Month: October 2023

October 20, 2023

As a brief aside from the business of cannabis, we thought it would be a good idea to educate those of you that are interested in growing your own cannabis. Minnesota’s personal use law is currently in force, so even though you may not be able to buy cannabis products yet, you can grow your own flower and make them yourself. 

There are some restrictions in terms of what you can and cannot do when it comes to homegrown cannabis (and I am including hemp in the word “cannabis” for purposes of this post). The main statute concerning homegrown cannabis is Minn. Stat. § 342.09. It allows a person to grow up to eight cannabis plants (with only for being mature, flowering plants) at a single residence (including the yard). While the statute prohibits the extraction of cannabis concentrate by use of volatile solvents, there are a variety of other methods of extraction, including, using hair straighteners or irons, using water and/or ice, or using sieves to separate “kief” from plant matter. Before trying any of these methods, however, you should do your own homework by reviewing the processes on a number of websites.

It authorizes a person 21 years of age or older to:

1. Use, possess, and transport cannabis paraphernalia. The phrase “cannabis paraphernalia” means all equipment, products, and materials that are used primarily in manufacturing cannabis products, ingesting or inhaling cannabis products, and testing cannabis products for strength, effectiveness, and purity. While this may not sound like much, possession of “drug paraphernalia” of all kinds (including cannabis paraphernalia) was previously a petty misdemeanor under Minnesota law.
2. Possess or transport up to two ounces of cannabis flower in a public place.
3. Possess up to two pounds of cannabis flower in a private residence.
4. Possess or transport up to eight grams of cannabis concentrate.
5. Possess or transport edible cannabis products with a combined total of up to 800 milligrams of THC.
6. Give – for no ‘remuneration’ – to persons 21 years of age and older up to: (a) two ounces of cannabis flower; (b) eight grams or less of adult-use cannabis concentrate; or (c) an edible cannabis product with up to 800 milligrams of THC.

The question that has come up the most for us, however, is where cannabis flower and cannabis products can be used. You can use cannabis flower and products:

1. In a private residence (including a yard);
2. On private property not generally accessible by the public, unless prohibited from doing so by the owner of the property; or
3. On the premises of an establishment or event licensed to permit on-site consumption.

Public consumption is still technically not permitted.

When it comes to restrictions placed on homegrown cannabis flower and products, an individual may not:

1. Use, possess, or transport cannabis flower or products if the individual is under 21 years of age except where the person under 21 years of age is a medical cannabis registered patient.
2. Use cannabis flower or products in a vehicle.
3. Use cannabis flower or products in a manner that involves inhalation of smoke, aerosol, or vapor where smoking is prohibited by Minn. Stat. § 144.414. The prohibited locations under this statute include, public places, places of employment, public transportation, public meetings, daycare premises during hours of operation (and if used outside of hours of operation, the individual must disclose that to the parents or guardians of the children attending that daycare), health care facilities, and clinics.
4. Use or possess cannabis flower or products in a public or charter school.
5. Use or possess cannabis flower or products in a state correctional facility.
6. Operate a motor vehicle while under the influence of cannabis flower or products.
7. Give away cannabis flower or products to persons under 21 years of age.
8. Give away cannabis flower or products “as a sample or promotional gift if the giver is in the business of selling goods or services.
9. Smoke or vaporize cannabis flower or products where the smoke, aerosol, or vapor would be inhaled by a minor.
10. Sell cannabis flower or products.
11. Import hemp-derived edibles manufactured outside of Minnesota with the intent to sell the edibles to consumers within the state of Minnesota or to any other person or business that intends to sell the edibles to consumers in Minnesota without a license that authorizes such importation. 

It is important to pay attention to – and follow – these rules and restrictions. Violations can result in serious penalties, including criminal penalties, and fines of up to three times the retail market value of the offending products or more (all the way up to $1,000,000).

The image contained in this post is a close-up of our first homegrown.

October 20, 2023

As the cannabis industry develops in Minnesota and other jurisdictions, there is going to be a growing demand for banking services. The problem, however, is that federally chartered banks generally avoid working with cannabis businesses. The federal government has made efforts to open up banking services for the industry, including via the SAFE Banking Act that passed the House in 2019, but the Senate did not give it a vote.

