Second in a series on the Minnesota Adult-Use Cannabis Law. See our First Look.

Businesses considering entering the recreational marijuana market under Minnesota’s recently passed act creating a regime for adult-use cannabis would be wise to consider the state’s unique geography and local politics. While the law covers the entire state, enforcement powers delegated to local governments are likely to lead to regional differences in the way the industry is regulated.

Minnesota Gov. Tim Walz only signed the law on May 30, 2023, the new Office of Cannabis Management is still being set up and a search is underway for a new commissioner, but the state government has promised to begin the licensing process in January 2024.

The Act gives a measure of control and oversight to local units of government (municipalities and/or counties, depending on where your operation is located), which is likely going to be contentious in certain parts of Minnesota due to the state’s history with THC. That said, no local unit of government may prohibit the establishment or operation of a cannabis business unless specifically allowed under the Act.

History provides some valuable context. On July 1, 2022, Minnesota permitted the sale of low-dose hemp-derived THC edible products. Subsequently, a patchwork of local governments established city- or county-wide moratoriums on the sale, cultivation and manufacturing of hemp-derived THC edible products as an act of caution or due to hostility toward the new products. These actions by local governments created confusion and frustration in Greater Minnesota and resulted in prosecutions against violators. While the Act attempts to limit the full-stop prohibition that some local governments implemented, it will not mean residents’ and elected officials’ biases against cannabis and THC have disappeared.

Importantly, Minnesota’s neighboring states have prohibitions (or are engaged in internal wrangling preventing the legalization of adult-use cannabis) that may increase cannabis tourism into Minnesota. These states primarily border Greater Minnesota, rather than the state’s major metropolitan areas, making the local political climate especially important when determining whether to set up a location to attract cannabis tourists.

Beyond the political environment, three main aspects of the Minnesota cannabis regime are likely to influence your decision to establish operations in Minnesota:

• Local registration and enforcement against retailers
• Time, place and manner restrictions against all cannabis operations
• The ability of local governments to institute moratoriums until January 1, 2025

Local Registration and Enforcement Against Retailers

Section 342.22 of the Act requires retailers to register with the city, town or county in which the retail establishment is located and pay a registration fee. The county registration is only required if the city or town has provided consent to the county to do so.

A local government may restrict the number of retail operations to only one registration per 12,500 residents but is not required to do so.

A local government may also require a preliminary compliance check against the Act and any future regulations before issuing the registration, and after registration, may conduct additional compliance checks, including mandatory unannounced age verification and possibly announced operational compliance checks once a year. If there is a compliance issue that poses an immediate threat to public health or safety, the local government may suspend registration and effectively close the retail operation. The Office of Cannabis Management will review each suspension within 30 days, unless the office further suspends operations or revokes the license. Further, the Office of Cannabis Management will work with local governments to develop model policies and procedures for the compliance checks.

Lastly, no registration with a local government may be transferred. So, even if retail licenses are generally transferable under the Act subject to approval from the Office of Cannabis Management, the registration may present a barrier to closing the transfer of the retail license to any potential holder. Depending on the local government’s registration requirements, the potential holder may have to apply for registration prior to the transfer of the retail license.

Time, Place and Manner Restrictions Against All Cannabis Operations

In an effort to avoid the patchwork moratoriums that arose under the 2022 hemp law, the Act specifies what local governments may regulate. A local government may adopt reasonable restrictions on the time, place and manner of the operation of a cannabis business provided that those restrictions do not prohibit the establishment or operation of a cannabis business. This includes prohibitions on opening businesses within 1,000 feet of a school or 500 feet of a day care, residential treatment facility or public park frequented by minors. The Office of Cannabis Management will work with local governments to develop model ordinances for these restrictions.

Local Moratoriums

Retail sales under the Act are likely to begin in the second quarter of 2025. Up and until January 1, 2025, local governments may regulate, restrict or prohibit the operation of a cannabis business within their jurisdiction for the purpose of creating reasonable time, place and manner restrictions.

Moratoriums are already being scheduled for public hearings or considered by local governments, including recently in Osseo, Hugo, St. Joseph and Park Rapids. While not the largest towns in Minnesota, this demonstrates that a patchwork of moratoriums is developing again after the 2022 approval of low-dose hemp-derived edibles.

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