Minnesota Embraces Cannabis Legalization, Paving the Way for Lucrative Business Ventures

MINNEAPOLIS – In a significant development, Minnesota has joined the ranks of adult-use cannabis states, creating a promising landscape for potential business opportunities. After months of legislative deliberation, the state became the 23rd in the nation to legalize cannabis for recreational use, signaling a significant shift in its approach to the market.

Under the newly enacted legislation, the Office of Cannabis Management (OCM) has been established as the regulatory body responsible for overseeing both the recreational and medical cannabis sectors. A recent report by Global Go, a leading cannabis consulting firm, revealed that Minnesota already boasts 15 medical dispensaries as of April 2023.

With one of the lowest cannabis tax rates in the country and surrounded by neighboring states without adult-use cannabis programs, Minnesota is strategically positioned to attract entrepreneurs and operators looking to capitalize on the burgeoning market. The state, the 22nd largest by population, is home to over 5.7 million residents based on 2022 U.S. Census data, presenting a sizable customer base. Currently, more than 40,000 patients are registered in Minnesota’s medical cannabis program.

While local governments cannot outright prohibit cannabis businesses, they can impose “reasonable restrictions” such as operating hours and proximity to schools and parks. These measures aim to strike a balance between ensuring access to cannabis products and maintaining community standards.

Under the new law, Minnesota has introduced a state cannabis tax rate of 10%, which will be in addition to the existing 6.875% sales tax, resulting in a total estimated tax rate of approximately 17%. The state offers a range of cannabis business license types, with vertical integration prohibited except for microbusinesses, mezzobusinesses, and lower-potency hemp edible manufacturers and retailers.

Notably, the legislation also enables liquor stores to sell hemp-derived, low-potency THC edibles and beverages, further expanding the distribution channels for these products. In a move to enhance accessibility, the law eliminates the $200 enrollment fee for new patients in the medical cannabis program.

The Office of Cannabis Management will issue licenses through a rigorous merit-based scoring process that considers various criteria, including social equity applicant status, veteran status, security measures, employee training plans, business plans, financial situations, labor and employment practices, and environmental plans. Social equity applicants can earn up to 20% of the total available points, highlighting the state’s commitment to fostering a diverse and inclusive industry. The OCM will determine the number of licenses issued based on market stability.

Recreational cannabis license application fees vary depending on the type of license sought. For example, retailers are required to pay a $2,500 application fee, a $2,500 initial license fee, and a $5,000 renewal license fee.

As the OCM continues to develop its program, it will release further information about the application process, including important dates. The application window is projected to open in May 2024, with sales anticipated to commence in the first quarter of 2025. In light of the expected competition for licenses, prospective applicants are advised by industry experts to begin gathering necessary materials at least a year in advance.

The momentous signing of the legislation by Governor Tim Walz marked the end of a lengthy legislative debate and numerous committee hearings. It signifies a significant departure from Minnesota’s previous market dynamics, which allowed the sale of hemp-based THC edibles at convenience stores while imposing strict regulations on medical marijuana flower and other products.

With the legalization of adult-use cannabis, Minnesota’s business landscape is set to experience a transformative shift, offering a plethora of opportunities for entrepreneurs and investors alike. As the state prepares to embark on this new era, all eyes are on the emerging market, awaiting the arrival of an industry poised for growth and innovation.