Minnesota Lawmakers Propose Raft Of Changes To State Marijuana Law, Including Homegrow And Equity Adjustments

“Prohibition of alcohol ended nearly 100 years ago and we still have a liquor bill nearly every year.”

By Peter Callaghan, MinnPost

The lead sponsors of 2023’s recreational cannabis law are sensitive to suggestions that the sweeping law needs “fixing.” Such a word might be interpreted as endorsing Republican talking points that the bill—along with much of the work of the 2023 session—was rushed and that mistakes were made.

Instead, top sponsors of House File 100 say changes they are both proposing, as well others filed by other lawmakers, are expected and routine. The law will be “modified,” not fixed.

“As I said many times last year, it won’t be the last time the Legislature hears a cannabis bill,” said Sen. Lindsey Port, the Burnsville DFLer who was the lead sponsor in the Senate. “Prohibition of alcohol ended nearly 100 years ago and we still have a liquor bill nearly every year.”

That said, what is being proposed to change the law at the midpoint between legalization and retail sales? Both Port and Rep. Zack Stephenson (DFL-Coon Rapids) have said they expect to have an omnibus cannabis bill that will contain all changes in one package.

The Office of Cannabis Management’s 100-page proposal—Senate File 4782/House File 4757—is the stage setter. Even though these bills show Port and Stephenson as sponsors, they put their name on top as a courtesy to the Office of Cannabis Management (OCM). Their own work will likely be affixed to the OCM bill.

The long list of changes would adjust how so-called social equity licenses are distributed, change the ownership ratios for such license holders, bring the hemp-derived market regulation under the Office of Cannabis Management sooner and put numerical caps on each type of license rather than let OCM decide how many the market requires. Many of the changes were suggested as ways to get to the same end point as HF 100 but with less risk of litigation.

Primary among the OCM proposals is a plan to replace a points-driven system for distributing licenses to enter the new market with what the agency called a “vetted lottery.” Only applicants who meet the social equity criteria and demonstrate that they have the knowledge and wherewithal to run a business would be entered into the first lottery. Later in the process, other applicants would enter a different lottery for remaining licenses.

All of these factors would be considered in the “vetted lottery,” interim OCM director Charlene Briner said. The lottery would eliminate potential subjective judgments by staff that could expose the law to litigation. Briner said the current law based on the accumulation of points would likely benefit the “well capitalized and politically savvy” and expose the state to lawsuits that could delay the roll out of retail sales next spring.

But what Briner sees as a way of enhancing opportunities for people and communities—defined in the law as social equity applicants—was viewed as hostile to those same applicants during testimony last week.

“The proposed lottery system is a cause for alarm from our members who have worked the last 10 months to prepare for a merit-based scoring system,” said John Bartee, president of Cannabis Retailers and Manufacturers Association of Minnesota. Big companies, he said, might be able to put in more applications, or what he called “more tickets to play,” to increase their odds of winning.

Many testifiers said it harmed social equity applicants by introducing chance into license awards and might give big companies the opportunity to “flood the zone” with dozens of applicants to increase their odds.

Others worried that changing the ownership ratios—something OCM saw as a way to help underfunded social equity applicants get investors—would expose those same applicants to financial predators. Current law says social equity applicants must provide 100 percent of the investment needed. The OCM proposal drops that to 65 percent as a way of helping those applicants find capital when traditional bank borrowing isn’t an option for cannabis.

Calandra Revering, founder of Minnesota Association of Black Cannabis Professionals, said the lottery and change in ownership percentages “has created a path for multi-state operators to come in and expand their footprint in Minnesota.” She said other states have seen big businesses partner with social equity applicants to win licenses, only to move them out of the business.

“As one of my colleagues who has opened cannabis operations in other states told me, this is called Rent a Minority” and it is on its way to Minnesota thanks to OCM’s proposal, she said.

Social equity is a pillar of the law, meant to assure that people and communities harmed by the war on drugs can now benefit from legalization. Race is not mentioned in the current law, but having been from neighborhoods, communities or even families that faced higher levels of arrests and prosecution would give applicants more points. Being a veteran who faced a less-than-honorable discharge due to marijuana use is another way to get points.

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But points would also be awarded for having other tasks completed, such as a business plan, demonstrating knowledge of the cannabis business, being a veteran, having financing and having a security plan in place. While OCM is to determine how many points might be scored for each of these, at least 20 percent must go toward meeting social equity goals. License applicants—cultivators, manufacturers, retailers and combination businesses that could both grow and sell products—who accumulated the most points would win licenses. In the event of ties, a random drawing could be used.

Port said Friday she expects her bill to make seven Senate committee stops before returning to the Senate Commerce Committee for final action. Stephenson posted a draft of his proposed bill Monday and will hold a hearing Wednesday in his commerce committee. It makes a few changes to the OCM bill, including some of the provisions detailed below. But for now, it retains most of the major provisions including the lottery plan.

This story was first published by MinnPost.

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Photo courtesy of Mike Latimer.