On May 30, 2023, Governor Tim Walz signed legislation to legalize recreational use of marijuana for persons 21 years of age and older. The bill legalizes the production and sale of marijuana flower concentrates, topical and edible products, immature cannabis plants and seeds, and hemp-derived THC products.
Impact on Businesses
The law creates licenses for 15 types of cannabis businesses, each of which will be subject to an application process, application fees, license fees, and renewal fees. Vertical integration of cannabis business is not allowed except in certain circumstances. Here’s a breakdown:
|Cannabis cultivators: The license holder may grow enough cannabis plants to fill up to 30,000 square feet. Cultivators may also harvest, package, and label cannabis flower for sale to other businesses, such as a manufacturer or retailer.|
|Cannabis manufacturers: Business may process cannabis flower into other products, such as concentrates, edibles, and topicals. Manufacturers can sell products to other businesses.|
|Cannabis retailers: Holders may operate up to five retail stores, commonly called dispensaries in other states, where cannabis products may be purchased by Minnesotans 21 and older.|
|Cannabis microbusinesses: Companies may cultivate up to 5,000 square feet, manufacture, and sell cannabis products at a single location. A microbusiness may allow on-site consumption of edibles in a dedicated space with a separate entrance. Microbusinesses can also offer live or recorded entertainment.|
|Cannabis mezzobusinesses: Similar to a microbusiness, except larger (“mezzo” is Italian for “medium”). Mezzobusinesses may cultivate up to 15,000 square feet, as well as manufacture and sell cannabis products. However, they will not be allowed to offer on-site consumption of cannabis products or entertainment. A mezzobusiness may operate up to three retail locations.|
|Cannabis wholesalers: License holders are authorized to purchase cannabis flower, immature plants, or other cannabis or hemp products from other businesses and sell them to cannabis manufacturers, retailers, microbusinesses, and mezzobusinesses.|
|Cannabis transporters: Holders may transport cannabis plants, flower, and other products between other cannabis businesses.|
|Cannabis delivery services: Businesses may purchase cannabis products from retailers, medical cannabis retailers, microbusinesses, or mezzobusinesses and deliver them to customers. Like cannabis transporters, a delivery service must install lockable storage compartments in its vehicles for transporting cannabis.|
|Cannabis event organizers: Holders may organize cannabis events lasting up to four days. Event organizers may charge entrance fees and must verify that all attendees are age 21 or older. They may also designate space for on-site consumption (if allowed by the local government) and authorize cannabis retailers, microbusinesses, and mezzobusinesses to sell cannabis products at licensed events. The law requires transporters to obtain insurance and install lockable storage compartments in their vehicles for transporting cannabis. All vehicles must be staffed by at least two employees while transporting marijuana products.|
Social Equity Provisions
The law contains social equity provisions for certain applicants, such as applicants from high-poverty areas or those with criminal convictions for possession or sale of marijuana. The preference is intended to assist applicants who were subject to inequitable enforcement of past marijuana laws.
Timeline for Sales
Adult use marijuana will be legal in Minnesota starting August 1, 2023. Future deadlines for the establishment of the final application processes will depend on the future work of the Office of Cannabis Management (“OCM”) and how long the OCM takes to establish a rulemaking process. It will take at least 12 months for the OCM to start issuing licenses and retailers to open. Legal retail sales do not begin until early 2025. All changes to Minnesota’s medical marijuana program take effect on March 1, 2025.
Possession and Growth Limits
Minnesotans 21 and older will be allowed to possess or transport in public up to 2 ounces of cannabis flower, up to 8 grams of cannabis concentrates and edible cannabis products containing up to 800 milligrams of THC. People can grow (indoors or outdoors) up to eight cannabis plants per residence with no more than four being mature and flowering at the same time. Plaints must be kept in an enclosed, locked space not open to the public.
It must be child-resistant, tamper-evident, and opaque. Packaging for edibles must be resealable in materials approved by the U.S. Food and Drug Administration for packaging foods. Packaging materials cannot contain or be coated with PFAS “forever” chemicals. Lower potency, hemp-derived beverages would not require child-resistant packaging. Packaging cannot resemble that of other products that do not contain cannabis.
Labeling for cannabis products will vary depending on the type of product, but will generally be required to identify the name and license number of the cultivator or manufacturer, the batch number, symbols identifying it as cannabis, a warning that the product is not for children and the phone number of the Minnesota Poison Control hotline. Cannabis flower labels must also include the net weight and the amount of cannabinoids. Labels for edible products must include the serving size, the net weight of the product, all ingredients, and the amount of cannabinoids it contains per serving.
Existing Legal Hemp-Derived THC Products
The existing market for hemp-derived THC food and beverage will continue as long as businesses register with the Minnesota Department of Health by October 1, 2023
Under the law, cannabis sold to customers will be subject to a 10% excise tax, in addition to state sales tax (currently 6.875%) and any applicable local sales tax. Lawmakers expect that the 10% excise tax will raise an estimated $120 million every two years, with an additional $75 million every two years to come from state and local sales tax rates. About 80% of the tax revenue is expected to cover the state costs of regulating the industry, while the remaining 20% will be distributed to local governments.
Transfer of Ownership
The law will permit licenses to be transferred to another owner upon approval from the OCM in its sole discretion. Social equity applicants, however, may only transfer their license to another social equity applicant. A previous iteration of the law included a requirement that 75% of the equity of business entity license holders be owned by Minnesota entities, but the restriction was removed in conference committee.
Minnesota’s cannabis law allows for local governments to adopt reasonable restrictions on the time, place, and manner of the operation of a cannabis business. Local governments may prohibit the operation of a cannabis business within 1,000 feet of a school or 500 feet of a daycare, residential treatment facility, playground, athletic field, or other attraction within a public park regularly used by minors.
Local governments also may adopt an interim ordinance that regulates, restricts, or even prohibits the operation of a cannabis business within its jurisdiction from enactment of the law until January 1, 2025.
Medical Cannabis Regulation
The law transitions the medical cannabis industry to the control by the OCM. Further, hemp-derived products will fall under the preview of the OCM and will be subject to greater regulations than previously.
Criminal Justice Reform
Minor marijuana convictions will be expunged automatically, and a review system will be set up to review more serious offenses for potential expungement.