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Minnesota Cannabis Lottery 2024: What You Need to Know

Getting a cannabis license in Minnesota isn’t easy, but also the legislature amended the law and is gearing up for applications in summer 2024.

The application process can be daunting, especially with strict deadlines and requirements.

Starting the pre-approval step from July 24 to August 12, applicants must show they meet criteria quickly for the first lottery.

This lottery is based on luck to award dispensaries and other license types, like mezzolicenses that allow for both growing and retail sales, but the regulation to carry out the lotteries are murky making us wonder if the legislation passed was overly optimistic on the timeline for the application process.

Application Process

The pre-approval application period will run from July 24 to August 12, requiring applicants to act quickly. Each applicant must demonstrate they meet the social equity and readiness criteria, ensuring they’re prepared to move forward in the lottery process.

To qualify for this “vetted lottery,” applicants must provide security plans, business plans, quality control plans, among others. While this lottery system aims to reduce unfair advantages, it still demands thorough preparation from all participants. Applicants should ensure all paperwork is meticulously completed to stand a chance.

Social Equity Criteria

Minnesota Cannabis Lottery 2024Social equity criteria focus on individuals—typically those from communities affected by prohibition—who need support to thrive in the cannabis industry.

Social equity applicants help diversify the market by encouraging broader representation of underserved groups.

In Minnesota, being eligible means proving your connection to these impacted communities and showing qualifications to enter the lottery.  Because the rules drafted social equity so broadly, news reports say that 1 in 3 people in Minnesota qualify to apply for the social equity license lottery.

Applicants must genuinely back their businesses to prevent misuse by external investors, ensuring fairness and integrity in the market.

Licensing Timeline

The application period is from July 24 to August 12, 2024.

During this time, applicants must submit detailed documents showcasing their ability to run a successful cannabis business, including a solid business plan. The Office of Cannabis Management (OCM) will review all submissions to determine eligibility for the lottery. This period is crucial for making sure applications are thorough and accurate.

After the application window closes, the OCM will begin the vetting process. By the fall, the first lottery to distribute licenses is expected to be held. Only those who pass the vetting process will be entered into the lottery, ensuring that only qualified candidates participate.

Winners of the lottery will receive pre-approval licenses allowing them to start setting up their businesses. These early licenses aim to give social equity applicants a head start, permitting them to begin cultivation in late 2024. This setup increases the likelihood that products will be available in stores when the market officially opens in spring 2025, aligning preparation with demand in a well-structured timeline.

Lottery System Overview

The Minnesota Cannabis Lottery is designed to fairly distribute cannabis licenses.

To participate, applicants must meet specific criteria, including financial readiness and a thorough business plan. The Office of Cannabis Management (OCM) will review all submissions to determine eligibility for the lottery.

This vetted system aims to avoid potential fairness issues and ensure readiness.

Vetted Vs. Pure Lottery

Why did Minnesota choose a vetted lottery system over a purely random one for allocating cannabis licenses?

In 2016, various states, including Nevada, had issues with purely random selection, which led to lawsuits and delays. Plaintiffs argued that random selection allowed unprepared applicants to win, risking market failure.

With a vetted lottery, Minnesota’s approach ensures only those who can demonstrate readiness can participate. This helps address concerns over fairness and preparedness, leading to a smoother launch.

Unlike purely random lotteries, vetted lotteries require applicants to show they can genuinely start their business if they win, reducing potential market disruptions.

A vetted system safeguards the market by balancing fairness with functional readiness.

Entry Requirements

Applicants must meet specific criteria, including social equity qualifications and business readiness.

To enter, potential cannabis business owners need to show evidence of preparedness, including detailed business plans and proof of financial stability. This helps ensure only capable applicants get the green light. The focus is on promoting a diverse and equitable market while maintaining high standards.

Additionally, applicants from groups negatively impacted by marijuana prohibition will be given priority. This aims to balance the scales by providing opportunities to those most affected, supporting inclusivity and fairness in the new market.

Ongoing verification processes will also be in place to maintain the integrity of the lottery. Applicants must continuously prove their qualifications to ensure they remain eligible, preventing misuse and supporting sustainable business practices in the Minnesota cannabis industry.

