an adjusted structure for compacts, Minnesota’s market could develop long-term imbalances where tribal businesses benefit from looser regulations and lower taxes while state-licensed businesses face stricter compliance requirements and higher operating costs.

The impact of Minnesota’s tribal compacts is a real concern to social equity applicants, who fear being sidelined. Pamela Rollins, CEO of Lekkers Drinks in Blaine, captures this tension well. As a Black-owned business, she noted her company is deeply invested in creating equitable opportunities, especially for those who have been historically marginalized. She acknowledged the importance of tribal sovereignty, but also expressed concerns about the lack of a level playing field unless policymakers address taxation and regulatory disparities.

“For Lekkers Drinks, this dynamic means we must work even harder to compete, innovate and advocate for policies that ensure fair access and opportunities for all,” she said. “We hope to see a future where tribal enterprises, Black-owned businesses and other minority-led companies can coexist and thrive together.”

Brooklyn Park Mayor Hollies Winston echoes Rollins’ concern. He argues that Minnesota’s compact strategy fundamentally undermines social equity, which was a central promise of legalization. Winston has publicly urged Walz and Taubel to reconsider these compacts. “The communities most affected by cannabis prohibition should be the first to benefit from legalization,” Winston says. “Instead, this compact language defeats the purpose of equity provisions.”

With Minnesota’s first cannabis-license lottery scheduled for June, the coming months will determine whether the state’s compact structure fosters a balanced marketplace or creates long-term disparities.

I find myself genuinely torn. The tribal compacts offer vital economic opportunities to historically marginalized Indigenous communities, which must not be discounted. Yet, their current form also risks disadvantaging other marginalized groups — social equity applicants who have waited a long time for an equitable opportunity to enter a newly legalized industry.

As Minnesota moves closer to launching its long-anticipated recreational cannabis market, it faces a critical test: Can the state balance tribal sovereignty with fairness for all cannabis entrepreneurs? How policymakers navigate this delicate balancing act in the coming months will define Minnesota’s cannabis future —for better or worse.