Judge Halts Minnesota Cannabis License Lottery

Numerous states legalizing adult-use cannabis have enacted social equity programs. These programs aim to use tax revenue to promote social equity, benefiting communities disproportionately impacted by cannabis prohibition and criminalization. In Minnesota, social equity starts with allowing certain individuals to apply for a cannabis business license with the Minnesota Office of Cannabis Management and participate in a lottery.

However, the state’s cannabis license preapproval lottery is now on hold indefinitely. A district court judge is asking the state regulatory agency for more information on the application process after some applicants sued, saying they were denied access to the social equity preapproval lottery despite meeting the Minnesota Office of Cannabis Management’s social equity guidelines.

What Makes Someone a Social Equity Candidate?

The Minnesota Office of Cannabis Management lists several criteria that make an individual eligible to apply under its social equity program. Some of the guidelines include:

• An individual convicted of a sale or possession of marijuana offense before May 2023
• An individual with a parent, guardian, child, spouse, or dependent convicted of a marijuana offense
• An individual who was a dependent of someone convicted of a marijuana offense before May 2023
• Military veterans, including service-disabled veterans or current and former members of the National Guard
• Military veterans who lost honorable status due to an offense involving the possession or sale of cannabis

An individual may also apply if they have lived for the past five years in an area with high cannabis enforcement rates, poverty rates of 20 percent or more, areas where at least 20 percent of households receive Supplemental Nutrition Assistance Program assistance or areas where the median family income does not exceed 80 percent of the statewide median family income.

Individuals who meet at least one of the criteria outlined by the Office of Cannabis Management can apply for a license to run cannabis microbusinesses, retailers, wholesalers, cultivators, manufacturers, and other cannabis-related business ventures.

The Problem with the Program

Minnesota legalized recreational, adult-use cannabis in 2023. As the state stretches its wings and attempts to get its cannabis industry off the ground, it seems they have hit a few snags. The Office of Cannabis Management is attempting to fend off legal challenges to how it has handled its social equity license application process. A district court stopped the preapproval lottery scheduled for November 26th. However, the district court judge would not rule on the case’s merits, instead pushing the matter to a higher court.

Some social equity applicants are suing, saying they were denied access to the social equity preapproval lottery. They say there are no clear criteria to apply and that there is no room to appeal a denial. One of the applicants claims that the Office of Cannabis Management denied her social equity application, even though she believes she meets the criteria laid out by the state. In her case, she states that the office violated the legislature’s cannabis statutes.

Other applicants claim they were denied for vague reasons or received no explanation at all for their denial. They claim the basis for rejection must be communicated to applicants.

The district judge sided with the social equity applicants, sending the case to a higher court, the state appeals court, for consideration.

The OCM Responds

The Office of Cannabis Management is defending its process. In a statement, the OCM says, “Minnesota’s approach has always aimed to protect the integrity of a social equity license, and the rigorous review also allowed us to identify and prevent bad actors from entering the system. State statute sets high standards for applicants to successfully complete applications while also filtering out those with malicious intent.”

The agency maintains that it is attempting to reject applicants looking to make a quick profit instead of setting up a legitimate cannabis business. Agency officials claim that one of the applicants who filed the lawsuit has connections to other, larger businesses and is attempting to use the social equity system to gain a market advantage over others. Larger businesses have the option to purchase a social equity license later.

The Office of Cannabis Management says it remains committed to launching an equitable and responsible cannabis marketplace in Minnesota. Over 1,500 individuals applied for social equity cannabis licenses, but the lottery process was supposed to reduce that number to 282.

Another Hiccup in the Process

The case against the Office of Cannabis Management is another hiccup in the Minnesota recreational marijuana rollout. State lawmakers legalized adult-use cannabis in 2023. However, licenses have yet to be issued to commercial growers or sellers. That, paired with the indefinite stall of the social equity business license process, may make it challenging for individuals to purchase recreational marijuana. The state was supposed to begin adult-use sales in the first quarter of 2025. Whether that happens or not is now up for debate.

In the meantime, individuals can find hemp-derived products on sale at local retailers, or they can grow up to eight cannabis plants, with no more than four being mature, at a single residence. Additionally, the Red Lake Nation and White Earth Nation have opened legal recreational cannabis dispensaries on tribal land.

It is unclear how long the case could remain in the Minnesota court system or how it may impact the proposed 2025 launch of recreational cannabis sales. The state has yet to begin accepting general cannabis license applications and had been expecting to open the process early next year. However, with the future of the marketplace in flux, some worry the agency may abandon the social equity process altogether to get the ball rolling again.

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