Cannabis business applicants sue state over license denials, seek to delay lottery

Eight people whose cannabis business applications were rejected have filed two lawsuits against Minnesota’s cannabis regulators, aiming to delay next week’s lottery that will further narrow the pool of applicants.

The state’s Office of Cannabis Management (OCM) said Friday that it will hold the lottery Tuesday to preapprove licenses for 182 of the remaining 648 social equity applicants.

The state’s social equity program is designed to help people negatively affected in the past by cannabis prohibition, veterans and people who live in high-poverty areas to compete with better-funded entrepreneurs in Minnesota’s fledgling adult-use marijuana market.

The lottery announcement came four days after the OCM dramatically reduced the pool of contenders, sending rejection letters to 1,169 applicants.

Some of the applicants reacted to the notices with disbelief and anger, saying minor clerical errors didn’t merit their rejection.

The two lawsuits allege that the state denied their applications arbitrarily or without explanation.

Jen Reise a Twin Cities cannabis attorney who filed suit Friday on behalf of six applicants, said the OCM ran an “unfair” evaluation process that was inconsistently applied to prospective cannabis entrepreneurs.

Reise is seeking a temporary restraining order to delay Tuesday’s 11 a.m. lottery. She also wants the cannabis office to give applicants a chance to correct errors on their applications and resubmit them or so the OCM can give more explanation for each denial.

“We’re deeply concerned that OCM has been unwilling to engage with social equity applicants, many of whom were denied for extremely minor paperwork problems or whose denials are not supported by the reasons OCM is giving them,” she said.

The lottery will be streamed online on the OCM’s YouTube page, spokesman Josh Collins said in an email. An additional lottery will be held in early 2025 for another shot at social equity license preapprovals, along with a general lottery for other applicants, he said.

OCM “stands by the process used to review applications for license preapproval. We look forward to holding the lottery on Tuesday,” Collins said.

In another suit filed Thursday, Cristina Aranguiz said the explanation given for the rejection of her application “made no sense” when considering the state’s requirements, and Jodi Connolly said she was given no explanation for her rejection.

In response, OCM Interim Director Charlene Briner released a statement saying the office was “committed to weeding out bad actors who seek to overwhelm the system at the expense of legitimate, prospective business owners.”

OCM spokesman Jim Walker added in a news release that the women’s suit was “the face of a scheme to use hundreds of straw applicants to gain unfair advantage in the lottery.”

“We look forward to details of the complaint becoming widely known to the public, because the details will show a deliberate attempt to subvert state law,” Walker said.

Matt DeLong contributed to this story.