Minnesota could license hundreds of marijuana retailers, cultivators in coming months

Minnesota has received more than 3,500 applications from prospective pot entrepreneurs for the first round of marijuana business licenses expected to be issued later this spring, according to data released Wednesday by the state Office of Cannabis Management (OCM).

The total includes 1,444 social equity applications that remain active after a previous license lottery was canceled late last year. An additional 2,085 applications were received during a monthlong window that closed March 16. That tally includes 297 social equity applications and 1,788 general applications for a range of available license types, such as cannabis retailer, cultivator and manufacturer licenses.

That means as many as 2,100 applicants could be eligible to receive licenses that allow them to operate at least one retail marijuana store in coming months, while 2,000 businesses could be permitted to cultivate cannabis in varying amounts.

However, the universe of possible licensees could shrink significantly as the OCM reviews applications. Some applicants may not meet minimum qualifications or could decide to withdraw from the process entirely.

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Qualified applicants seeking license types that are not limited in number — such as microbusiness, wholesaler, delivery service and medical cannabis combination business — can proceed with the licensing process once their applications are approved by the OCM, without entering a lottery.

More than half of all applicants are pursuing microbusiness licenses, one of three license types that allow the holder to cultivate, process and sell cannabis products, also known as vertical integration, on a relatively small scale.

About 200 social equity microbusiness applicants who qualified for a canceled license preapproval lottery are currently working their way through the licensing process and could potentially open ahead of two new lotteries tentatively slated for May and June. The first lottery will be reserved for social equity applicants seeking license types that are capped in number by law, with the other open to general applicants. Social equity applicants who are not awarded a license in the first lottery will also be entered in the second.

Social equity licenses are intended to help veterans, individuals who were harmed by cannabis prohibition and those living in areas of high poverty enter the state’s fledgling cannabis industry. The preapproval lottery was canceled last year after a handful of applicants sued the OCM alleging they were unfairly denied entry. The preapproval process was intended to allow social equity applicants to proceed with the work of setting up their businesses, as well as to permit some cultivators to begin planting in order to ensure a supply of cannabis was available when the market launches.

Minnesota cannabis attorney Jason Tarasek said the flood of microbusiness applicants could greatly improve the chances in the lotteries for applicants seeking capped license types, such as cultivator, manufacturer and retailer licenses. For example, there are just 96 applicants seeking 50 available cannabis cultivator licenses and 83 contenders for 24 manufacturer licenses.

“A lot of people, including a lot of my clients, pivoted to the microbusiness license because it’s uncapped,” he said. “I think some of those people in the lottery now have better odds than I was anticipating a couple weeks ago.”

Tarasek said he expects most microbusiness applicants will only open a retail store, without cultivating or manufacturing their own products. That could lead to a glut of retailers with limited available product to sell, particularly in the Twin Cities.

“In light of the decision of the cities of Minneapolis and St. Paul not to limit the number of dispensaries, I’m concerned that we may see an oversaturation of dispensaries in the Twin Cities,” he said.

The OCM also announced this week that it has submitted a draft of regulations that will govern the state’s legal marijuana market to an administrative law judge for review. The judge has 14 days to either approve the rules, approve them with changes or reject them. Once the rules are approved and published in the state register, the OCM can begin issuing cannabis business licenses.

The draft regulations were revised after a 30-day public comment period earlier this year. Many of the rules address the minutiae of how cannabis businesses should operate, such as requirements for product packaging, security plans, and how to dispose of waste material.

However, some regulations drew criticism from business owners and advocates. Perhaps the biggest lightning rod was a 70% limit on THC potency for cannabis concentrates that appeared in a previous draft of the rules. Following the public comment period, the proposed limit was raised to 80%.

Gabriel Hanson, owner of Athens Township-based hemp extraction company Loon Lab Extracts, said he is encouraged the OCM raised the proposed potency limit, but he remains disappointed that any limit was included at all.

“It’s a shame that they didn’t eliminate the rule completely,” Hanson said. “I think it is only going to encourage the black market to thrive.”

Minnesota is also in the process of negotiating cannabis compacts with 10 of 11 tribal nations in the state. Once finalized, the agreements could allow tribes to license up to five retail marijuana stores outside of reservations, according to a draft compact obtained by the Minnesota Star Tribune. OCM interim Director Eric Taubel said he expects the first compact to be completed in the next month or so. Five Minnesota tribes are currently operating legal marijuana businesses on tribal land.

Tarasek said he is excited to see signs of progress toward opening the state’s marijuana market, nearly two years since the Legislature voted to legalized cannabis for adult use.

“It appears that we actually will have a market launch in 2025,” he said. “I’m certain a lot of people are eager to start visiting dispensaries and buying cannabis.”