Minnesota Cannabis Regulators Scrap Preapproval Process for Social Equity Applicants

In a move likely to reshape the launch of Minnesota’s adult-use cannabis market, state regulators have decided to eliminate a preapproval process intended to give social equity applicants a head start. The decision, announced on Dec. 11, is aimed at avoiding further delays after legal challenges disrupted the original plan.

A Legal Battle That Changed the Course

The preapproval process for social equity applicants was intended to provide early advantages to individuals disproportionately affected by cannabis prohibition, military veterans, and those in poverty-defined areas. Winners of the planned November lottery would have been able to secure investments and real estate ahead of general applicants.

However, the process faced significant challenges:

• Widespread Disqualifications: Two-thirds of 1,817 applicants were disqualified by the Minnesota Office of Cannabis Management (OCM) due to concerns over applicants gaming the system.
• Legal Action: Disqualified applicants filed lawsuits, leading to a court-ordered stay by Judge Stephen Smith in late November.

Faced with these obstacles, the OCM abandoned its preapproval process in favor of a standard licensing cycle for all applicants, both social equity and general.

New Licensing Timeline for Social Equity and General Applicants

While the OCM remains committed to supporting social equity applicants, they announced a revised licensing structure that eliminates the six-month advantage previously offered. The updated timeline includes:

• Jan. 10: Deadline for preapproval applicants to request application fee refunds.
• Jan. 15 – Jan. 30: Verification window for new social equity applicants.
• Feb. 18 – March 14: Licensing application period for all applicants.
• May/June: Tentative licensing lottery date.

The 648 applicants who were initially approved for the preapproval process will automatically move forward in this new cycle, maintaining their eligibility.

Social Equity Benefits Still in Play

While the expedited process has been shelved, regulators emphasize that social equity remains central to Minnesota’s cannabis law. Interim Director Charlene Briner reaffirmed this commitment, stating, “We remain dedicated to launching an equitable, sustainable, and responsible cannabis marketplace.”

• Technical Assistance: Resources to help applicants navigate the complex licensing process.
• Grant Opportunities: New funding streams aimed at bolstering social equity licensees.
• Error Correction: Denied applicants from the preapproval process can address application mistakes during the next cycle.

Despite these adjustments, many social equity advocates are disappointed by the loss of the early-mover advantage originally promised to impacted communities.

Addressing Fraud and Abuse in the Licensing Process

Minnesota’s cannabis regulators are doubling down on efforts to enforce protections against fraud and abuse. The state’s “true party of interest” rules are designed to prevent larger, well-funded companies from exploiting social equity licenses.

The OCM has promised thorough vetting of applications and indicated it will pursue penalties for any violations. This follows concerns raised in other states, where social equity winners have sold licenses to larger corporations rather than starting their own operations.

Looking Ahead

Minnesota legalized adult-use cannabis in May 2023, becoming the 23rd state to do so. The market is expected to create significant economic opportunities, but delays and legal battles have tempered initial optimism.

Regulators aim to keep the licensing process on track despite these challenges. Briner expressed optimism about the future, saying, “We will continue to provide resources to support licensees throughout this process and at every step of the way.”

As the state prepares for the next phase of licensing, all eyes will be on whether these changes can deliver a fair and functional cannabis market that lives up to its social equity promises.