The SAFER Banking Act, however, is currently moving forward through various senate committees. Given the present state of Congress, it is unlikely that we will see the SAFER Act become law in the near future. This law would include a ‘safe harbor’ for banks from certain civil, criminal, and administrative penalties, if they offer financial services to state-compliant cannabis businesses. Additionally, it would allow cannabis businesses to accept credit cards. There are a number of other provisions built in to this statute, but it has a long way to go before it becomes law.

As a result of these restrictions on banks, among other difficulties, it has made it more difficult for cannabis businesses to obtain loans, open operating accounts, and process credit card payments. Moreover, the SBA will not approve any loan to a cannabis business because the federal government still deems cannabis to be an illegal controlled substance (except for hemp). 

This gap for financial services has allowed credit unions and state-chartered banks to step in. Because of the risks involved, however, interest rates for loans tend to be higher for cannabis businesses. Even though these banks and credit unions have been able to fill in some of the gaps in financial services, cannabis businesses still largely operate using cash, exposing them to safety and security risks. 

This means there are many things cannabis businesses must consider when it comes to handling finances:

1. Monitoring Cash: Cannabis businesses should have standard operating procedures when it comes to cash that employees must follow. It is also important to train employees on these standard operating procedures. Such procedures can include frequent checks and balances (recording cash on hand at specific times, using lockable money bags when physically moving cash, and establishing processes for dealing with discrepancies).
2. Selecting Payment Card Processors Carefully: Many new businesses think that they can just use one of the larger payment card processors, such as Square or Stripe. Each processor, however, has their own internal policies when it comes to processing payments for cannabis products. And because these are private businesses, they can essentially change those policies whenever they want. Accepting ATM cards is going to reduce the amount of cash on hand, reducing risk of loss, but if you select the wrong payment processor, you may end up with frozen accounts.
3. Selecting POS Systems Carefully: Some POS systems are in the ‘one-size-fits-all’ category, essentially tweaking a base system for each business that utilizes the POS. Many of these POS systems are not set up to (or will refuse to) work with cannabis businesses, so even if it costs more to use a cannabis-specific POS, it will be worth it in the long run. There are companies that are well-known in the cannabis space, such as Dutchie and Flowhub, but you should do your own research to determine what system makes the most sense for your business. 
4. Security: Security is of the utmost importance to cannabis businesses given the amount of cash on hand at any given time. Some degree of security is statutorily required in Minnesota. Security can include hiring security personnel, installing high-resolution security cameras, hiring armored cards, and training staff in how to handle security threats. For example, you will want a standard operating procedure as to how employees should react if someone enters intending to steal cash with threats of violence and you will want controlled entrances and exits. Dispensaries often require a person entering to provide a state-issued ID card prior to entry – this can help keep track of who is coming and going. Dispensaries can also obtain cash-tracking GPS devices. Finally, keeping things a bit random can help deter theft. For example, if an armored car comes to pick up cash at various times throughout the day, they can randomize those times or at least work with the dispensary owner to schedule times that avoid any sort of pattern.

October 20, 2023

A cannabis mezzobusiness is given many of the same benefits given to a microbusiness licensee and has even more room to grow than a microbusiness, but one key exception is that mezzobusinesses are not permitted to obtain an on-site consumption endorsement.

1. Authorized Actions: A mezzobusiness license allows the licensee to grow, produce concentrate, manufacture artificially derived cannabinoids, and producing other cannabis or hemp products. A mezzobusiness can also purchase plants, seeds, and flower, and sell cannabis and hemp products to other licensed businesses and directly to customers.
2. Size Limitations: Mezzobusiness licensees may cultivate up to 15,000 square feet of plant canopy indoors and up to one acre of plant canopy that grows outdoors. Limiting the manufacture of products is going to be up to the Office, which is supposed to limit manufacturing to the equal amount of production that could be obtained from cannabis flower harvested from a facility with a plant canopy of 15,000 square feet of space. This is going to be a difficult task for the Office. And while a microbusiness may only have one retail location, a mezzobusiness may have up to three retail locations.
3. Multiple Licenses: A mezzobusiness licensee may also hold a cannabis event organizer license. 
4. No On-Site Consumption: A mezzobusiness license does not come with the opportunity to allow for on-site consumption.

