Minnesota became the 23rd state to legalize adult-use cannabis in the summer of 2023. Over a year later, licenses to grow, sell, and distribute the plant have yet to be issued. Many potential operators thought they’d finally begin to see some movement this week when a lottery was scheduled for a limited number of conditional licenses. However, a last-minute lawsuit has delayed the process yet again.
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The suit was brought by several people whose applications were rejected by the Minnesota Office of Cannabis Management (OCM). The individuals claim they were not given a reason why their applications were denied, nor were they given a chance to fix their errors.
The OCM rejected roughly two-thirds of applications for the initial lottery, which is specifically for social equity applicants (people the state has defined as being disproportionately harmed by prohibition). Representatives from the OCM said the rejections were triggered by everything from incomplete paperwork to so-called “zone flooders” who were trying to increase their chances of winning a license by submitting multiple applications. They also pointed to “straw applicants,” defined as people who have a qualified social equity applicant but don’t actually own the business.
“We saw people who were trying to game the system in order to improve their chances in the lottery,” OCM interim director Charline Briner told MinnPost.
“We saw a couple of hundred applications that were virtually identical, including the business plans and the projected profits for the first year,” Briner said. “There were multiple people with the same address.”
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Nic Easley, founder of 3C Consulting and an expert on cannabis licensing, believes many applicants were taken advantage of by bad actors who were likely hired to help complete paperwork but failed to do their due diligence.
“All one had to do was double-check files after saving before uploading. The problem was that a few firms just sold bunk mass-produced templates riddled with errors and took advantage of social equity applicants eager to get into the market,” Easley told GreenState.
“I’m pretty aware of the few issues that snagged most people who were disqualified, and most of those issues were avoidable if they had followed the instructions to the letter, didn’t wait until the last minute, or didn’t get swindled by law firms acting like consultants.”
“A huge blow…”
Minnesota law does not allow rejected applicants to appeal, but they can request a review of their application within seven days of denial. Jen Reise, an attorney with North Star Law, told GreenState that the OCM failed to abide by the review process, which triggered legal action.
“We represented six named plaintiffs, all Minnesota entrepreneurs who want to start small businesses, and we asked for the opportunity to request review or, at the very least, understand why the applications were denied, which OCM has refused to do,” Reise said.
A Ramsey County judge issued a stay of the cases, asking the Court of Appeals to review whether OCM violated the law. The decision also meant the scheduled lottery would not move forward.
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“This is an important result and the right one,” Reise continued. “OCM’s process was deeply flawed, and our plaintiffs and others were unfairly and improperly denied the ability to enter the lottery.
“At the same time, the pause in the lottery is a huge blow to other applicants, including some of our other clients, who were eager to finally get started growing legal cannabis in Minnesota.”
An appellate court hearing on the case has yet to be scheduled. However, it’s likely the lawsuits could drag on into the new year—meaning Minnesotans will have to wait even longer to access legal adult-use cannabis. At this point, their only options are dispensaries on tribal reservations, and the closest one is located over an hour away from the Twin Cities metro.
Reise contends that while the news may come as a shock to some, it’s a necessary step to ensure a smooth roll-out.
“While we understand the applicants that successfully made it through to the lottery may be disappointed, know that we feel so strongly that this process was improper that any lottery would have to be redone. Because of that, we want to ensure those that actually are given a license feel confident in all of their post-lottery business decisions,” she concluded.
