Minnesota Adult Use Cannabis Updates

Minnesota Adult Use Cannabis Update We assisted multiple clients in completing and submitting their adult-use cannabis license applications to the Office of Cannabis Management (“OCM”), and we continue to monitor how and when the OCM evaluates those applications. Meanwhile, Minnesota’s rollout of its adult-use cannabis market continues—slowly but surely—with recent developments including:

• OCM is currently processing preliminary approvals for a variety of uncapped cannabis license types, including the popular microbusiness category (i.e., smaller-scale, vertically integrated operations). Applicants who submitted during the first licensing period (February 18–March 14) have been receiving notifications of preliminary approval from OCM, which then opens an 18-month window to secure both an operational site and a state license. Some applicants are also receiving notices to correct their applications or outright rejections. If you have received preliminary approval from OCM, now is the time to act quickly to secure your operational premises in compliance with local law and to obtain an appropriate cannabis-sensitive commercial lease agreement.
• OCM will hold the lottery for certain “capped” license types—cultivators, manufacturers, and mezzobusinesses—on June 5, 2025. The lottery will be livestreamed on OCM’s YouTube channel.
• Also on June 5, OCM will conduct a second lottery for social equity applicants pursuing a cannabis retailer license. This lottery was originally scheduled for December 2024 but was canceled by OCM when litigation arose over the rejection of a majority of social equity applicants’ applications. A district court later ordered OCM to reinstate and conduct the lottery.
• On May 15, Governor Tim Walz and the leadership of the Minnesota House and Senate announced the framework for a budget deal for the next biennium. Included in this bipartisan deal—which comes as the Minnesota House is tied 67-67 between both parties, the Democrats hold a one-seat majority in the Senate, and Governor Walz is a Democrat—is an increase in the cannabis tax.

At present, the cannabis tax is 10% of gross receipts from retail sales of taxable cannabis products. These products are also subject to the general sales tax rate of 6.875%, as well as applicable local sales taxes based on where the transaction takes place. Under the announced framework, the cannabis tax would increase to 15%. Proponents of legalization have sought to keep this tax as low as possible in hopes that the legal cannabis market will take hold and suppress the legacy market. In the original 2023 legislation, the Minnesota House had proposed an 8% tax rate, but the Senate’s 10% rate prevailed in conference committee and was included in the final legislation signed into law by Governor Walz. This proposed tax increase has already sparked concern about its impact, particularly given that Minnesota’s adult-use cannabis market has not yet launched.