In order to obtain a cannabis mezzobusiness license, the applicant will have to provide a substantial amount of information, particularly if they intend to be vertically integrated.

October 20, 2023

One of the more unique approaches to licensing in Minnesota is the focus on helping small local businesses. The microbusiness license provides small businesses with flexibility not available to other licensees.

1. Authorized Actions:  A cannabis microbusiness license allows the licensee to grow, produce concentrate, manufacture artificially derived cannabinoids, and producing other cannabis or hemp products. A microbusiness can also purchase plants, seeds, and flower, and sell cannabis and hemp products to other licensed businesses and directly to customers.
2. On-Site Consumption: The microbusiness license is unique in that it permits the licensee to have an on-site consumption endorsement. On-site consumption is otherwise severely limited in the statute outside of the lower-potency hemp edible retailer license. So microbusinesses are the only licensees permitted to allow on-site consumption of cannabis (in addition to hemp) products. In order to qualify for an on-site consumption endorsement, however, a microbusiness licensee must meet a number of requirements: (1) consumption must be limited to a distinct area of the facility with a distinct entrance; (2) products must be served in the statutorily required packaging (but customers may remove the packaging themselves to consume on-site); (3) consumption and display must not be visible from outside of the licensed premises; (4) a licensee with an on-site consumption endorsement may not sell alcohol or tobacco; (5) a licensee may not permit cannabis or hemp to be consumed through smoking or vaping “on the premises” (but whether this applies to outdoor space is potentially an open question); and (6) they may not distribute samples.
3. Size Limitations: A microbusiness may cultivate up to 5,000 square feet of indoor plant canopy (or one-half acre if growing outdoors). With respect to non-grow operations, the Office is required to establish a limit on the manufacturing of cannabis and hemp products, which must be equal to the amount of flower that can be harvested from a facility with a plant canopy of 5,000 square feet in year. This is going to be difficult to calculate in light of the fact that 5,000 square feet of plant canopy could result in various amounts of flower, depending on plant yield.
4. Retail: In our opinion, the most important restriction on microbusinesses is that they can only operate one retail location, severely limiting their ability to grow.
5. Exceptions Not Applicable to Other Licensees: One obligation imposed on cannabis licensees generally that microbusinesses do not have to abide by is the requirement of an attestation signed by a bona fide labor organization stating the applicant has entered into a labor peace agreement.
6. Multiple Licenses: The only other license that a microbusiness may hold is an event organizer license. Of course, with a microbusiness license the licensee can engage in cultivation, extraction and concentration, production, and sale with the proper endorsements, so would not necessarily need any other license type.

We expect the microbusiness license to be a popular license-type because of the vertical integration it allows. Growth will be limited, but there is potentially a lot of room to make a profitable and viable business with a microbusiness license. Applying for this license, however, will require a lot of information given the various tiers in which it may operate. 

October 20, 2023

Hemp licenses are somewhat different from cannabis licenses in the sense that a lower-potency hemp edible manufacturer may also own a lower-potency hemp edible retailer license. Moreover, a person could also hold an industrial hemp cultivation license. The vertical integration for lower-potency hemp edible licensees that are not available to cannabis licensees (other than micro- and mezzobusinesses), may help hemp licensees create efficiencies where cannabis licensees cannot. 

