By: David Standa, Esq.
Yesterday, the Minnesota Office of Cannabis Management (OCM) held a virtual press conference where interim director Charlene Briner announced that the OCM would not be completing the preapproval process set out in the statute and instead would be holding a single licensing round consisting of a social equity lottery and a general lottery.
As with many of the OCM’s actions over the past year, the press conference and subsequent press release
According to the OCM, preapproval applicants have two options: (1) withdraw their application and receive a refund of their application fee (there is no mention of a refund for all of the other money that went into the social equity verification process or for completing the applications), or (2) push forward and get tossed into the social equity lottery with all of the new social equity applicants that get verified in January (preapproval applicants that were denied will need to go through a “request for more information” (RFMI) process). For denied applicants, there is no guarantee that the RFMI process will lead to a reversal of their denial, and conveniently for the OCM, that time period is beyond the appeal deadline for the current denials. Put another way, the OCM has not stated that it has rescinded its denial decisions (so the appellate clock might still be ticking) but denied applicants cannot participate in the RFMI process until after their deadline to appeal the denial has lapsed. A risky proposition to be sure.
The OCM’s decision to scrap the preapproval process stems from its decision to serve as the gatekeeper to the preapproval lottery qualification process, which was supposed to be a perfunctory “check the box” process to establish the field of lottery entrants. Then, to ensure readiness and compliance, the contemplated process allowed the OCM to vet lottery winners after the lottery had been completed. If applied in the manner anticipated by the statute, the process would have allowed for a quick lottery process with announced winners where the OCM could vet winners on the back end to ensure they had not violated any statutory provisions or “flooded the zone” as the OCM has accused some of doing. This would have ensured that preapprovals would have been issued and that at least some of those preapprovals would have converted to licenses within the next few months. In other words, the Minnesota adult-use cannabis industry would have actually opened in early 2025.
Instead, the OCM issued nearly 1,200 perfunctory denials that provided no detail or basis for the denials. Not surprisingly, social equity individuals who had worked so hard to get their verifications and applications together filed suit seeking to undo their unfair denials. Also not surprisingly, Judge Stephen Smith in Ramsey County saw the errors in the OCM’s process and stayed the lottery. The fact that the OCM did not challenge Judge Smith’s decision and instead now seeks to scrap the entire process is telling and certainly seems to be a concession that the OCM cannot defend its process which led to the denial of an astounding two-thirds of the preapproval applicants. Rather, the OCM seeks to scrap the entire preapproval process and instead have a single licensing process that includes a social equity lottery in mid-2025, but the statute does not appear to allow the OCM to do that.
The statute says that the OCM “may must
The legislative reasoning behind the requirement to complete the process once it started is obvious. If the OCM creates a process that requires social equity applicants to spend time and money to jump through all of the preapproval requirement hoops, it cannot then abandon that process and leave those applicants in the wind. The practical reality of this is that the recently filed petition for writ of prohibition
Not only are the affirmed preapproval applicants’ claims still ripe but so are the appeals of the denied applicants who decided to pursue them. Stated differently, this whole process is a complete mess and could go in a number of different directions.
David Standa ([email protected]
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