Tony Lange | Cannabis Business Times
By TONY LANGE
Source: www.cannabisbusinesstimes.com, May 2023

Gov. Tim Walz officially makes Minnesota the 23rd state to legalize adult-use cannabis after lawmakers reconciled legislation earlier this month.

Editor’s note: This story was updated at 1 p.m. on Tuesday, May 30 to reflect Minnesota Gov. Tim Walz signing the adult-use cannabis legalization bill into law.

Minnesota has become the 23rd state to legalize adult-use cannabis after Gov. Tim Walz signed the state’s legalization bill into law May 30.

“Minnesota just became the 23rd state in the nation to legalize adult-use cannabis,” Walz tweeted upon signing the legislation on Tuesday.

This reality comes after the Senate voted, 34-32, to pass the final version of an adult-use bill May 20, just two days before the end of the legislative session, and with Walz, a Democrat, vowing to sign it into law.

The vote on the bill came shortly after 1 a.m., roughly two hours after debate began on the measure, which followed a lineup of human services and state appropriations bills. The Senate’s passage on cannabis also came less than 48 hours after the House passed the final version of the bill, with Rep. Zack Stephenson leading the charge as sponsor in his chamber.

RELATED: Cannabis Legalization One Step Away From Minnesota Governor’s Desk

The final language in the 320-page bill aims to allow adults 21 and older to purchase up to 2 ounces of cannabis from licensed retailers, possess up to 2 pounds in their private residences and grow up to eight plants (four mature) at home. These provisions would be effective Aug. 1, 2023.

The bill would also establish a regulatory agency to oversee the new cannabis marketplace as well as create regulations, licensing and taxation for the state’s existing hemp market.

Saturday’s early morning vote fell entirely along party lines in the Senate, a chamber that was previously controlled by Republicans for the past six years. Notably, a similar adult-use bill had passed the Minnesota House in May 2021, but the former GOP-controlled Senate blocked companion legislation from a floor vote throughout 2021 and 2022.

With a one-seat majority in the upper chamber this year (one Republican abstained from Saturday’s vote), Democrats pushed the bill across the finish line after 13 committee hearings, a floor vote on a pre-reconciled version last month, a three-day bicameral conference committee that concluded May 16, and now the final vote on the reconciled version. The lower chamber also included an all-encompassing vetting process of 16 committee hearings prior to floor action.

Democratic Sen. Lindsey Port, who sponsored the legislation in the upper chamber, addressed her colleagues one final time before the floor vote May 20.

“I’ve heard a few things tonight that we’ve heard throughout the year and that I think are rational feelings,” she said. “It is rational to be afraid of this. Change is new and change is hard. And people are talking about fear for their kids, which, as a mom, is something I understand deeply. And the best way that we can protect our kids from access to cannabis is by legalizing and regulating. This is an adult-use cannabis bill, which will be sold in 21-plus locations … the system that we have right now is not working.”

While Minnesota is lined up to be the 23rd state to allow adults 21 and older to purchase and possess cannabis, it will be just the ninth state to do so by way of Legislature (the other 14 had elections). All but one of these nine legislatures had Democratic trifectas in their respective house, senate and governor’s office: Vermont Republican Gov. Phil Scott signed an adult-use bill into law in 2018 as the lone outlier.

Despite Saturday’s party-line vote in the Minnesota Senate, the bill included more than a dozen Republican amendments and five Republican supporters in the House. In addition, one House Republican and one Senate Republican were included on the 10-member conference committee that negotiated differences between companion bills.

Among the key variances reconciled in conference committee were purchase and possession limits, a 10% excise tax rate, economic development, employment regulations, licensing, criminal penalties, expungement, and appropriations of tax revenue.

“Since we last saw this bill, most of it remains intact and many of the features that we added here in the Senate were adopted in the conference committee report,” Port said. “Specifically, the local control and zoning regulations that we put in here on the Senate side stayed in this bill, as did the portion of the tax that goes to local municipalities.”

