Minnesota holds first lotteries for cannabis business licenses, nearly two years after legalization

Nearly two years after Minnesota legalized marijuana for recreational use, the state Office of Cannabis Management (OCM) on Thursday held the first lotteries to begin the process of awarding hundreds of cannabis business licenses to qualified applicants.

The drawings marked a long-awaited milestone on Minnesota’s bumpy road to launching a legal marijuana market.

The OCM initially planned to hold lotteries for social equity licenses in late November. But the agency abandoned those contests after a Ramsey County judge delayed them in response to lawsuits from several applicants alleging they were unfairly denied entry.

“This is an exciting day for business owners preparing to establish themselves in the state’s new adult-use cannabis market,” OCM Interim Director Eric Taubel said in a statement. “We’re setting a strong foundation for an equitable and safe adult-use cannabis market that will mature over the next few years.”

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A total of 776 qualified applicants were in the running for 249 licenses Thursday. The first batch of lotteries, livestreamed with little pomp on YouTube, were set aside for social equity applicants seeking license types capped in number by law, including cultivator, manufacturer, retailer and mezzobusiness – which would allow the holder to grow, process and sell cannabis products on a relatively limited scale.

Social equity licenses are intended to help veterans, individuals who have been harmed by cannabis prohibition and those living in areas of high poverty to enter the legal cannabis industry.

Social equity applicants who were not selected in the morning were automatically entered in the general license lotteries.

Lottery winners will not immediately receive a full license, Taubel cautioned during a Thursday news conference. Successful applicants must still pass a criminal background check and secure a labor peace agreement to receive preliminary approval for a license, he said. At that point, they can find a location for their business, work with local government to ensure compliance with fire, building and zoning codes and undergo an OCM inspection before they can begin operating.

Applicants who were chosen in the lotteries were identified by a unique number associated with their applications. Their names will not be released until they are fully licensed.

More than 350 applicants seeking license types that are not capped in number – nearly all of them going for microbusiness licenses, which will allow the holder to control the entire supply chain at a smaller scale than mezzobusiness licenses – have also received preliminary approval, according to data published by the OCM. Those applicants are currently proceeding with the licensing process outside of the lotteries.

The White Earth Band of Chippewa last month signed a cannabis compact with the state and opened its first retail marijuana dispensary outside of tribal lands in Moorhead over Memorial Day weekend. Taubel said he expects the Walz administration will soon finalize similar agreements with other Minnesota tribes that will allow each to open up to eight off-reservation pot stores in the state.

A new lawsuit was filed against the OCM Wednesday in Ramsey County District Court by a prospective social equity applicant who was denied entry into Thursday’s lotteries. Jason Grigg, a disabled veteran who registered his business in St. Paul, alleged his application was rejected as a result of a malfunction of the OCM’s license application system.

OCM spokesman Josh Collins said the office is reviewing the lawsuit.

“We are confident in the policies and practices that resulted in today’s lottery drawings and look forward to working with selected applicants as they move through the final steps in obtaining a business license,” Collins said.

Nick Rahn, an Air Force veteran and owner of the Warrior’s Garden Hemp & Wellness in St. Paul’s Lowertown neighborhood, said in a Thursday interview that he was “crying for the last 15 minutes” after learning that his application for a social equity retailer license will move forward.

A carpenter by trade, Rahn said he plans to build a wall in his existing store to keep the retail marijuana business separate from his hemp shop, as well as the comedy venue he operates at the location. He hopes to begin selling adult-use cannabis products by Aug. 1 and eventually open all five retail locations authorized by the license.