As the 2024 Minnesota Legislative Session came to a chaotic close on May 20, numerous changes to Minnesota Statutes Chapter 342 were sent to the Governor’s desk to build on the already existing cannabis regulatory structure. On May 24, Governor Tim Walz signed the amendments to Chapter 342, which address social equity provisions, preapproval process for social equity applicants, the larger application and licensing process, and consumer safety.
Social Equity Provisions
The first major change was to the social equity provisions of Chapter 342. Notably, the ownership requirement for social equity applicants has been reduced from 100% to 65%. Social equity applicants include people or family members of individuals who were previously convicted of marijuana offenses, military veterans, residents of high-poverty areas and “emerging farmers” who have provided the majority of labor and management for a small farm for at least three years.
This will allow for more opportunities for social equity applicants to partner with others to gain access to more capital, resources and previous operational experience. However, this change led to the legislature including provisions that protect social equity applicants, including tools to verify fair ownership, limitation on gamesmanship, and more stringent standards for those who are granted licenses.
As part of the social equity changes, Chapter 342 authorizes the Office of Cannabis Management (OCM), to hold a “vetted lottery” in order to issue pre-approved licenses to social equity applicants. These licenses will be granted to social equity applicants prior to opening the application process to the general public, and therefore must begin no later than July 24, 2024, and end no later than August 12, 2024. The “vetted lottery” will require OCM to confirm that the application meets the minimum requirements, and no obvious barriers are present in order for the applicant to enter the lottery. In fact, the Office of Cannabis management recently announced that the social equity applicant verification will open on June 24, 2024, and close at midnight on July 10, 2024.
Application and License Process
With respect to the typical application and license process, changes were made to streamline the process. While many changes are internal to OCM, a major change involves removing the requirement for applicants to have already secured a property at the time of submitting the application, thereby reducing the financial risk and burden on applicants.
In terms of licenses, the changes to Chapter 342 have consolidated the types of licenses and placed a cap on the number of licenses to be issued. For example, those currently with a medical cannabis license will be able to grow, manufacture or sell cannabis products under the same licensing category as those in the recreational space. These license holders will avail themselves to the same benefits as a medical cannabis license such as exemption from state sales tax and consultations at the point of sale, without having to go through the recreational licensing process again. As part of this consolidation, the Office of Medical Cannabis will be integrated into the OCM by July 1, 2024.
Unlike many states, Minnesota is building its cannabis program off its already existing hemp program. Chapter 342 was amended to make this transition smoother and more efficient. As of July 1, 2024, the hemp-derived cannabinoid industry will fall under the watch of the OCM. With that, a process will be developed that allows current hemp-derived businesses to convert over to a cannabis license.
Consumer Safety
Finally, Chapter 342 now provides OCM with the authority to issue product recalls, create regulatory and inspection authority, revise the background check process, clarify regulations surrounding packaging and labeling, and build agency capacity.
Husch Blackwell will continue to monitor the regulatory changes in Minnesota. In the meantime, if you have any questions, please do not hesitate to contact us.