Minnesota Cannabis Mezzobusiness: Everything You Need to Know

If you’re an entrepreneurial business owner looking to invest in the newly legalized cannabis industry in Minnesota, understanding the state’s regulatory landscape is crucial. This blog post focuses on Minnesota’s cannabis mezzobusiness license and eligibility requirements for applicants, providing valuable information for potential first mover investors.

Understanding Minnesota’s Cannabis Mezzobusiness License

A cannabis mezzobusiness license in Minnesota enables the holder to grow and manufacture cannabis for retail sales or distribution as a wholesaler. The size of cultivation is limited, with indoor canopy no more than 15,000 square feet for a canopy of mature flowering plants, or an outdoor canopy of one acre. This license to cultivate also allows the holder to dispense and operate up to three retail locations and hold one retail license. However, vertically integrated businesses are not allowed under this licensing category.

A cannabis mezzobusiness license in Minnesota allows cultivation and manufacturing of cannabis for retail sales or distribution, with limited size restrictions.

The fees associated with securing a cannabis mezzobusiness license include an application fee of $5,000, an initial license fee of $5,000 and a renewal fee of $10,000. Any business holding this type of licence must register with its local city council or county where it operates its operations endorsement to avoid any legal issues that may arise later on due to non-compliance.

Overview of Cannabis Mezzobusiness Licensing and Operations

Minnesota’s adult-use cannabis laws allows for the cultivation, extraction, manufacturing, and sale of cannabis products by businesses holding a mezzobusiness license. To obtain such a license, applicants must provide information on their business operations and comply with state regulations. Mezzobusinesses are limited to one retail license and up to three locations, with an indoor canopy of 15,000 square feet or outdoor canopy of no more than one acre if they also grow cannabis. Fees associated with obtaining this license include an application fee of $5,000 and renewal fee of $10,000.

The types of businesses eligible for a cannabis mezzobusiness license include those interested in growing and manufacturing cannabis products for retail sales or distribution as wholesalers to other licensed businesses. These microbusinesses can hold additional endorsements allowing them to operate on-site consumption facilities or sell lower-potency hemp edibles. Residency requirements apply to individual applicants who must be Minnesota residents over 21 years old; equity/ownership interest in business entities applying must be at least 75% held by Minnesota residents as well.

Mezzobusiness Model and Limitations

Minnesota Cannabis MezzobusinessMezzobusinesses in the cannabis industry are small operators authorized to hold one retail license and operate up to three retail locations, while cultivating and manufacturing cannabis for their own sales or distribution as a wholesaler. The limitations of this model include capped indoor canopy sizes of 15,000 square feet or an outdoor canopy size of no more than one acre.

Mezzobusinesses may also be licensed as a cannabis event organizer but must comply with all other operation requirements established under state law. Pros include being able to sell medical cannabis and products on the same premises if holding a medical retailer license. However, mezzobusiness fees associated with licensing can be costly at $5,000 for initial registration and renewal at $10,000.

Operating as a mezzobusiness in Minnesota has its pros and cons for investors looking to invest in the state’s thriving cannabis market. On one hand, being locally grown promotes artisan-type brands that align with Minnesota farmers’ focus on promoting businesses within the local economy.

However, residency requirements mandate that all license holders be residents of Minnesota aged over 21 years old. While vertical integration is prohibited under state law language interpretation suggests it does not restrict microbusiness or mezzobusiness licenses from going out to the same entity or person – allowing greater flexibility in business operations so long as they meet required standards set forth by legal statutes such as those governing cultivation limits imposed by OCM rules regarding packaging labeling testing etc., before selling approved products compliant with final regulatory guidelines adopted therein dictated by OCM regulations covering these activities related aspects like approval processes associated therewith end-to-end supply chains involved when distributing such items throughout MN dispensaries storefronts respectively

Overview of Minnesota’s First Round of Adult-Use Cannabis Licensing – 2024

The State of Minnesota has announced the details for its first round of adult-use cannabis licensing in 2024. This summary provides an overview of the available licenses, application methods, social equity qualifications, ownership restrictions, municipal controls, and application requirements.

License Categories and Fees

The available license types and their respective application fees are:

  • Cultivation: $10,000
  • Manufacturing: $10,000
  • Microbusiness: $500 (includes 1 dispensary and 5,000 square feet of cultivation)
  • Mezzo-business: $5,000 (includes 3 dispensaries and 15,000 square feet of cultivation)
  • Testing Facility: $5,000

Licenses Available

A total of 194 licenses will be available in this round:

  • Cultivation: 13 licenses
  • Manufacturing: 6 licenses
  • Microbusiness: 100 licenses
  • Mezzo-business: 25 licenses
  • Testing Facility: 50 licenses

Application Process

Licenses will be awarded via a random lottery, and all are designated for social equity applicants. The specific geographic allocation of these licenses has not yet been determined by the State of Minnesota.