1. Hemp Manufacturer Authorized Actions: A lower-potency hemp edible manufacturer license will permit the licensee to purchase hemp plant parts, hemp concentrate, and artificially derived cannabinoids from other cannabis or hemp-licensed businesses. It will also allow them to make their own hemp concentrate, artificially derived cannabinoids, and consumable lower-potency hemp edible products, which they can then sell to the customer (or to other cannabis and hemp licensed businesses).
2. Hemp Manufacturer General Operational Requirements: Hemp manufacturing must take place in a facility and on equipment that meets applicable health and safety requirements that the Office establishes (including with respect to cleaning and testing machinery between production of different products).
3. Hemp Concentrate: A hemp manufacturer that produces hemp concentrate is subject to many of the same requirements of a cannabis manufacturer that produces concentrate. For example, the lower-potency hemp edible manufacturer must inform the Office of its extraction and concentration methods, as well as identify volatile chemicals used in production.
4. Artificially Derived Cannabinoids: Where a hemp manufacturer creates artificially derived cannabinoids, the manufacturer must inform the Office of all methods of conversion, along with specific catalysts, as well as the type and molecular name of all cannabinoids or other compounds that the manufacturer will create.
5. Third-Party Certification: Each licensee must obtain a certification from an independent third-party “industrial hygienist or professional engineer” approving (1) electrical, gas, fire suppression, and exhaust systems; and (2) plans for safe storage and disposal of hazardous chemicals.
6. Disclosures: A hemp manufacturer that sells hemp concentrate or artificially derived cannabinoids must provide written disclosure to the buyer stating the methods of extraction and concentration or conversion used, along with any solvents, gases, or catalysts.
7. Ingredient List: A lower-potency hemp edible manufacturer must provide a statement to the buyer disclosing all of the product’s ingredients (including major food allergens declared by name – e.g., milk, eggs, tree nuts, peanuts, wheat, and soybeans).
8. Transportation: One area where hemp manufacturers may have an advantage over cannabis manufacturers is that hemp manufacturers can transport hemp themselves, so long as they comply with certain operational requirements, including: (1) the products are in a locked, safe, and secure storage compartment that is part of the vehicle or in a locked container with separate key or combination pad; (2) the products are not visible from outside the vehicle; (3) the manufacturer must have a shipping manifest, describing the contents of each package; (4) all departures, arrivals, and stops must be appropriately documented; and (5) only employees may enter the vehicle at any time it is transporting hemp products.

These requirements are just the tip of the iceberg. The Office will provide more detail regarding operational requirements in the rules and regulations that it ultimately issues.

Hemp retail licensees also have a variety of operational requirements they must meet.

1. Products: Hemp retail licensees may only sell products obtained from licensed Minnesota cannabis or hemp businesses. Because wholesalers can import hemp products, retailers may be able to obtain out-of-state products, but they will have to go through a wholesaler to get them. This is also how alcohol from outside Minnesota gets into Minnesota (only through an importer/wholesaler who can then sell to retailers).
2. Display and Storage: A lower-potency hemp edible retailer must ensure that all products (other than those intended to be consumed as beverages) are displayed behind a checkout counter or in a locked case. Inventory that will ultimately be given to the purchasing customer must be stored separately in a secured area (except for hemp beverages).
3. Transportation: Lower-potency hemp edible retailers may transport product on public roadways if the products are: (1) in final packaging; (2) in tamper-evident containers that are not visible from outside the vehicle; (3) the retailer has a shipping manifest; (4) all departures, arrivals, and stops must be documented; and (5) only employees may be in the vehicle when the vehicle contains hemp products.
4. Compliant Products: This provision caps the amount of Delta-9 THC at 25 milligrams per serving, and it also limits hemp-derived CBD and CBG to 25 milligrams per serving. Hemp products may also not contain any artificially derived cannabinoid other than Delta-9 THC. Much like our current hemp laws, if the lower-potency hemp edible contains more than a single serving, it must be packaged in a way that shows by scoring, wrapping, or some other indication, the amount that would qualify as an individual serving size. And hemp beverages will be capped at two servings per container. Finally, we have received a lot of questions about this portion of the statute – more specifically, Section 342.46, Subd. 6(c), which limits the size of a single package containing multiple servings to 50 milligrams of Delta-9 THC, 250 milligrams of CBD, and 250 milligrams of CBG. Hemp producers are concerned at the 250 milligram limit of CBD and CBG per package. Businesses outside of Minnesota, for example, currently sell CBD oil containing thousands or even tens of thousands of milligrams of CBD – it will be difficult or impossible for Minnesota producers to compete if they can only sell packages with 250 milligrams. We do not know if this will be amended but it is a concern for hemp producers.
5. On-Site Consumption: Another benefit to the lower-potency hemp edible retailer license is the ability to permit on-site consumption. This permission will be given to lower-potency hemp edibles that also hold on-sale liquor licenses (or beer and wine licenses) under Minn. Chapter 340A. Ultimately, local units of government issue retail licenses and they are not issued under Chapter 340A, but 340A does give the local units of government such authorization. Lower-potency hemp edibles sold for on-site consumption (other than beverages) must be served in the required sealed packaging, but may be removed by customers and consumed on site. And while beverages can be served outside of their packaging, the information required to be on a lower-potency hemp edible label must be displayed. There are a few gray areas when it comes to on-site consumption. For example, the law states: “Food and beverages not otherwise prohibited by [by law or ordinance] may be prepared and sold on site provided that the retailer complies with all relevant [laws, rules, and ordinances].” On the one hand, this suggests that lower-potency hemp edibles may be used in dishes or beverages served to customers, but it is also not clear how a retailer can do that and still comply with all the labeling and packaging requirements. We suspect that the Office will have some guidance about this when the rules and regulations are drafted.

