After extensive negotiating, party-line votes, and resolution of conflicts between the senate and house, Minnesota’s Adult-Use Cannabis bill (“HF 100” or “the bill”) is finally headed to the Governor’s desk. The Governor has indicated he is eager to sign the bill, making Minnesota the 23rd state to legalize adult-use cannabis. While the bill is jam-packed, here’s what you need to know.
What You Need to Know:
Minnesota is expected to become the 23rd state in the country to legalize adult-use cannabis under a bill waiting to be signed by the Governor that includes the following:
- Provides for 16 different license types, including licenses for various types of recreational, lower-potency hemp edible, and medical cannabis businesses;
- Creates license structure that limits vertical integration and promotes social equity;
- Taxes gross retail sales at 10 percent, in addition to other state and local sales taxes;
- Prohibits employers from refusing to hire, discipline, or discharge employees for off-premises cannabis use; and
- Limits employers’ ability to test employees for cannabis, partly dependent on certain categories of employees.
Cannabis Businesses and Licenses
The bill creates a complex regulatory system, providing for 16 different license types, including for cultivators, manufacturers, wholesalers, and retailers.
- Cannabis microbusinesses and mezzobusinesses are permitted to grow cannabis, manufacture cannabis concentrate and products, package and label products, or sell to other cannabis businesses or end users, provided they obtain the proper endorsements from the Office of Cannabis Management (OCM).
- Microbusinesses with a retail operation endorsement are permitted to operate one retail location. A microbusiness with a cultivation endorsement is limited to 5,000 square feet of indoor canopy or to cultivating a half-acre of mature, flowering plants outdoors.
- Mezzobusinesses with a retail endorsement are permitted to operate up to three retail locations. A mezzobusiness with a cultivation endorsement is limited to 15,000 square feet of indoor canopy or to cultivating one acre of mature, flowering plants outdoors.
- These limits are subject to expansion to meet market demand by the OCM.
- Additional license categories include cultivators, manufacturers, retailers, wholesalers, transporters, testing facilities, event organizers, and delivery providers.
- Licenses and fees depend on status of business as either recreational cannabis, low-potency hemp, or medical cannabis.
The bill largely prohibits vertical integration. License holders may hold more than one type of license, the variety of which is dependent on the type of license(s) they already hold. Licenses may also be freely transferred, subject to approval by the OCM.
Regulation
HF 100 establishes the Office of Cannabis Management (OCM), which will regulate medical and recreational cannabis, as well as consumer hemp products. The bill also establishes the Cannabis Advisory Council (Council), tasked with reviewing policy and making recommendations to the OCM. Creation of the OCM and Council should resolve a key complaint arising from the passage of last year’s hemp-derived edibles bill, which legalized certain edibles with what many said was insufficient oversight.
Key areas of regulation include:
- Licensure of cannabis microbusinesses, mezzobusinesses, cultivators, manufacturers, retailers, wholesalers, transporters, testing facilities, event organizers; lower-potency hemp edible manufacturers and retailers; and medical cannabis cultivators, processors, retailers, and combination businesses;
- The possession and transportation of adult-use cannabis;
- Expungement of criminal records for previous low-level marijuana offenses;
- Hemp-derived edibles; and
- Medical cannabis.
The OCM—whose website is already up and running—will immediately start regulating the possession, processing, sale, and use of recreational cannabis and will take over regulation of hemp-derived edibles and medical cannabis starting March 1, 2025. Regulation of hemp-derived edibles and medical cannabis will remain under the Minnesota Department of Health until that time.
Taxation
Adult-use cannabis products will be taxed at 10 percent of retail sales, in addition to state and local sales taxes. The bill also imposes a 10 percent tax on a person who receives cannabis product for use or storage in Minnesota. Tax revenue will be split with 80 percent going to the state’s general fund and 20 percent going to assist local governments. Medical cannabis will not be taxed under the bill.
Employers
The bill amends existing state employment laws with provisions relevant to cannabis and non-cannabis employers alike.
Cannabis industry license applicants are encouraged to have a written employee training plan and written labor and employment practices. Applicants that do will receive a preference in obtaining a license.
Non-cannabis employers are required to comply with certain drug testing laws and protections for cannabis use. Specifically, the bill:
- Prohibits employers from refusing to hire, and from disciplining or discharging, an employee because of cannabis use if the use took place off premises during nonworking hours;
- Allows employers to test for cannabis only by complying with particular guidelines, with some exceptions for certain categories of workers; and
- Forbids employers from requesting or requiring job applicants or employees to undergo cannabis testing on an arbitrary or capricious basis.
Hemp Retailers
The bill differentiates between “lower-potency hemp edibles”, which are hemp edibles containing no more than five milligrams delta-9 THC, 25 milligrams of cannabidiol or cannabigerol, and do not contain an artificially derived cannabinoid beside delta-9 THC, and “hemp-derived consumer products,” which are not subject to the same potency restrictions. The bill provides that lower-potency hemp edibles can be sold by either licensed lower-potency hemp edible retailers or cannabis dispensaries, whereas most other hemp-derived consumer products may only be sold by licensed cannabis dispensaries, the exceptions being hemp-derived topical products, hemp fiber and hemp grain.
Limits on Personal Use, Possession, Growth
The bill implements specific limitations on personal cannabis use, possession, and growth, including:
- Adults age 21 and older may possess or transport up to two ounces of flower, eight grams of concentrate and 800 milligrams of edible product (including lower-potency hemp-derived product).
- Adults age 21 and older may possess up to two pounds of flower in a private residence.
- Adults age 21 and older may grow for personal use up to eight cannabis plants, with no more than four being mature at any given time.
Legalization of adult use goes into effect August 1, 2023.
Social Equity
Finally, the Minnesota bill—like many other States—has a social equity preference, prioritizing license applicants from certain low-income areas, individuals convicted of low-level marijuana offenses, and veterans who lost honorable status due to a low-level marijuana offense.
Conclusion and Next Steps
The OCM is in the process of developing regulations and a timeline for license applicants, but it is expected to take at least 12-18 months for new licenses to be approved and operating.
In sum, the bill creates a complex regulatory scheme, with even more likely to digest once the OCM promulgates regulations. Navigating these untested waters will require careful analysis and significant expertise in the industry. We are continuing to monitor the rollout and will issue further updates as appropriate.
