Minnesota’s social equity cannabis lottery postponed to late spring

The Minnesota Office of Cannabis Management Wednesday announced it was canceling the special license lottery for social equity applicants and will instead move toward a lottery next year for both social equity and general applicants.

While no new date is set for license lotteries, a chart released by OCM suggests it will now be in May or June, months later than previous estimates of 1st quarter of 2025.

The office said it was responding to a Ramsey County court order late last month that put the lottery on hold to give disappointed applicants who were denied entry into that first lottery time to make their case to the court of appeals. At least eight legal actions have been filed with the appeals court seeking review of their cases. A ninth comes from successful lottery entrants who ask the court to let the lottery proceed soon.

Among those denied who have asked for relief from the appeals court is a group that OCM asserts is violating laws against multiple applicants for licenses and so-called straw applicants, that is applicants who are fronts for others.

“I don’t want to sugar coat this,” said OCM interim director Charlene Briner during a Wednesday press conference. “The 648 social equity applicants who qualified and were expecting to participate in the lottery are understandably disappointed.”

“To avoid further delay and risks to social equity, OCM is ending the license preapproval process and moving forward with opening a standard licensing cycle for both social equity and general applicants beginning early next year,” the agency said in a press release. “This step allows the office to prevent delays to the market launch due to ongoing litigation and retain some benefit to social equity by allowing applicants for license preapprovals to move into this new round.

“Leaving these applicants in limbo is not an acceptable outcome and would diminish their opportunity to succeed in the market.”  

There are still advantages given in state law to what are called social equity applicants — military veterans, people who suffered from cannabis prohibition, and people who live in neighborhoods with high levels of enforcement. There are still license set asides for social equity applicants and grant money aimed at these potential businesses. But the so-called “early mover advantage” that was to come from the Nov. 26 lottery goes away. Early mover was meant to give some licensees certainty that they would win a license so they could get buildings, local permissions and financing in place before the launch in spring.

Other than on tribal reservations, no cannabis sales can happen until final rules are adopted, the lottery held, licenses issued and the official opening of the state cannabis market.

Sometime in late spring there will be two lotteries — one for social equity applicants and a subsequent lottery for general applicants. Briner said she expects the two lotteries will be held within days of each other. Some 500 licenses in capped categories such as cultivators, mezzobusinesses and manufacturers will be awarded in the social equity lottery and an equal number in the general lottery.

Put at risk by the cancellation of the preapproval process was a hope by legislators to allow some preapproval licensees to begin growing cannabis so a supply would be ready when stores open sometime in the spring.

“The delays related to the court’s order to pause the lottery eliminate any early-mover advantages offered by the expedited license preapproval process envisioned by the Legislature,” the OCM statement said. “Therefore, the lawsuits brought by some unsuccessful applicants necessitate moving directly to the licensing cycle for both social equity and general applicants.”

Said Briner: “Our path forward ensures we remain on track to launch Minnesota’s new cannabis market and also preserves some of the social equity benefits that were at the heart of the preapproval process and that are foundational to the law as it was originally conceived.”  

The agency said it would notify the 648 applicants who survived a process that confirmed their status as social equity applicants and examined the basics of their proposed businesses that their applications will automatically move forward. Some licenses are capped by state law while others are not. The smallest businesses — so-called microbusiness licensees who can both grow and sell cannabis — are not capped.

OCM will hold a social equity lottery to award those set-aside licenses and then include non-winners in the subsequent general lottery.

“OCM will also communicate with all applicants who received denial notices about the options available to them,” the statement said. “These applicants will have the opportunity to move forward in the general licensing cycle — which includes a lottery and licenses reserved specifically for social equity applicants for certain license types — or they may choose to discontinue their participation in the next cycle and request a refund of their application fee.”

At the Court of Appeals, nine actions have been filed so far — eight seeking to force OCM to allow prospective social equity license holders to be included in the lottery and one asking the court to allow the lottery to take place with the current qualifiers.

The actions seeking court orders known as writs of certiorari ask the court of appeals to review the decision of the Ramsey County district court that blocked the lottery but did not rule on the underlying legal issues. Those were whether OCM followed state law in how it selected and rejected applicants for the first social equity license lottery that was to be held Nov. 26.

Another action is being brought by applicants who were successful in gaining entry to the lottery who claim they are being harmed by the district court’s stay of the lottery. Without it, and unless it happens soon, the advantages state law gives to social equity applicants will be reduced, if not eliminated.

“The preapproval lottery was designed to ensure the most operationally ready social equity applicants could overcome systemic barriers and lead the market’s development,” said Leili Fatehi, a spokesperson for the plaintiffs.

“By halting this process, the court’s decision harms those applicants, disrupts market stability, and delays efforts to combat illicit markets.” The action was filed before OCM’s announcement Wednesday to cancel the preapproval process.

Related