October 20, 2023

Regardless of the license held, any person licensed to manufacture products must meet a number of requirements. These operational requirements apply to all cannabis product production whether a cannabis manufacturer or a microbusiness with a manufacturing endorsement.

1. Facility: Cannabis manufacturing must take place in an enclosed, locked facility used exclusively for the manufacture of cannabis products, creation of hemp concentrate, creation of artificially derived cannabinoids, creation of lower-potency hemp edibles, or creation of hemp-derived consumer products, except that a business that also holds a cannabis cultivator license may operate in a facility that shares general office space, bathrooms, entryways, and walkways.
2. Equipment: Any person manufacturing cannabis products may only do so on equipment used “exclusively” for the manufacture of cannabis and hemp products. 
3. Extraction and Concentration: A licensee must inform the Office of all methods of extraction and concentration that the licensee intends to use, and the licensee must also identify the volatile chemicals (if any) that will be involved in the extraction and concentration processes.
4. Artificially Derived Cannabinoids: A licensee creating artificially derived cannabinoids will need to inform the Office of all methods of conversion, including the catalysts the manufacturer will use, and the molecular name of all cannabinoids or other chemicals that the manufacturer will crease.
5. Third-Party Certifications: Each licensee must obtain a certification from an independent third-party “industrial hygienist or professional engineer” approving (1) electrical, gas, fire suppression, and exhaust systems; and (2) plans for safe storage and disposal of hazardous chemicals.
6. Unlicensed Cannabis Flower: Interestingly, a licensed manufacturer may obtain authorization to manufacture cannabis products from cannabis flower received by unlicensed persons. This potentially allows home growers to have their own personal-use products made by a licensed manufacturer. The unlicensed cannabis, however, will have to be stored separately from licensed cannabis, use equipment exclusively used for the extraction or concentration of unlicensed flower, store products derived from unlicensed growers separate from products produced for or by licensed growers, and provide any concentrate only to the person that provided the homegrown cannabis flower. 
7. Disclosure: Upon the sale of any concentrate or artificially derived cannabinoids, the manufacturer must disclose in writing the method of extraction and concentration or conversions used, and any solvents, gases, or catalysts involved int that method.
8. Trademarked Food: A licensed manufacturer may not add cannabis or hemp to any of the manufacturer’s products for which the manufacturer holds a trademark, except they may use a trademarked food product if – and only if – the manufacturer uses the product as a component or as part of a recipe, and where the business does not state or advertise to the customer that the final product contains a trademarked food product. This could get tricky, so it is important for manufacturers to break this down carefully so as to avoid coming out with a cannabis version of a trademarked food product.

Manufacturing equipment can be expensive, so it is important for businesses to set up compliance policies prior to beginning production in order to avoid running afoul of the state production laws, many of which are described above.