One major provision that was derived from the Senate version of the bill and adopted during negotiations in conference committee included adjustments for local control, a contentious point in previous debates with many Republicans wanting to grant municipalities the option to ban cannabis businesses from operating within their jurisdictions.

In particular, the bicameral conferees agreed to allow cities to adopt an ordinance limiting the number of cannabis dispensaries in their community, but they cannot limit that number by any more than one retail facility for every 12,500 people.

In addition, local governments would be allowed to reasonably regulate the time, place and manner for which cannabis businesses could operate in their jurisdictions under Minnesota’s legislation.

But cities and counties would not be allowed to ban cannabis businesses altogether—something that has allowed the illicit market to thrive throughout much of California, where hundreds of thousands of people are more than an hour away from a licensed dispensary.

What else is in the final bill?

In addition to a 2-ounce purchase limit for cannabis flower, the legislation would allow Minnesotans 21 and older to buy up to 8 grams of concentrate or 800 milligrams of THC in edible products per visit at a licensed dispensary, according to final bill’s language.

The legislation aims to establish an Office of Cannabis Management (OCM) by July 1, 2023, for regulatory oversight of a forthcoming adult-use program as well as the state’s existing medical cannabis and hemp programs. But the process of developing good consumer, health and safety protections for a licensed infrastructure could take 12 to 18 months before adult-use dispensaries open.

In addition, the bill’s enactment would establish a cannabis advisory council, require specific studies and reports on the impacts of legalization, and set up a state-wide monitoring system (Metrc is the current track-and-trace provider for the state’s medical program).

Under the bill, a 10% cannabis excise tax would apply at retail in addition to the state’s 6.875% sales tax. This excise rate aligns with the Senate’s position going into bicameral negotiations (the House’s version offered an 8% tax rate).

Twenty percent of the tax revenue from the excise tax will go toward local governments to help oversee a legalized marketplace, while the other 80% would be appropriated toward state costs, from funding the OCM to youth education, an expungement board, and employment and economic development, among other agencies and programs.

As part of the aim to undo harms caused by prohibition, the legislation provides for automatic expungement of certain cannabis offenses. The Bureau of Criminal Apprehension would be tasked with identifying eligible individuals whose records qualify for an order of expungement. That process would begin Aug. 1, 2023.

The legislation also proposes 16 licensing categories—for adult-use, medical and hemp operators—and includes provisions for a social equity program to help ensure individuals and communities most harmed by prohibition have an opportunity to engage in the industry. A special scoring structure for licensing would be in place for applicants who meet social equity or veteran/retired National Guard criteria.

The OCM would be responsible for licensing the number of cannabis businesses necessary “in order to ensure the sufficient supply of cannabis flower and cannabis products to meet demand, provide market stability, ensure a competitive market, and limit the sale of unregulated cannabis flower and cannabis products,” according to the bill.

In addition to taxes, the state would collect revenue through application and licensing fees. For cannabis cultivators, those fees would include $10,000 for applications, $20,000 for an initial license and $30,000 to renew a license.

Similarly, those fees would be $2,500, $2,500 and $5,000 for retailers; $10,000, $10,000 and $20,000 for manufacturers; $5,000, $5,000 and $10,000 for wholesalers; and $500, $0 and $2,000 for microbusinesses. Another license type called “cannabis mezzobusiness” would allow medium size businesses to become vertically integrated with fees of $5,000, $5,000 and $10,000.

A cannabis cultivator would be allowed to grow up to 30,000 square feet of plant canopy indoors—with the OCM having the authority to increase that limit to meet market demand—whereas cannabis mezzobusiness licensees would be allowed to grow up to 15,000 square feet and microbusiness could cultivate up to 5,000 square feet from the program onset.

The legislation also aims to establish plant propagation standards, including certification, testing and labeling requirements for methods used to grow new cannabis plants. Requirements for agricultural best practices and environmental standards are also outlined in the legislation.

Following her comments about Minnesota’s current system of prohibition not working, Portman said, “If we had a way to solve this with law enforcement, we would have done it. So, it’s time to try something new.”

Editor’s note: Senior Digital Editor Melissa Schiller contributed to this report.

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