Early Cultivation Rules

Minnesota’s early cultivation rules allow pre-approved social equity applicants to start growing cannabis sooner. These applicants can plant and harvest this fall under existing medical cannabis rules, ensuring a supply of raw cannabis flower by next spring.

Timeline for Growers

The timeline for growers in Minnesota’s cannabis industry is structured to ensure a smooth market launch.

Starting in early July, the OCM should begin verifying social equity applicants. This verification ensures that applicants from communities harmed by marijuana prohibition meet legal criteria, paving the way for early engagement in the industry.

By mid-fall, the first lottery for pre-approval licenses will likely be held. Successful applicants in this lottery will be allowed to start their cultivation activities, gearing up for the full-scale market launch next spring.

This phased approach allows growers to begin planting and harvesting this fall. Thus, by spring, retailers will have a supply of raw cannabis flower to sell. This ensures a robust start to the new market, addressing potential supply gaps early in the process.

Restrictions and Allowances

Certain restrictions must be met to enter the Minnesota cannabis market, even for social equity applicants.

For instance, to qualify as a social equity applicant, individuals must meet specific criteria, including residency in areas disproportionately affected by marijuana prohibition, or having a cannabis-related conviction, being a veteran and more elements.  An applicant only needs to qualify under one of the elements of Social Equity, which is why approximately 30% of the population of Minnesota qualifies.  This focus aims to rectify historical injustices and ensure a more equitable market.

Further, the rules cap the number of licenses issued in the first rollout, ensuring a controlled and manageable entry into the market. This measure helps maintain balance and avoids market oversaturation, essential for a stable industry launch.

On the allowance side, pre-approved growers will have an early start on cultivation activities, meaning they can start planting as early as this fall. This provision ensures that by the time all regulations are finalized by next spring, there will already be a supply of mature cannabis plants ready for retail. This strategic head-start aims to prevent the market from launching to empty shelves.

Preventing Market Manipulations

To safeguard the fairness of the market, a series of application safewguard measures have been put into place. These include strict limits on the number of lottery entries per person or business entity, effectively minimizing any chance of manipulation by well-funded entities trying to dominate through multiple applications. This strategy ensures a level playing field where opportunities are distributed equitably, discouraging financial predators from exploiting the system.

Application Safeguard Measures

To safeguard the fairness of Minnesota’s cannabis market, stringent anti-predator measures are being implemented.

  1. Single Lottery Entry: Only one lottery entry is allowed per person or business entity.
  2. Thorough Vetting: Applicants must pass rigorous checks to ensure they are genuine and ready to run a business.
  3. Investor Limitations: Restrictions are placed on investors to prevent financial exploitation of social equity applicants.
  4. Straw Applicants Ban: Measures are in place to detect and eliminate straw applicants used to flood the lottery.
  5. Front-end Protections: Robust front-end protections are designed to identify improper applications before licenses are issued.

These measures aim to prevent well-funded entities from exploiting the system.

By ensuring that only prepared and genuine applicants receive licenses, Minnesota is fostering a fair and equitable cannabis market.

Limiting Multiple Entries

To ensure a fair distribution process, limiting multiple entries is crucial for the Minnesota cannabis lottery.

In many states, multiple lottery entries have skewed the system towards those with greater resources. By only allowing one entry per person or business entity, Minnesota aims to level the playing field. This restriction helps mitigate the risk of wealthier participants dominating the lottery at the expense of smaller, potentially more deserving, applicants.

Moreover, limiting entries prevents “flooding the zone,” where a single entity uses multiple applications under different names to increase their chances of winning. This tactic undermines the lottery’s integrity and disadvantages others. By capping entries, the system better reflects the principles of fairness and equity.

Overall, the limitation of multiple entries works to create an environment where each applicant has an equal shot at success. It reduces the influence of financial power and focuses on the genuine readiness and capability of each participant to operate in Minnesota’s cannabis market.

 

Picture of Thomas Howard

Thomas Howard

Licensed to practice since 2008, Thomas Howard has represented numerous financial institutions in litigation to enforce their security interests.
Homegrown Cannabis Co's Cannabis Seedshomegrown
Picture of Thomas Howard

Thomas Howard

Licensed to practice since 2008, Thomas Howard has represented numerous financial institutions in litigation to enforce their security interests.

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