October 20, 2023

Not all states that have legalized cannabis authorized legal delivery of cannabis. Minnesota, however, is following the lead of states like Colorado, Massachusetts, Oregon, Michigan, and Nevada that do authorize delivery. A delivery license will not, however, come easy and those that obtain a delivery license are subject to a variety of operational requirements.

1. Authorized Actions: A cannabis delivery service licensee may purchase cannabis and hemp products from licensed cannabis businesses with a retail license or endorsement, and the licensee may “transport and deliver” cannabis and hemp products.
2. Additional Information Required: Aside from the standard application information that will have to be submitted by all applicants, those seeking a delivery service license will have to provide some additional information, including: (1) a list of all vehicles used in the delivery of cannabis and hemp products, along with each vehicle’s make, model, color, VIN, and license plate number; (2) proof of insurance for each vehicle; and (3) a business plan showing policies to avoid sales to persons under 21 and how to prevent the visibility of the products when being delivered from the vehicle to the recipient.
3. Multiple Licenses: A delivery service licensee may also hold a cannabis retailer, wholesaler, transporter, event organizer, and medical retail licenses (subject to the restrictions that each other license has). For example, while this provision seems to suggest a delivery service licensee can also hold a retailer and a wholesaler license, a retailer licensee may not hold a wholesaler license (outside of the micro- or mezzobusiness contexts). Applicants are going to have to plan carefully when they consider what license(s) they will seek.

When it comes to operations, delivery service licensees are subject to a variety of requirements and restrictions:

1. Age or Registry Verification: Before completing a delivery, the licensee must ensure that the customer receiving the delivery is at least 21 years of age or is enrolled in the medical registry program.
2. Records: The Office will establish record keeping requirements for delivery service licensees. We expect this will be similar to the requirements imposed on businesses delivering alcohol, which include: (1) an invoice delivery slip stating the name, date and address of the seller and the purchaser; (2) an itemized list on the invoice on the number, size, and brand of products to be delivered; (3) a signed invoice by the person accepting delivery and the deliverer to be retained by the delivery service. The products will probably have to be delivered directly to a person over 21 years of age or a person on the medical registry, and likely the deliverer will not be permitted to leave the products at a doorstep or in a P.O. Box.
3. Amount Limits: The Office will establish limits on the amount of products that a delivery service may transport. This may include maximum amounts within the vehicle at any given time, as well as maximum amounts permitted to be delivered to the same address, but we will have to see how the Office handles this in the rules and regulations.
4. Statewide Monitoring System: Just like every other licensee that is involved in the chain of custody prior to the product reaching the consumer, a delivery licensee will have to record the products delivered.
5. Storage Compartment: Storing products in the vehicle for delivery is not going to be easy. The law requires that the products be transported “in a locked, safe, and secure storage compartment that is part of the cannabis delivery service vehicle or in a locked storage container that has a separate key or combination pad.” 
6. Identifying Logos or Business Names: Like transporter licensees, delivery licensees are not permitted to wrap their vehicles using any image that depicts the type of products being transported, or even the name of the delivery service if the name suggests the vehicle is part of a cannabis delivery business.
7. Vehicles Subject to Inspection: A delivery vehicle is subject to inspection at any time. As a result, compliance is going to be important even if that means creating some inefficiencies. For example, if a delivery driver has two deliveries to make and the recipients live next door to one another, the deliverer will still essentially have to make two stops. In other words, the deliverer will have to open the locked container, take out one order, leave the second order in the container, lock the container, and then deliver the product to the first recipient. Only after that is complete can the deliverer go back, open the locked container, and deliver the second recipient’s order to the house next door.

Delivery is likely going to be a big business for various licensees, and it will be important not only to pay attention to the statute (described in summary above), but also the rules and regulations when issued.

October 20, 2023

Minnesota’s cannabis wholesaler license gives licensed wholesalers a number of rights when it comes to purchasing and selling cannabis at wholesale, but it is not going to be the Wild West – far from it, in fact.