Current Market Landscape

Currently, Minnesota has:

  • 2 operational dispensaries.
  • 2 operational cultivation or processing facilities.

If all new dispensary licenses are issued and become operational, the state will have approximately one dispensary per 32,700 residents.

Social Equity Applicant Criteria

Applicants must meet at least one of the following criteria to qualify as a social equity applicant:

  1. Conviction for a cannabis-related offense before May 1, 2023.
  2. Immediate family member convicted of a cannabis-related offense before May 1, 2023.
  3. Dependent of someone convicted of a cannabis-related offense before May 1, 2023.
  4. Military veterans, including those who lost honorable status due to cannabis-related offenses.
  5. Residents of areas with disproportionate cannabis enforcement for the last five years.
  6. Emerging farmers as defined by Minnesota statutes.
  7. Residents of census tracts with high poverty rates or low median family income for the last five years.

Out-of-state applicants who meet these criteria are also eligible to apply.

Social Equity Ownership Restrictions

  1. At least 65% social equity ownership must be maintained for a minimum of three years post-award.
  2. Ownership can only be transferred between verified social equity individuals during the first three years.

Municipal Control and Real Estate

Real estate is not required at the time of application but must be secured during the 18-month conditional license phase. Local governments can establish buffer zones prohibiting cannabis businesses within certain distances from schools, daycares, residential treatment facilities, and specific park attractions. While local governments cannot opt out of allowing cannabis businesses, they can limit the number of licenses based on population.

Ownership Restrictions for First-Round Licenses

  1. Holders of Mezzo-business or Micro-business licenses can only have an interest in one such business and no other license types.
  2. Cultivation license holders can also hold one manufacturing license, and vice versa. Vertical integration is prohibited in this first round.

Application Requirements

Applicants must submit the following:

  1. Ownership disclosures.
  2. Proof of social equity status for at least 65% ownership.
  3. An organizational chart.
  4. Foundational documents (e.g., Articles of Incorporation, Bylaws).
  5. Disclosure of all existing financial obligations.
  6. Attestations to comply with Minnesota laws.

The State of Minnesota has simplified the application process for this first round to encourage wider participation from social equity applicants.

Regulation of Adult-Use Cannabis in Minnesota

The regulation of adult-use cannabis in Minnesota requires applicants for a mezzobusiness license to provide information regarding business operations. Mezzobusiness holders are limited to one retail license and no more than three retail locations, as well as an indoor canopy of 15,000 square feet or an outdoor canopy of one acre if they also grow cannabis.

The final bill does not limit the number of licenses to be issued but instead aims to reach market stability by assuring a competitive marketplace and meeting demand while prohibiting vertical integration. Cannabis and hemp businesses can only sell approved products that comply with OCM’s final rules on testing, packaging, and labeling. Residency requirements remain under debate but are expected to favor local farmers over non-residents.

Cannabis microbusinesses holding a retail endorsement can operate onsite consumption facilities while cannabis mezzobusinesses holding the same endorsement may also hold a cannabis event organizer license or sell medical cannabis products on-site if licensed appropriately. Microbusinesses must ensure compliance with operation requirements established under this chapter.

By setting clear limits on cultivation size and processing amounts while allowing multiple endorsements for various operations such as product manufacturing and consumer sales, Minnesota aims to foster small-scale operators who promote locally grown artisan-type brands without compromising competitiveness in the marketplace or supply chain stability through vertical integration practices prohibited by law.

Applying for a Cannabis Mezzobusiness License

To apply for a cannabis mezzobusiness license in Minnesota, applicants must ensure they meet the minimum requirements and qualifications. These include being at least 21 years old, holding a majority of equity or ownership interest if applying as a business entity, and complying with all other operation requirements established under state regulations.

The application process timeline and fees involve an initial application fee of $5,000, an initial license fee of $5,000, and a renewal fee of $10,000. When submitting their application documentation to the Office of Cannabis Management (OCM), applicants must provide information regarding their business operations such as cultivation size limits and retail location restrictions.

