After months of legislative deliberation, Minnesota became the 23rd state to go adult-use, introducing a new market landscape ripe with potential business opportunities.
Among other things, the wide-sweeping bill established the Office of Cannabis Management (OCM) as the regulatory agency overseeing both recreational and medical markets, and as of April 2023, the state counted 15 medical dispensaries, according to a report from cannabis consulting firm Global Go.
Benefiting from one of the nation’s lowest cannabis tax rates and being surrounded by states devoid of adult-use cannabis programs, Minnesota is well-positioned as a strategic location for operators looking to lay their heads down.
The state is the 22nd largest by population, boasting a population of over 5.7 million based on 2022 U.S. Census data. There are over 40,000 patients registered in the state’s medical program. And while local governments cannot prohibit the operation of cannabis businesses, they can adopt “reasonable restrictions” like hours of operation and distance from schools and parks.
Additionally, the law established a state cannabis tax rate of 10%, which will be in addition to Minnesota’s existing 6.875% sales tax, creating a total likely tax rate of approximately 17%.
The state also offers a variety of cannabis business license types, with vertical integration prohibited except for microbusinesses, mezzobusinesses and both lower-potency hemp edible manufacturer and retailer licenses.
The law allows liquor stores to sell hemp-derived, low-potency THC edibles and beverages and eliminates the $200 enrollment fee for new patients in medical cannabis program.
Licenses are issued by the OCM via a merit-based scoring process that includes criteria such as:
- Social equity applicant status
- Veteran status
- Security and record-keeping measures
- Employee training plan
- Business plan and financial situation
- Labor and employment practices
- Knowledge and experience
- Environmental plan.
Notably, social equity applicants can account for at least 20% of the total available points. The OCM determines the total number of licenses issued based on “market stability”.
Fees for recreational cannabis license applications vary. For instance, a retailer must pay an application fee of $2,500, an initial license fee of $2,500, and a renewal license fee of $5,000.
The OCM will provide more information on the application process, including key dates, as it continues to cobble together its program. The application window is projected to open in May 2024, with sales expected to start in the first quarter of 2025.
Though the new cannabis licenses won’t be awarded until 2024, the firm recommends that potential applicants start gathering necessary materials at least a year in advance, signaling the competitive nature of the emerging state market.
The landmark signing by Gov. Tim Walz ended months of legislative debates and numerous committee hearings before eventually surviving a thin Senate vote. The news marked a notable shift in Minnesota’s unique market, which had previously allowed the sale of hemp-based THC edibles at convenience stores, while strictly regulating medical marijuana flower and other products.