| We are now less than one week away from the long-awaited commencement of Minnesota’s adult-use cannabis business licensing round and prospective applicants are earnestly preparing to file business license applications as early as next week. Minnesota’s Office of Cannabis Management (“OCM”) had initially kicked off a Social Equity Applicant (“SEA”) license pre-approval process in 2024, but announced in December that it was ending that pre-approval process and moving forward with a standard license application cycle launching this month. This decision followed the commencement of litigation by certain SEAs that were denied by the OCM in the pre-approval process and sued based on perceived procedural errors and hurried timelines. Following the OCM’s pivot in December, there is now just one single license application and lottery process for SEAs and general applicants.
Although the OCM application portal is not yet open, Minnesota law, OCM’s draft regulations relating to adult-use cannabis (published in the State Register on January 13, 2025), and existing guidance shed light on what will be required in order to submit a “passing” application that would qualify an applicant for inclusion in the OCM’s license lottery (for those license types subject to numerical caps) to be convened sometime this Spring. Below we have provided a high-level summary of the key dates and details for this imminent license application round.
Key Dates:
- January 30, 2025 – SEA verification window closed.
- February 18, 2025 – OCM license application window opens (SEA and general applicants).
- March 14, 2025 – License application window closes.
- May or June – OCM to hold license lottery.
Available License Types and Endorsements:
- Microbusiness – Can grow, make, sell, and buy cannabis (including plants and seedlings), lower-potency hemp edibles, and hemp-derived consumer products. They can also have an on-site space where customers can use cannabis. Available endorsements include:
- Cultivation
- Extraction and concentration
- Production of customer (consumer) products
- Retail operations
- On-site consumption
- Edible cannabinoid product handler endorsement
- Mezzobusiness – Can grow, make, sell, and buy cannabis (including plants and seedlings), lower-potency hemp edibles, and hemp-derived consumer products. Available endorsements include:
- Cultivation
- Extraction and concentration
- Production of customer (consumer) products
- Retail operations
- Edible cannabinoid product handler endorsement
- Cannabis cultivator – can grow cannabis plants from seed to maturity. Cultivators are allowed to harvest, package, label, and transport fully grown cannabis plants to manufacturers. They can also package, label, and transport seedlings. Available endorsements include:
- Medical cannabis cultivation
- Edible cannabinoid product handler endorsement
- Cannabis manufacturer – can process raw cannabis plants into various products, such as edibles, concentrates, wax, oils, and tinctures. Manufacturers can buy cannabis flowers, cannabis products, hemp plant parts, hemp concentrate, and artificially derived cannabinoids from other cannabis businesses. They turn these materials into cannabis products, then package and sell them to other cannabis businesses. Available endorsements include:
- Medical cannabis processor
- Edible cannabinoid product handler endorsement
- Cannabis retailer – can sell packaged cannabis products to the general public and medical patients. They can buy cannabis (including plants and seedlings), lower-potency hemp edibles, and hemp-derived consumer products from other cannabis businesses and sell them to customers. Available endorsements include:
- Medical cannabis retailer
- Edible cannabinoid product handler endorsement
- Cannabis wholesaler – can buy cannabis, cannabis products, and lower-potency hemp edibles, and hemp-derived consumer products from cannabis businesses and then sell them to other cannabis and lower-potency hemp business. They can import hemp-derived consumer products and lower-potency hemp edibles that contain hemp concentrate or artificially derived cannabinoids. Available endorsements include:
- Hemp-derived product importer
- Edible cannabinoid product handler endorsement
- Cannabis transporter – can move cannabis, cannabis products, lower-potency hemp edibles, and hemp-derived consumer products between businesses. No endorsements available.
- Cannabis testing facility – can obtain and test immature cannabis plants and seedlings, cannabis flower, cannabis products, hemp plant parts, hemp concentrate, artificially derived cannabinoids, lower-potency hemp edibles, and hemp-derived consumer products from businesses licensed to produce those items. They ensure these products meet safety standards. No endorsements available.
- Cannabis event organizer – can plan and host cannabis events lasting up to four (4) days, and may allow for the sale of cannabis, lower-potency hemp edibles, and hemp-derived consumer products to customers at events. This is a temporary license that must be applied for per event. No endorsements available.
- Cannabis delivery service – can purchase cannabis, lower-potency hemp edibles, and hemp-derived consumer products from specific cannabis businesses and sell and deliver those products directly to consumers. No endorsements available.
- Lower-potency hemp edible manufacturer – can produce edibles from hemp. These manufacturers can create, package, and label lower-potency hemp edibles, and sell them to cannabis businesses. Available endorsements include:
- Extraction and concentration
- Edible cannabinoid product handler endorsement
- Lower-potency hemp edible retailer – can sell packaged lower-potency hemp edibles to consumers. Available endorsements include:
- On-site consumption
- Edible cannabinoid product handler endorsement
- Medical cannabis combination business – can grow medical and adult-use cannabis (subject to law), manufacture medical and adult-use cannabis products, lower-potency hemp edibles, and hemp-derived consumer products; package and label those products; and purchase immature cannabis plants and seedlings, cannabis flower, cannabis products, hemp concentrate, and artificially derived cannabinoids from businesses licensed to sell those products. No endorsements available.