The required documentations for obtaining this type of license include proof that the applicant has met residency requirements by being either an individual resident or having at least 75% equity held by Minnesota residents in case it is applied via business entity. Additionally OCM will require proposed site plan(s), security plan(s), proof that you have secured sufficient financial support to operate your planned business along with its projected costs summary, zoning & revenue report etc., all necessary permits from local government agencies where applicable which must be paid prior to issuance by said entities per ordinance/code specific rules therein stated).

Successful candidates will also need compliance certification on final product testing protocols; packaging & labeling standards set forth according OCM’s guidelines before selling approved products within regulated marketplaces across MN jurisdictional area governed accordingly under regulatory framework established by SF73 legislation passed recently into law covering cannabis industry throughout the state’s operational pipeline from seed-to-sale chainlink connectivity end-points encompassed within these new provisions ensuring rigorous oversight thereof ensures public safety while assuring consumer confidence remains high during transition toward emerging sector expected flourish over time given current trendlines forecast future demand nationwide trends already well-established across country today

Endorsements for Cannabis Microbusiness License Holders

Benefits of obtaining endorsements as a cannabis microbusiness license holder are numerous. Endorsements allow the cultivation of cannabis, production and sale of consumer products, operation of retail establishments and on-site consumption facilities. With these endorsements, businesses can diversify their offerings and increase revenue streams.

To be eligible for endorsement as a microbusiness license holder in Minnesota, compliance with other operation requirements established under this chapter is necessary. Additionally, registration with the city or county where the retail establishment is located must occur. The application process requires an initial fee of $5,000 and renewal fees thereafter.

Obtaining endorsements from state regulators involves a thorough understanding of Minnesota’s cannabis laws and regulations. Businesses should work closely with legal counsel to ensure compliance before applying for any endorsements to avoid costly fines or penalties down the line.

Registration Requirements for Cannabis Microbusinesses and Mezzobusinesses

State registration process, timelines and fees:

  • Cannabis mezzobusinesses must pay an initial license fee of $5,000, application fee of $5,000 and a renewal license fee of $10,000
  • All cannabis businesses with a retail operations endorsement must register with the city or town in which the retail establishment is located.

“Do’s” and “Don’ts” of registering your cannabis business with the state government:

  • Do provide accurate information regarding your business operations when applying for a cannabis mezzobusiness license.
  • Don’t attempt to circumvent residency requirements set forth by Minnesota law.

“Clean slate” provisions that allow existing cannabis businesses to register under the new law:

Nothing in the text of current legislation prohibits existing marijuana businesses from obtaining microbusiness or mezzobusiness licenses.

Market Stability and Meeting Demand

Minnesota’s adult-use cannabis market faces challenges in meeting supply and demand. The state is committed to achieving market stability by ensuring a competitive marketplace while meeting the demands of consumers. Group purchasing organizations (GPOs) are one solution that can help stabilize the industry by providing opportunities for smaller operators, such as mezzobusinesses, to access economies of scale when purchasing supplies. Additionally, Minnesota has an opportunity to attract cannabis tourism through its legalization efforts, which could increase demand and support local businesses.

Overall, providing stability in the Minnesota cannabis industry requires creative solutions that balance supply with demand. While GPOs offer opportunities for small operators to compete on a larger scale, tourism can provide significant economic benefits and growth potential for local businesses.

With careful planning and strategic partnerships between government agencies and private investors, Minnesota has the potential to establish itself as a leader in this emerging industry while promoting locally grown brands and supporting sustainable business practices.

Vertical Integration and Ownership of Multiple Licenses

Vertical integration and ownership of multiple licenses can provide benefits to cannabis investors in Minnesota. While vertical integration is prohibited, nothing in the text of the bill prohibits a person or entity from holding both microbusiness and mezzobusiness licenses.

Mezzobusinesses are smaller operators that can hold one retail license and operate up to three retail locations, as well as grow and manufacture their own cannabis for distribution to other licensees. With these options available, investors may consider owning multiple licenses for greater control over their operations.

However, it’s important for investors to understand registration requirements with local governments where their business will be located. Additionally, they must comply with final rules adopted by OCM regarding testing, packaging, labeling of approved products sold at their facilities.

While there are no limits on the number of licenses issued in Minnesota under current law; the state requires competitive markets meeting demand before granting more permits which makes market stability essential when contemplating investing into Cannabis businesses within this state.

Requirements for Selling Approved Products

To sell approved products in Minnesota’s cannabis industry, businesses must comply with final rules adopted by the Office of Cannabis Management (OCM) regarding testing, packaging, and labeling. These regulations apply to both cannabis and hemp products. Businesses are also limited to selling only Approved Products that meet these requirements. It is important for businesses to stay up-to-date with any changes or updates made by the OCM to ensure compliance and avoid penalties or legal issues.

