Business licensing proposal supported by new state cannabis office sparks debate
SAINT PAUL, Minn. — The Minnesota Office of Cannabis Management, the new agency tasked with oversight of newly legal marijuana, is backing a bill that would make tweaks to the law to improve the licensing process, ensure timely market launch, and regulate effectively.
However, a proposed change to how the agency would approve who receives a state license to open a cannabis business is sparking a fierce debate.
Current law instructs the office to create a points system for reviewing business license applications. Regulators would consider criteria like experience in the cannabis industry and business and safety plans, among others.
If the business owner meets the definition of a "social equity applicant," the application is given a boost in scoring—an effort to reach a key goal set by bill authors and advocates who want to give Minnesotans disproportionately impacted by cannabis prohibition an opportunity to cash in on legalization.
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The Office of Cannabis Management would then award licenses with priority given to applications with the highest score. Charlene Briner, the interim cannabis office director, told lawmakers on Friday that she would like lawmakers to scrap that merit-based system for fear that it's too subjective and that it could attract lawsuits seen in other states with similar programs.
The proposal backed by her office—discussed in both House and Senate committees—suggests a lottery system instead.
"There is an inherent advantage for well-funded applicants who have the means to prepare an application in accordance with the subjective and non-subjective criteria in the process," Briner said. "A merit-based system favors folks who already know how to strategize a subjective system, or will have the means to hire a consultant or an attorney who knows how to navigate that."
"We believe that a vetted lottery eliminates that subjective risk and also reflects what the courts have looked on more kindly in other states when it comes to their suspicion of a points-based system," she added.
She explained that applications would be "vetted"—or pre-screened—to ensure they've met the criteria for a license before entering the lottery, including verifying if the person qualifies as a social equity applicant.
That description of the proposal did not calm the fears of some in the cannabis industry or advocates who want to ensure social equity goals are achieved. Many people testified to the House and Senate panels Friday, asking that lawmakers reject the proposed change.
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Nathan Young, the cannabis policy lead for the Minnesota Black Chamber of Commerce, said the system could lead to "straw applicants," or deals large operators will make with Minnesotans who meet the social equity criteria in order to enter that ultimately benefit the company.
That happened in Arizona, where the Arizona Center on Investigative Reporting found that 42% of the social equity license lottery winners are owned by corporate dispensaries–just two years after the state's program launched.
"This is not only unfair for the unassuming Black entrepreneurs who fall victim to the scheme," he said. "It is deeply unfair to the numerous Black entrepreneurs, many of whom are already working on their business plans, who worked hard to build a viable business only to lose on chance to a big business who cheated their way in."
Another part of the OCM-backed bill would establish temporary licenses which if approved, would open applications as early as this summer. The goal is to ensure businesses are ready to go by early next year when regulators hope the legal market will be ready to launch.
Only social equity applicants would be eligible for these licenses. There would be a set number of them and there would be a lottery for these as well.
If businesses with temporary licenses are in good standing, those would convert into official licenses once the state opens up the general applications to become a state-approved grower, manufacturer or retailer, following completion of rulemaking.
