Preparing for the Minnesota Cannabis Social Equity Lottery

Legalization

Minnesota hopped on the cannabis bandwagon to legalize adult-use back in 2023. Approved by Governor Tim Walz, Minnesota is now the 23rd state to allow recreational cannabis.

A new regulatory agency was created to oversee the State’s recreational cannabis use: The Office of Cannabis Management (OCM). They are tasked with providing for the licensing, inspection, and regulation of all cannabis businesses. The rules are now out, and the opportunity for social equity applicants to receive a cannabis license is drawing near.

Applicants

It has become common for social equity applicants to gain an advantage in the application process. New Jersey gave them priority evaluation. New York tried to offer financial advantages, although that program has been controversial. States like Maryland, Illinois, Connecticut, and Washington have allocated licenses solely for social equity applicants, with varying degrees of success and roll-out speed. Massachusetts restricted delivery businesses to social equity applicants for three years initially. It remains to be seen just how much of a head start these social equity licenses will gain in Minnesota, which does have a very small medical program currently.

Social equity applicants must meet at least one of the following:

Was convicted of an offense involving the possession or sale of cannabis prior to May 1, 2023;
Had a parent, guardian, child, spouse, or dependent convicted of an offence involving the possession or sale of cannabis prior to May 1, 2023;
Was a dependent of someone convicted of an offence involving the possession or sale of cannabis prior to May 1, 2023;
Is a military veteran;
Has been a resident for the past five years in qualifying areas, as set forth by the OCM ; and
Has participated in farm operations for at least 3 years, with gross sales between $5,000 and $100,000.

Licensees must have at least 65% social-equity ownership of the business to be qualified. Social equity applicants must be verified by the OCM between June 24, 2024 – July 10, 2024. The OCM hopes to streamline the application process by verifying applicants’ social equity qualifications first.

Between July 24, 2024 – August 12, 2024, OCM-approved social equity applicants will then be allowed to submit an application for a cannabis license.

Documentation

Required documents needed for a social license equity preapproval includes:

Proposed business plan
Security plan
Business capitalization table, and
Standard operating procedures for:
- Quality assurance
- Inventory control, storage, and diversion prevention, and
- Accounting and tax compliance.

There will be a 14 day deficiency period where applicants, if notified, have the chance to re-submit inefficient documents.

The winners will be randomly selected via a lottery. If the program is not delayed by lawsuits or other problems, the lottery is expected to occur this Fall (2024).

This application period will cap all winners at the following:

Micro: 100
Mezzo: 25
Cult: 13
Manu: 6
Retail: 38
Wholesaler: 20
Transporter: 20
Testing: 50
Delivery: 10

Dispensary winners will have an 18-month window to begin their operations. If they have not utilized their license during that time frame, their license will be redacted.

It is important to prove to the OCM that you are a qualified, well-funded, and well-connected applicant. AU cannabis sales are expected to start early 2025.

How Can Sapphire Risk Help?

Tony Gallo and the team of experts and consultants at Sapphire Risk Advisory Group have worked to secure medical and recreational cannabis businesses in 37 states. Follow us on social media to stay up to date with more security best practices and cannabis industry updates!