State cannabis regulators deny two-thirds of applicants for initial business licenses
MINNEAPOLIS — State regulators denied two-thirds of the applications seeking one of the initial "preapproved" licenses to operate a cannabis business in Minnesota, a spokesperson for the Office of Cannabis Management said by email.
The applicants rejected received emails Monday and Tuesday. Failure to meet statutory requirements, and inconsistencies in documentation and the absence of required information were among the reasons the office denied 1,169 of 1,800 social equity applicants seeking the roughly 280 first licenses to be issued.
Others did not meet ownership conditions — a verified social equity applicant must own 65% of the business — and some submitted "fraudulent applications inconsistent with the protections in law designed to prevent predatory practices" or attempted to game the system to get an unfair advantage, interim director of the Office of Cannabis Management Charlene Briner said in a statement.
"Informing applicants of their status is an important step in Minnesota's journey to launch its new adult-use cannabis industry, and to do it in a way that sets us apart from the pitfalls and setbacks that have hampered other states," Briner said. "The clear requirements in law for a robust vetting process carried out by the Office of Cannabis Management resulted in a significant number of applications that will not move into the lottery."
Vetted applicants will be selected for licenses from a lottery at a yet-to-be-determined date, though Briner previously told WCCO that would happen before the end of the year.
With two-thirds of the applicants rejected, that improves the fortunes of those approved who are seeking a license. But some of those who were denied believe their applications were wrongfully dismissed on technicalities or by error. And others anticipate legal action.
Chad Olson is a veteran — one of the social equity criteria — who applied to be a cannabis transporter, a license that would allow him to move products from manufacturing facilities to retail dispensaries, for example. He said there were some "hiccups" with his application initially and was notified of the deficiencies by the cannabis office in order to fix them, which regulators did for several applicants.
But ultimately he received a notice that he would not be included in the lottery for failing to include information he said wasn't clear he needed: the square footage of a space he'd use for his business.
"I'm kind of confused. I mean, to be honest with you, none of that was ever asked for at the beginning," Olson said. "It did ask for — send us a rendering of what your garage would look like, showing where the vehicles we parked, where a maintenance area would be, offices, storage. So I did that."
This initial lottery is for the "preapproved" or early licenses designed to give people a head start on building their business with the security that they have a license to operate when rulemaking is complete early next year. Cultivators who have license pre-approval, however, would be allowed to plant early to have supply ready for market launch.
There will be additional license lotteries for social equity applicants and everyone else who doesn't meet that criteria next year, so there will be another opportunity to apply.
"We understand that applicants who did not pass the application review will be disappointed," Briner said. "However, we are confident that we will have a robust pool of qualified applications enter the lottery, and that those selected will be well positioned to continue the next steps to opening their businesses."
Calandra Revering, an attorney who has worked with social equity applicants and advocated for that provision at the capitol, praised the Office of Cannabis Management for its work ensuring that there aren't any "straw applicants," or operators who don't truly meet the social equity criteria, trying to get a license.
That very scenario has played out in other states, like Missouri, where regulators recently denied some licenses and previously warned of predatory practices to game the system, according to local news outlet the Missouri Independent.
Revering said she believes OCM has learned the lessons of other state cannabis programs in order to "level the playing field."
"I think that it's the right thing to really highly vet all of these applications to ensure the person applying for social equity license is the true applicant, and not a big business, not groups of individuals who are basically trying to hijack the lottery — trying to hijack the efforts of minority businesses and to thwart possible generational wealth for many communities that have suffered from cannabis enforcement," Revering said.
She hopes lawmakers consider adding penalties to the cannabis law to punish bad actors who try this tactic.
A spokesperson for OCM said individuals who did not receive a denial notice should not assume they are in the lottery. The office is still doing final reviews.
