by Jason Tarasek
Vicente LLP
More than two years after Minnesota Governor Tim Walz signed legislation legalizing adult-use cannabis in Minnesota, cannabis businesses are finally ready to start opening their doors.
After a series of delays, the Minnesota Office of Cannabis Management has begun issuing licenses authorizing the growing, manufacturing and sale of cannabis and cannabis products in the North Star State.
Late last month, OCM issued the first-ever adult-use cannabis license to a microbusiness that intends on growing marijuana outdoors in northern Minnesota. Over the last few weeks, dozens of other prospective business owners have received “preliminary approvals” that may soon be converted into full licenses.
Applicants received such “preliminary approvals” either by seeking an unlimited license type such as a microbusiness or by winning a lottery for a limited license type such as cultivation, manufacturing, retail or mezzobusiness.
Minnesota prohibits vertical integration except for two license types, the microbusiness and the mezzobusiness, which each allow a license holder to grow, manufacture and sell. The primary distinctions between a micro and mezzo are the canopy size (5,000 square feet v. 15,000 square feet) and the number of dispensaries (one v. three).
As should be no surprise, the resale market for all license types has been very active over the last few weeks. Because microbusiness licenses are uncapped, sales prices tend to be rather modest. Conversely, sales of capped licenses, particularly mezzo and retail, often approach or exceed $1 million.
Minnesota is an attractive market for cannabis entrepreneurs for two primary reasons:
- unlike most states with a pre-existing medical cannabis program, Minnesota is not allowing its two existing medical-cannabis manufacturers to automatically convert to serve the adult-use market; and
- Minnesota is surrounded by prohibition states such as North Dakota, South Dakota, Iowa and Wisconsin. Although most of those states have small medical cannabis programs, Wisconsin has no legalized cannabis program whatsoever. Over the years, therefore, Wisconsinites have flocked to Michigan and Illinois to purchase adult-use cannabis products. Observers anticipate, however, that many of those consumers will soon choose to cross the Mississippi River to purchase products in Minnesota.
As an additional wrinkle, ten of Minnesota’s Tribal Nations are in active discussions with the state of Minnesota to finalize agreements that would allow them to open cannabis businesses off tribal land. Although the terms of these “compacts” vary from tribe to tribe, observers expect that Tribal Nations will be soon begin opening dispensaries throughout the state. It is possible, too, that such Tribal Nations may choose to partner with private-sector partners as they expand to serve the broader state market.
Jason Tarasek is a cannabis attorney in Minneapolis. He can be reached at 612-961-8112 or j.tarasek@vicentellp.com