Judge halts cannabis license lottery that is precursor to Minnesota marijuana retail launch

A planned lottery to give some would-be cannabis business owners a licensing head start won’t go forward early this week after a judge halted the process Monday.

Ramsey County District Court Judge Stephen Smith sided with a group of applicants who had been denied access to the social equity pre-approval lottery. They sued over a process they argued had lacked clear criteria and that left no room for appeals.

“There’s no lottery tomorrow,” Smith ruled toward the end of an hour-long online hearing. He said the state was free to file an appeal.

Ahead of the hearing, officials with the Office of Cannabis Management warned that the lottery might not happen at all if it was postponed given the cost and logistics of putting it on.

Attorney David Asp, who represented some of the applicants, told Smith that the lottery was rushed and that people who were denied entry deserved a chance to contest their disqualification.

“The state doesn’t dispute that our client will suffer irreparable harm if this order isn’t entered. That’s usually one of the main issues in an injunction, but it’s not a dispute here. Our clients will be harmed. As I said, more than $1,000,” Asp said. “The harm on the OCM side is entirely of their own making.”

The Office of Cannabis Management had defended its process, saying they were attempting to root out applicants who were looking for a quick profit instead of actually moving to set up legitimate businesses. Officials with the regulatory agency said that some applications appeared to have been put in on behalf of other entrepreneurs trying to get a foothold in Minnesota’s nascent market.

“The Legislature chose for this pre-approval process to be an efficient and expedient one, and part of that is evidenced by the fact that there is no appeals provided for the pre-approval process, whereas in the final license approval process there is an availability for reconsideration,” the agency’s attorney, Ryan Petty, said. “So a major factor of this is the Legislature’s decision to make this process efficient and expedient, so that the social equity applicants can get that head start.”

In a written statement after the ruling, the office said the regulatory agency remained “committed to launching an equitable, sustainable and responsible adult-use cannabis marketplace.”

There were more than 1,500 applicants for this stage of the licensing process, the agency said. The lottery was to narrow that down to 282.

When the judge asked Petty about the timeline, including the lottery being scheduled shortly after denial letters went out, Petty said that the selection process involved several moving parts.

“There wasn’t any hiding the ball here. There wasn’t any attempt to restrict the ability of applicants to challenge their denials,” he said. 

State lawmakers legalized cannabis for adult recreational use in 2023 but the setup of a retail marketplace has been slow. No licenses have been issued for commercial growers or sellers ahead of what is expected to be an early 2025 launch.

People can grow their own marijuana and give away small quantities. American Indian tribes have also opened their own stores but those sales are limited to reservation land.

The social equity lottery is intended to give a leg up to people who live in high poverty areas, those harmed by the war on drugs, and military veterans. Cristina Aranguiz is a first-generation Latina entrepreneur who applied for a license but was denied. She sued the office and said she was glad the judge agreed to block the lottery.

“I am a legitimate applicant, not a straw buyer,” she said in a statement. “My application meets the criteria set by the state. I have colleagues who met the criteria and want to start a cannabis business, too, so I provided assistance to help them be successful. Helping others in this process is not improper.”

State Sen. Lindsey Port, DFL-Burnsville, helped write the legislation that legalized cannabis and established the lottery system to issue licenses. She said the office did a good job vetting social equity applicants and preventing larger groups from getting in on the first round.

“Once those folks get a foot in the door, it's very hard to take back those licenses,” Port said. “It's a unique system to Minnesota that really has always been focused on making sure that small businesses, folks with social equity backgrounds who have been most harmed by prohibition have an opportunity to get into this cycle.”

MPR News politics fellow Ellie Roth contributed to this report from St. Paul.

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