Minnesota Legalization Bill a Good Start But Could be Improved

Several unknowns remain on what the state's market would look like.

A new bill in the Minnesota Legislature to legalize adult-use cannabis features a few provisions that indicate state lawmakers are learning which policies work and which don’t when it comes to replacing underground marijuana markets with regulated ones.

In particular, according to an analysis by MinnPost, the author of the bill wrote in deliberately low state cannabis tax rates and wants to prevent cities and counties from enacting bans on cannabis companies, all to ideally replace illegal cannabis businesses with licensed taxpaying companies.

“They want a system where people of different levels of wealth or investment can take part, and they want prices to starve the illegal market as much as possible,” MinnPost reported.

While that may be a solid start, the bill itself falls short in a few key areas if the state truly wants to eliminate its underground market, said Karen O’Keefe, director of state policies at the Marijuana Policy Project.

Specifically, she said there are some mandates within the proposed legislation that could stall or undermine the rollout of an adult-use market – such as a merit-based business license application system that will keep barriers to entry high, and possible license caps that will be determined at a later date by state regulators.

“So it all depends … how many licenses do they actually issue? Do they issue enough to have adequate supply and have adequate numbers of retailers throughout the state?” O’Keefe said.

There’s also a residency requirement for business ownership. One such mandate was ruled unconstitutional by a federal judge and other residency requirements are also being litigated in New York and California.

Other provisions in the Minnesota bill also will increase costs for businesses, O’Keefe said, such as the requirement to use a third-party transportation company, instead of allowing cultivators to transport their crops directly to retailers by themselves.

“And each of those transporters has to have two staff in the car at all times,” O’Keefe noted. “In California, the same requirement is one of the things that’s making legal cannabis less competitive with illegal cannabis.”

While the Minnesota bill appears to be a good start, it still needs work if the state wants to stamp out its underground marijuana trade, O’Keefe said.

“In terms of replacing the illicit market, cheaper prices means more people are going to buy legal cannabis,” O’Keefe said. “But to me, just having a capped system and merit-based licensing puts it behind all of the other states where you can actually succeed.”

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

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