Will the delayed cannabis license lottery slow the rollout of Minnesota’s marijuana market?

A critical goal of Minnesota’s first lottery for people seeking cannabis business licenses was to give a select number of cultivators the opportunity to immediately begin growing, helping establish a supply chain of marijuana ahead of next year’s retail market launch.

That goal is now in jeopardy after a Ramsey County judge blocked the state’s Office of Cannabis Management (OCM) from holding the lottery in response to lawsuits filed by applicants, who said they were unfairly denied entrance. Judge Stephen Smith sent the recently filed legal challenges to the Minnesota Court of Appeals for further review Monday delaying the lottery indefinitely.

The lottery the OCM had planned to hold Tuesday for social equity applicants seeking license preapproval was meant to give veterans, residents of high-poverty areas and people negatively affected by cannabis prohibition a head start in the new industry. With license preapproval, aspiring cannabis business owners would have the certainty they need to secure investment, commercial real estate and local zoning approval. Preapproved cultivators would be allowed to start building the state’s cannabis supply chain.

“OCM’s focus from the start has been on meeting market demand as we launch a new supply chain dependent industry,” OCM spokesman Josh Collins said in a statement. “We are evaluating our options based on Monday’s decision, including the impact to social equity applicants and our plans for market launch in 2025.”

The lottery’s postponement, however long it may be, delays cultivation from starting. That could lead to less supply for retailers when the market opens next year.

The OCM rejected 1,169 of the 1,817 applicants who had hoped to enter the preapproval lottery, for reasons such as failure to meet qualifying standards, submit proper documentation or meet ownership requirements. But some of the attorneys representing rejected applicants in court said their clients were denied entry to the lottery for vague reasons, simple clerical errors or without any explanation at all.

Assistant Attorney General Oliver Larson, who represented the OCM in court on Monday, warned that if the lottery for social equity applicants is delayed too long, the office might have to abandon it entirely. That would mean no early cultivation, and no opportunity for the 648 social equity applicants who made it into the lottery to get preapproved for a license.

Aspiring cannabis retailers, cultivators and other entrepreneurs would have to wait until the OCM opens the application process and a broader license lottery to the general public early next year.

Carol Moss, an Edina-based cannabis attorney, said that doing away with the social equity lottery would be “devastating” for applicants who were accepted into the pool. She said her firm advised a mix of applicants, some of whom made it into the lottery and some who didn’t.

“A lot of people spent a lot of time and money and effort in doing these applications,” Moss said.

Leili Fatehi, a partner at the cannabis consulting firm Blunt Strategies, said a group of applicants who were accepted into the lottery are hoping to appeal the judge’s decision. She said abandoning this lottery could “create problems across the board.”

“No one is going to be able to get seed in ground,” said Fatehi, who worked with legislators on Minnesota’s marijuana law. “I think it pulls the rug out from under 640 local small businesses that were able to demonstrate operational readiness.”

Collins said the early cultivation that would be allowed under the delayed lottery “would have only provided a fraction of the anticipated supply to meet demand.” The OCM is focused on launching a market that is “well positioned to mature over the months and years ahead,” he said.

“OCM has always planned to open the general application round soon after the start of the new year, and that round will include all license types that allow for cannabis cultivation,” Collins said.