Minnesota Cannabis News

Rules Final Soon

OCM submitted its proposed rules to an administrative law judge (ALJ) for confirmation on March 24. The ALJ has 14 calendar days [i.e., until April 7] to approve, approve with changes, or disapprove the draft rules. Once approved by the ALJ, the final rules will be published in the State Register, at which time they are adopted and in effect.

Thus, we expect the administrative rules to be final in April. That means OCM can allow the first microbusinesses to open thereafter (see their “Chutes and Ladders” graphic below).

What’s in these rules? Download a copy from here for reference until we get the final version.

The biggest change was an increase in the potency limit for cannabis concentrates, from 70% to 80%, after much commentary. For more, check out Star Tribune’s Nuggets (3/28), with commentary from Minnesota cannabis attorney Jason Tarasek.

Minnesota Legislature Update

Bills and hearings are moving rapidly at the Legislature. I hope to bring you a fuller update in the next newsletter.

One important issue being worked on is “unification” of the supply chains for medical and adult-use cannabis. Under current law and rules, licensees are allowed to produce medical cannabis products, but only if they keep them entirely separate from their adult-use products - separate grow rooms, separate POS system, everything. That’s cost-prohibitive for the small licensees. But if the supply chain were unified, then it would be easier for the micro and mezzo licensees to be a part of the medical market.

However, unification also changes the way that the ratios function for the medical combination license. Small businesses advocates got a win yesterday when Nolan West decreased the canopy limits for medical combination businesses in his bill, after public outcry. Stay tuned for more.

Another important issue is supply: will the current medical companies be able to sell to the newly-opening micros to supply the adult-use industry?

No Compacts Yet

Perhaps due to the negative public response when a draft of the tribal compacts was leaked in mid-February, we have not heard anything further about the pending tribal compacts.

Jen’s take: I still expect these compacts to be signed and made public, perhaps in the next couple of weeks, and I expect that they will allow each tribe to open a limited number of dispensaries off of tribal land (5 locations per tribe was the number in the leaked draft). I’m also wondering to what extent the tribes can and will be interested in selling products to the newly-opening micros to help solve the supply issue.

Analysis and Advice

You Asked: What’s Next for Microlicense Applicants?

If you are one of the 1,300 people who submitted an application for a micro license in Minnesota, you may be wondering, What’s next? What am I supposed to do while I wait?

From a licensing perspective: You are waiting. It might be several months. OCM has stated that they will review the micro license submissions on a rolling basis, so each applicant is on their own timeline. But the next step will be an email saying the applicant is either advancing to the next step or giving 14 days to correct issues with the application (if possible). So be alert for that.

While you wait for an email from OCM, you could: 

• Identify key service providers. If you’re a dispensary, you’ll need to choose a POS system. If you’ll be setting up a grow, you’ll need lights (tip: look into rebate programs). Both will need accountants who deeply understand IRC 280E and a bank account with a cannabis-friendly bank.

• Skill up. Unless you’ve worked in a legal state already, you’re going to have to learn Metrc, the computer system in which we’ll log every step seed to sale. If you are new to running a small business, look into courses or books that help you understand managing operations, a team, marketing, etc.

• Connect. This is a highly fragmented industry, by design. That means we need each other! Come to events like the weekly Industry Happy Hour at Earl Giles on Wednesday evenings, and the Rise & Grind sessions on Tuesday mornings with the Grow House.

• Refine your business plan. The app got people thinking about their possible future sales and employee counts. Now, spend time identifying what steps you will have to take before you can earn that first dollar in revenue. Relatedly:

• Understand your capital needs. Engage a cannabis accountant to create forecasts so you can make a realistic budget and know how much you will have to spend (i) to even open and (ii) to operate the first year. Explore your options – taking on debt or selling equity? Owner investment vs. outside investors? Can you identify any grants to apply for?

• Investor materials. If you hope to raise capital from outside investors, you will need a high-quality business plan with forecasts and a pitch deck. Then, start working on having meetings with potential investors. Most likely, investors won’t commit until you are farther along in the process, but you can start networking and building relationships.

• Explore property options. For those on a shoestring budget, it may be too soon to actually sign a lease. But you can start the process of looking at properties and getting a sense. Learn what a triple-net commercial lease is. Think about, How well does this space comply with the proposed rules (for example, bathrooms? secure areas)? How much work would it take to “build out” this space to meet your needs, and what would that cost (added security, maybe upgraded electrical or HVAC, etc. etc.) For consumer-facing businesses, how is the foot traffic or visibility to a busy street? Parking? And, of course, you need to find a space that is zoned appropriately by its city or county. Retailers, communicate with cities earlier rather than later to make sure obtaining a retail registration is realistic there.