Additionally, while there is no limit on the number of licenses issued in Minnesota’s cannabis industry, vertical integration is expressly prohibited. However, the issuance of microbusiness or mezzobusiness licenses to the same person or entity is not prohibited under current legislation. This allows for more flexibility in ownership and operation but requires careful consideration when applying for multiple licenses within the industry.

Eligible Applicants and Residency Requirements

To be eligible for a cannabis mezzobusiness license in Minnesota, the individual applicant must be a state resident of at least 21 years old, and if it’s a business entity applying for the license, at least 75% of its equity or ownership interest should be held by Minnesota residents. While residency requirements have been successfully challenged in court in other states, the final bill in Minnesota still emphasizes locally grown cannabis and favors local farmers.

Challenges to residency requirements may arise due to concerns over restricting interstate commerce. However, even with no residency requirement in place, there is an emphasis on supporting local businesses and preventing vertical integration of cannabis operations under Minnesota law. Aspiring investors looking to enter the cannabis industry through mezzobusinesses should consider these factors when considering their options.

Requirement for State Residency

  • The Final Bill requires all cannabis mezzobusiness license holders to be state residents.
  • If the applicant is a business entity, at least 75% of the equity/ownership interest in the business would have to be held by Minnesota residents.
  • Similar residency requirements in other states have been challenged and successfully overturned.

Challenges to Residency Requirements:

  • Residency requirements may limit investment opportunities for non-residents.
  • Non-resident investors may face legal challenges similar to those seen in Maine with NPG LLC v. Maine Department of Administrative and Financial Services.

Emphasis on Locally Grown Cannabis:

  • While residency requirements are not explicitly stated, there is an emphasis on promoting locally grown cannabis brands that favor Minnesota farmers.
  • Vertical integration of cannabis operations is prohibited, further supporting local artisan-type businesses.

Challenges to Residency Requirements

The residency requirements for cannabis mezzobusinesses in Minnesota pose a challenge to non-resident investors. The law requires that at least 75% of the equity or ownership interest in the business must be held by Minnesota residents, which could limit investment opportunities for out-of-state investors. However, similar state residency requirements have been successfully challenged in other states on the grounds of violating the dormant commerce clause, so there may be potential legal solutions for non-residents looking to invest in Minnesota’s cannabis industry.

Another challenge posed by Minnesota’s emphasis on locally grown cannabis is that it may limit options for businesses looking to source their products from outside of the state. While this may benefit local farmers and promote artisan-type brands, it could also lead to supply chain issues and higher costs for businesses who cannot find suitable suppliers within the state. Businesses will need to navigate these challenges while complying with regulations and finding ways to establish themselves within Minnesota’s competitive marketplace.

Emphasis on Locally Grown Cannabis

Minnesota’s cannabis industry places a strong emphasis on locally grown products, with the state favoring artisan-style brands produced by local farmers. The Final Bill prohibits vertical integration of cannabis operations, prioritizing small-scale mezzobusinesses that operate up to three retail locations and grow their own cannabis for distribution as wholesalers or for their own retail sales. Cannabis microbusinesses are also permitted to hold event organizer licenses and offer endorsements for cultivation, extraction, product production, retail establishment operation, and on-site consumption facilities.

To be eligible for licensing in Minnesota’s cannabis industry, applicants must either be state residents or have at least 75% equity/ownership held by Minnesota residents if applying as a business entity. While residency requirements have been challenged in other states on the grounds of violating the dormant commerce clause of the US Constitution’s Commerce Clause Article I prohibiting restrictions on interstate commerce – most notably Maine – no such challenges have yet arisen within Minnesota itself.

About the Author

Tom Howard, a Cannabis Industry Lawyer and Consultant has practiced commercial law since 2008 when he graduated from law school and got his Series 7 & 66 Securities licenses. He pivoted to practicing litigation for financial institutions before helping cannabis teams form, capitalize, and get licensed. He has concentrated on the cannabis business since Illinois legalized it in 2019. He won licenses for clients in Illinois, Connecticut, New Jersey, New Mexico, Massachusetts, Missouri and has gotten into lotteries in Ohio, Maryland, and Maine. He became a Certified Ganjier in 2021. He chairs the ISBA’s section council for Cannabis Law in 2023.

Additional Resources & Websites that’ll help you understand cannabis in Minnesota

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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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