License Limits:
Before July 1, 2026, the OCM may issue up to the maximum number of licenses identified below:
For social equity licenses:
- Cannabis cultivator licenses – 25.
- Cannabis manufacturer licenses – 12.
- Cannabis retailer licenses – 75.
- Cannabis mezzobusiness licenses – 50.
For general licenses:
- Cannabis cultivator licenses – 25.
- Cannabis manufacturer licenses – 12.
- Cannabis retailer licenses – 75.
- Cannabis mezzobusiness licenses – 50.
Beginning July 1, 2026, the OCM will determine if any additional licenses should be made available based on market data and OCM’s attendant obligations to ensure that there is a sufficient supply of cannabis flower and cannabis products to meet demand, to provide market stability, to ensure there is a competitive market, and to limit the sale of unregulated cannabis flower and cannabis products. If additional licenses are to be made available, those made available to SEAs shall be in equal or greater number to those made available to general applicants. For any license types not listed above, OCM may issue as many licenses as it deems necessary.
Key Application Criteria:
All cannabis business license applicants will be required to submit biographical/background information and detailed operational narratives demonstrating that the applicant has the resources and technical wherewithal to successfully operate a cannabis business. In terms of biographical/background information, applicants must submit, among other things: 1) the name, address and date of birth of the applicant; 2) the disclosure of whether the applicant has ever filed for bankruptcy; 3) the address and legal property description of the business, except an applicant is not required to secure the physical premises at the time of application; 4) a general description of the location or locations that the applicant plans to operate; and 5) disclosure of ownership and control details.
With regard to the latter, the application will require the identification of any “true party of interest” (as that term is defined in MN Statutes Section 342.185, subdivision 1, paragraph (g)), and require each applicant to submit, among other things:
- The management structure, ownership and control of the applicant (including, for any business applicants, the name of each owner, board member and officer of the company and any parent companies, including each owner’s, board member’s or officer’s percentage ownership interest in the parent company and the cannabis business);
- As applicable, copies of articles of incorporation, bylaws, partnership agreements, operating agreements, or shareholders agreements;
- Copies of promissory notes, security instruments or similar agreements; and An explanation of the funding sources used to finance the business.
Notably, an entity or true party of interest may not submit more than one application for any single license type. This limitation does not apply to an individual, business, or entity that holds no more than 10% ownership of the applying business entity. In addition, an entity or true party of interest may submit applications for multiple license types if it would not result in the applicant being vertically integrated in violation of MN Statutes Chapter 342. The Cannabis License and Endorsement Types Chart published by the OCM specifically identifies which licenses may be held simultaneously. Some examples of licenses that may be held in combination by a single true party of interest are:
- A single cannabis cultivator license and a single cannabis manufacturer license.
- A single cannabis wholesaler license and a single cannabis transporter license.
- A single cannabis wholesaler license and a single cannabis delivery service license.
- A single cannabis transporter license and single cannabis delivery service license.
- A single cannabis wholesaler license, a single transporter license, and a single cannabis delivery service license.
- A single cannabis retailer license and a single cannabis delivery service license.
In addition, applicants must develop and submit, among other things, the following narratives and documents:
- Business plan showing:
- Expected size of the business;
- Anticipated growth;
- Methods of recordkeeping;
- Knowledge and experience of the applicant (and any officer, director, manager, and general partner);
- Environmental plan; and
- Other relevant financial and operational components.
- Security plan showing security monitoring, security equipment and facility maps (if applicable).
- Standard operating procedures for:
- Quality assurance;
- Inventory control, storage and diversion prevention; and
- Accounting and tax compliance.
- Attestation from a bona fide labor organization confirming the applicant has a labor peace agreement.
- Description of any training and education that the applicant will provide to employees of the business.
Curing Deficiencies:
If the OCM receives an application that fails to provide the required information or pay the applicable application fee, it shall issue a deficiency notice to the applicant. The applicant may submit the required information or pay the required application fee within 14 calendar days from the date of the deficiency notice.
License Duration, Restrictions on Transfer and Changes in Location:
All OCM licenses, regardless of whether issued to an SEA or general applicant are valid for 1-year and must be renewed annually.
Licenses issued to general applicants may be freely transferred subject to prior written approval of the OCM unless the license holder has not received a final site inspection. Licenses issued to SEAs may only be transferred to another SEA for three years after the date on which the OCM issues the license. Three years after the date of issuance, a social equity license holder may transfer a license to any entity, although transfers of any license that was issued as a social equity license must be reviewed by the Division of Social Equity and is subject to the prior written approval of the OCM. In addition, a new license must be obtained whenever: 1) the form of the licensee’s legal business structure converts or changes to a different type of legal business structure; or 2) the licensee dissolves; consolidates; reorganizes; undergoes bankruptcy, insolvency or receivership proceedings; merges with another legal organization; or assigns all or substantially all of its assets for the benefit of creditors.
Finally, the OCM is authorized to permit the relocation of a cannabis license and may adopt requirements for the submission of a license relocation application and establish standards for the approval of such applications. Fees for such applications shall not exceed $250. |
