By Aaron John, Attorney at Harris Sliwoski
Minnesota cannabis producers have raised concerns over the availability of products when the legal market finally opens. In response, the Minnesota legislature has acted quickly to allow an avenue for early cultivation providing key guidance for the forthcoming Minnesota legal cannabis market. Noting these concerns, industry participants have asked the Minnesota Office of Cannabis Management (OCM) and their local legislators to consider opening cultivation and production of cannabis products early, in order to supply retailers with legal products to sell once licenses are awarded and retailers open for business.
The OCM’s problematic decision not to endorse or seek immediate changes for Minnesota cannabis production
The OCM issued a statement recently indicating it will not ask for changes to the current laws that would allow some cannabis cultivators to start growing plants early as a way to have products available and ready for retail when stores open sometime in early spring of 2025. The OCM notes that they remain receptive to proposals that could pave the way for early production, but are not seeking immediate action at this time. This recent decision highlights the issues and complexities of introducing a new legal cannabis market into an already existing marketplace. The main issue surrounds how legal retailers could open for business if they do not have any legal cannabis products to sell.
The OCM suggests additional delays could occur
One option would be to rely on existing medical cannabis rules for early cultivation. However, concerns that issuing producer licenses contemporaneously with retail licenses would cause unnecessary delays, are met with concerns over unnecessary delays from the OCM. The OCM notes that reliance on the existing medical cannabis rules presents inherent flaws, particularly in accommodating outdoor farms and ensuring equitable opportunities for social equity applicants. Allowing for early cultivation under the existing medical cannabis requirements only exacerbates challenges faced by social equity applicants and would place legal producers outside of the existing medical regulatory framework at a disadvantage.
Despite concerns legislators took action and have provided a proposal for early cultivation
Senator Lindsey Port spearheaded amendments, which culminated in floor debate lasting over six hours. In response to the challenges facing producer and retail licenses, as well as accommodating outdoor farms, ensuring equal access for social equity applicants, or allowing early cultivation under the existing medical cannabis regulatory framework, legislators are took up the issue and provided additional proposals. The amendments were aimed at facilitating early cultivation, an essential step towards nurturing a robust and inclusive cannabis market. These amendments seek to grant permission for early production to social equity producers, addressing the imperative of equitable participation in the anticipated Minnesota legal cannabis industry. By integrating the existing medical cannabis regulations with newly proposed social equity pre-approved licenses, Senator Port’s amendments offer a pragmatic framework for expediting cultivation timelines while safeguarding the interests of diverse stakeholders.
Early cultivation is key to a strong launch
The significance of early cultivation cannot be overstated in the context of Minnesota’s nascent legal cannabis market. Not only will Minnesota’s legal cannabis market be forced to compete with the existing illegal market, the same as every other state, but the new legal market will also be competing with the existing THC beverage and lower-potency hemp edible markets. Early cultivation holds the key to undermining the influence of illicit markets and channeling demand towards legal and regulated avenues, but only if the legal cannabis market can get a strong launch. Moreover, early cultivation will serve as a lifeline for small businesses and social equity applicants, affording them a crucial head start and robust launch in an industry characterized by fierce competition and evolving regulatory dynamics.
Licensing and lottery system concerns for Minnesota cannabis producers
Understanding the nuances of licensing is integral to navigating Minnesota’s cannabis marketplace. Although licenses will not be issued until early 2025 at the earliest, and the full regulatory framework has not been finalized, producers and cultivators will have access to three distinct production license categories – bulk cultivators, mezzo licenses, and micro licenses. Each category carries with it separate requirements and allowances regarding canopy space, facility size, quality control requirements, staffing protocols, and more. Notably, lower-potency hemp cultivation and sale remain exempt from canopy caps, presenting another wrinkle or opportunity within the overall regulatory framework.
Although the outline has been set regarding cultivation, mezzo and micro licenses, uncertainty remains regarding the license lottery system. This uncertainty was also exacerbated by the issues surrounding whether, and how, Minnesota would allow early cultivation. Some cultivators raised concerns over what might happen if they are able to begin early cultivation but then lose out on the later license lottery. Others worried that if they do not begin cultivating early, they could forfeit additional points that could have secured them a license. Disruptions to the point-based allocation mechanism also raise pertinent questions regarding fairness and transparency through the licensing process. Addressing apprehensions surrounding straw applicants and ownership transparency is paramount to fostering trust and accountability within the OCM and its regulatory framework. It’s promising to see Minnesota legislators and regulatory agencies working in conjunction to address these issues early in hopes of fostering a robust market.
Leadership is critical for Minnesota cannabis program success
Establishing a flourishing cannabis market will require a form of early cultivation and production to ensure retailers are stocked with products to sell at launch and both the Legislature and the OCM are aware of that fact and working towards addressing these issues. The OCM’s leadership and decision-making on these issues have the potential to reshape and drive the trajectory of Minnesota’s legal cannabis market as we approach the much-anticipated retail launch in early spring of 2025. As Minnesota moves towards that launch, the discourse surrounding early cultivation serves as a litmus test for regulatory agility and stakeholder collaboration. By navigating the complexities of licensing, and regulatory concerns, and addressing the imperative early cultivation period, Minnesota is poised to address many tough questions and policy dilemmas before a single seed is sown or a single flower is sold under the new legal cannabis market.
Reprinted with the permission of Harris Sliwoski