Out-of-state applicants swarm Minnesota’s early cannabis license window

More than half of the early social equity applicants vying to be first in line to receive Minnesota cannabis licenses live in other states.

The Office of Cannabis Management (OCM) received more than 1,800 pre-applications this summer from around the country. Just 802, or 44%, came from Minnesota residents.

State law doesn’t require applicants to live in Minnesota. All social equity applicants who clear an initial review will have equal treatment in the lottery drawing this fall that will determine who wins the license preapprovals, according to the cannabis office.

“We knew we couldn’t keep out-of-state parties out because that has been deemed unconstitutional in other states,” said Carol Moss, a cannabis industry attorney and member of the state Cannabis Advisory Council. “We knew out-of-state people were going to come in, so it didn’t take some of us by surprise.”

Still, there remains an inherent tension between those building a homegrown industry and the expected flood of outsiders all hoping to get a piece of what is expected to be a $1.5 billion market by the end of the decade.

“We were seeing a lot of last-minute deals being made with social equity applicants, and we were trying to make sure there wasn’t anything predatory going on,” Moss said.

After legalizing marijuana in 2023, the Legislature passed a measure this spring that allows certain applicants to preapply so they can be ready to receive licenses as soon as the OCM is able to issue them, likely early next year.

Social equity applicants can include those convicted of marijuana crimes and their relatives; military veterans; those who lived in areas with high rates of cannabis enforcement and/or poverty; and small farmers.

The preapproval is meant to put social equity applicants on equal footing with well-funded entrepreneurs who might have an easier time navigating the regulatory process. Those who win the preapproval lottery will be able to go to investors, landlords and local governments with the certainty needed to line up the money and approvals required to start their businesses as the state issues full licenses.

But, Moss said, “This is just a preapproval, not a license. You still have a lot of rigmarole to get through.”

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The state’s cannabis agency recently issued a first draft of its rules and expects to finalize them later this year, which are key steps needed before the state can issue any licenses and dispensaries can open.

However, grow operations chosen in the lottery will be able to start as soon as they win the preapproval. Coupled with cannabis grown on reservations, the early cultivators could give the new industry a stable supply and help move consumers out of the illicit market as dispensaries open.

In many states that legalized recreational marijuana, high prices because of low supply and high demand often marked the early days.

There are a total of 282 licenses available in the preapproval lottery, including 100 microbusiness, 25 mezzobusiness and 38 retailer licenses up for grabs in the first round. Microbusinesses and mezzobusinesses allow the licensees to both grow and sell cannabis.

Most of the social equity pre-applications were for dispensary, micro and mezzo licenses. Another round of pre-applications should open this fall.

Among the out-of-state applicants, many came from states that have existing adult-use cannabis markets. More than 180 listed Arizona addresses on their entries, and hundreds more came from Illinois, Missouri, California and Maryland.

There were 29 applications for microbusiness and mezzobusiness licenses from a small town in Arkansas called Eudora.

Staff writer Matt DeLong contributed to this report.