For Those Moving to the Lottery: Calculating Your Chances

OCM released the below updated application numbers last week, which reflect the number of applications submitted by the March deadline and also update the numbers from the 2024 round.

Jen’s takeaways:

• There were 1,322 new microlicense applications submitted this spring. As an uncapped license type, the micro was attractive to a lot of people, as expected.

• The first micros to be allowed to move to opening are in that first column, the preapproved social equity applicants. There are still 527 of them, after many applicants took the opportunity to get a refund in January and other withdrawals. My understanding is that many, if not all 527 of them, have gotten the email to proceed to the next step (background check).

Looking at the capped categories which will go to a May/June lottery:

• The fact that one-half of the capped categories are reserved for social equity applicants (SEA) will work to the benefit of the SEAs in the May/June lottery. In addition, there were only 20 additional social equity applicants in the mezzo category this spring, and a number of withdrawals from the fall round, making it a rosier picture than many expected. I’ve calculated the likelihood of an applicant in being chosen below, taking into account that OCM has said they will run the lottery in 2 rounds: one with the SEA applicants only, and the second with all unpicked SEA applicants plus the non-SEA applicants.

• In fact, a mezzolicense application with social equity qualification now has a 38% chance of being chosen in the May/June lottery!

  Here’s the rest of the probability I derived:

Updated 4-4-25: For those who like math, here’s how I got these numbers: The chances of a SEA mezzo applicant receiving one of the 50 licenses reserved for SEA-Mezzo are now 50/(209+20), or 20%. But remember that OCM will then add all of the SEA-Mezzo applicants who did not get picked in that lottery to the regular lottery round, so each Mezzo applicant then has a 22% chance: 50/(229-50 SEAs who got picked already) + 44 non-SEA mezzo applicants = 223)). For the SEAs, the probability of winning on the first try or second try then are combined using a weighted average in statistical analysis (thanks, Bob Walloch!). (Catch an error? Think I’m wrong? Let me know: [email protected])

Deadlines Approaching for Minnesota Grants

 CanNavigate and CanStartup Grants

The Minnesota Department of Employment and Economic Development (DEED) announced two new programs to support organizations that will assist businesses operating in the state's adult-use cannabis industry. Up to $8 million of state funding is available for service providers to help business owners – specifically social equity business owners and entrepreneurs from disproportionately impacted communities.

CanNavigate (Cannabis Industry Navigation Grants) offers up to $2 million in competitively awarded grants to community-based entrepreneurial support organization (ESOs) and organizations with cannabis regulatory experts to help individuals navigate the regulatory structure of operating a business in the legal cannabis industry. There is an emphasis on serving individuals whose social equity status has been verified and people facing barriers to employment. Proposals to be a Cannabis Industry Navigation (CanNavigate) service provider are being accepted from March 10 through April 11. https://mn.gov/deed/business/financing-business/deed-programs/cannavigate/

CanStartup (Cannabis Industry Startup Financing Grants) will award up to $6 million in grants to nonprofit lenders to fund loans to new cannabis microbusinesses and support job creation in communities where long-term residents are eligible to be social equity applicants. Proposals to be a nonprofit lender partner are being accepted from March 10 to April 9. https://mn.gov/deed/business/financing-business/deed-programs/canstartup/ . Learn more about both programs.

Legal Cannabis Dual Training Grant

The Minnesota Office of Higher Education launched the request for proposal for the Legal Cannabis Dual Training Grant. Dual training grant recipients can use the funds to help cover costs related to instruction toward attaining an industry-recognized degree, certificate or credential for their employees through a dual-training program. View the eligible occupations here. Learn more about this opportunity by visiting the Dual Training Grant: Legal Cannabis Industry website. Grant management system user Registration Deadline: April 9, 2025 ; Request for Proposal Deadline: April 15, 2025 at 4:00 p.m. CT

Industrial Hemp - MN Program

Minnesota Hemp Growers and Processors: Apply by April 30 for the 2025 Season! Learn more here.

Industry Classifieds

Seeking Minnesota commercial real estate brokers with experience with the cannabis industry! Contact Jen to connect ([email protected])

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House of Oilworx in Anoka is closing after seven years, and has furnishings that new retailers may want to buy: coolers, display cases, etc., as well as an array of Halloween and canna-focused stuff.

Have a property or services to offer to my readers? Or, looking for one?

I’m going to try this Classifieds Section approach and see if it helps people connect as they build their cannabis businesses in Minnesota. Contact me for more info: [email protected]

Other Cannabis News

The parent company of Edible Arrangements has decided to expand into delivering hemp-derived THC goodies, starting in Texas.

At the same time, the Pre Roll newsletter did a nice roundup on states moving towards banning/limiting hemp-derived THC:

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