Jessica Jackson looked out over a crowd of could-be recreational cannabis entrepreneurs gathered at Sabathani Community Center in Minneapolis and asked for a show of hands.
How many have experience running a business? How many have been in the low-potency hemp industry but are hoping to move into legal cannabis? Each time, a quarter to a third of those who nearly filled the center’s auditorium raised their hands.
One query, though, also elicited some nervous laughter. How many have been involved in “the legacy market,” legalization-speak for the illegal sale of marijuana? A few dozen raised their hands while others might have been unwilling to self-identify as participants in the gray market.
Yet those same people — both those who raised their hands and those who were too shy — could have an advantage in the upcoming legalization market. Of the seven categories that define “social equity applicant” in the new law, a status that provides benefits including pre-approval of licenses and even early cultivation of cannabis this fall, four involve past illegal sales or possession. For example, someone convicted of illegal sales or possession before the new recreational cannabis law was passed can be a social equity applicant. The same is true for someone with a parent, a spouse or a child who had such a conviction.
A pillar of the state’s legalization law is to rectify some of the harms caused by prohibition, including inequitable arrests and prosecutions of people of color and over-policing in minority communities.
“We feel very strongly about the harm repair that is embedded in Minnesota’s cannabis law,” said interim Office of Cannabis Management director Charlene Briner. “Too many communities, too many individuals, too many families have been harmed by the war on drugs and by the impact of criminalization.
“Offering this early mover advantage and centering ourselves in this work is one of the first steps and one of the best steps we can take in Minnesota to begin repairing the harms that have been caused, particularly in communities and families disproportionately impacted,” she said.
The briefing was intended to explain how the state will verify whether people will be considered social equity applicants. If they qualify, the same applicants can enter into the first license lottery that will be held in the fall. Only social equity applicants will be entered into that lottery, which will award licenses in nine different categories — from mezzobusinesses that can both cultivate and sell cannabis products to regular retailers, cannabis wholesalers and cannabis transporters.
Because amendments to the state legalization law were approved last month, there is a cap on how many licenses will be granted in most categories. Giving social equity applicants first shot at those licenses is a major advantage.
In addition, those seeking to be cannabis cultivators or mezzobusiness operators can begin growing plants sometime this fall in response to legislative changes meant to assure there is some legal supply when stores open sometime in the spring. All other growers will have to wait until OCM completes the rulemaking process next year.
How will they know if they qualify? The OCM on Monday turned on a webpage that allows applicants to fill out forms and provide documents to have their status verified. Applicants have until 11:59 p.m. on July 10 to complete the forms.
Who is eligible? The list is extensive … and complicated.
Those convicted of sale or possession prior to May 1, 2023
Those with a close relative convicted of sale or possession prior to May 1, 2023
Those with a parent or guardian convicted of sale or possession
Military veterans and current members of the National Guard
Military veterans who lost honorable status due to a cannabis sale or possession incident
Those who worked in farming for at least three years on farms with gross sales of between $5,000 and $100,000.
Those who lived for the last five years in areas with high cannabis law enforcement, poverty rates of 20% or more, high food stamp usage and those in areas of high level of vulnerability according to the U.S. Centers for Disease Control and Prevention
Applicants are only required to meet one of the criteria and gain no advantage for meeting multiple categories. While court records and discharge records can be used to prove the conviction and veteran status, proving the last category is more complicated. The OCM has posted an interactive map where applicants can enter an address and find out if they qualify. Because the state does not require residency for licenses, someone in a qualifying area anywhere in the U.S. can gain social equity applicant status. In addition, convictions for sale and possession in other states does count as long as records can be submitted. Any violent crimes associated with these charges, however, are disqualifying.
There are also some quirks. A woman at the workshop said she spent her entire life in a high-poverty neighborhood but recently moved. She would not qualify if her current address is not in a high-poverty, high-law enforcement neighborhood, she was told by OCM staff. Similarly, a MinnPost search of public housing high rises found several addresses that would not qualify.
There is no advantage provided to disabled people. And cannabis dealers who avoided arrest and conviction would not have the court records to prove their status as a social equity applicant.
The May 1, 2023, date is important because the law says convictions must have occurred before the legalization law passed. In addition, changes were made this year to say anyone convicted of sale or possession after possession and use became legal on Aug. 1, 2023, are not only not allowed to gain social equity status but are not allowed to have a cannabis license of any type until five years have passed.
Verification then allows applicants to apply for pre-approved licenses. That application period begins July 24 and ends at 11:59 p.m. on Aug. 12. After being selected in the lottery, applicants must undergo a series of other examinations to assure that they have plans and procedures in place to operate their business. There is also a new “true party of interest” test to make sure that applicants aren’t posing as the business owner on behalf of others who don’t qualify as social equity applicants. Applicants must show that at least 65% of the financing is from social equity verified applicants.
The fall lottery will distribute the following licenses:
Microbusiness, 100
Mezzobusiness, 25
Cultivator, 13
Manufacturer 6
Retailer, 38
Wholesaler, 20
Transporter, 20
Testing facility, 50
Delivery service, 10.
Someone who wins a license in the preapproval lottery has 18 months to use it, though OCM can grant one six-month extension if the applicant has made good-faith efforts to open. While there will not be an overall cap for microbusiness — small cultivation and sales businesses — the first round that allows early cultivation for these licensees does have a cap.
The three licensees who can begin growing cannabis this fall will not be allowed to do anything else until rules are approved next year. That is, they can begin growing but they can’t sell to customers or begin manufacturing cannabis products.
People who entered the social equity license lottery but were not selected can be entered in the next lottery, likely early next year, that will be open to all applicants.
By Peter Callaghan