1. Authorized Purchases: A cannabis wholesaler license allows the licensee to purchase immature cannabis plants, seedlings, cannabis flower, cannabis products, lower-potency hemp edibles, and hemp-derived consumer products from various sources, including microbusinesses, mezzobusinesses, cultivators, manufacturers, and other cannabis microbusinesses. Licensees will also have the ability to purchase hemp concentrate from an industrial hemp processor licensed under chapter 18K.
2. Authorized Sales: Licensed cannabis wholesalers are permitted to sell immature cannabis plants, seedlings, cannabis flower, cannabis products, lower-potency hemp edibles, and hemp-derived consumer products to cannabis microbusinesses, mezzobusinesses, manufacturers, and retailers. They can also sell only lower-potency hemp edibles to lower-potency hemp edible retailers. 
3. Importation: Interestingly, the law expressly authorizes a licensed wholesaler to import hemp-derived products and lower-potency hemp edibles from outside of Minnesota. Notice that it expressly omits the ability to import any products other than hemp-derived products – this is because to comply with federal law, Minnesota’s legislature knew that they could not allow the importation of cannabis (or ‘marijuana’ under federal law) because it is federally illegal and importation would constitute interstate commerce over which the federal government has jurisdiction. 
4. Additional Information Required: Applicants for a cannabis wholesaler license must submit details about, among other things, their facilities, ventilation systems, and policies to prevent the sale of products to unlicensed business.
5. Multiple Licenses: A wholesaler licensee may also hold a cannabis transporter license, a cannabis delivery service, and a cannabis event organizer license. Cannabis delivery is unlikely to be high on the list of wholesalers’ priorities because they’re likely to focus on business-to-business volume rather than direct-to-consumer delivery.
6. Limits on Wholesaler Licenses: The Office of Cannabis Management may establish rules to limit the number of cannabis wholesaler licenses a person or business can hold – whether or not they will prohibit individuals from owning an interest in multiple retail licenses has yet to be decided. And while the Office has some degree of discretion in determining how many wholesaler licenses a person may have an interest in, it looks like if they limit the number of wholesaler licenses a business can hold, then such restriction will also apply to directors, managers, general partners, and cooperative members. It seems like the implication is that the Office may allow passive investors in multiple wholesaler licenses even if they limit the number of wholesaler licenses a business may hold to one license.

The above only covers licensing issues. When it comes to operational matters, wholesalers are subject to a variety of restrictions and requirements.

1. Separation of Products: In order to avoid cross-contamination, wholesalers need to keep cannabis products (including plants and flower) separate from all other products (including lower-potency hemp edibles). In other words, they cannot just throw all their inventory into the back of a track, but must have a special portion designated for cannabis flower, plants, and products.
2. Records and Labels: The cannabis wholesaler licensee must ensure that all labels remain affixed to the products to which they are attached.
3. Importation: As noted above, wholesaler licensees will be able to import hemp-derived products. But there is a specific endorsement that they must obtain before importing any hemp-derived products. Moreover, the out-of-state supplier whose products are being distributed by a wholesaler licensee, either must be licensed in another jurisdiction and subject to regulations that are aimed at protecting consumer health and safety, or the wholesaler must establish to the Office’s satisfaction that they supplier engages in practices similar to the practices required for hemp-derived product suppliers in Minnesota. How the Office will go about determining this is not clear but will likely be part of the rules and regulations.

These are not the only operational requirements that wholesalers must meet, but it is a starting point. And ultimately, the Office’s rules and regulations are going to go into much more detail about operational requirements for wholesaler licensees.

October 20, 2023

A cannabis transporter license is a somewhat unique type of license. In the alcohol industry, there are essentially retailers, wholesalers, and producers/suppliers (and while this is an oversimplification of alcohol regulations, it covers the basic idea underlying alcohol regulation). So while we have discussed retail licensing and wholesale licensing that generally track the underlying approach to alcohol regulation, we now have this new “transporter license” (which, as will be discussed in a subsequent post, is not the same as a delivery license). 

1. Authorized Actions: A cannabis transporter license allows the license holder to transport cannabis and hemp products. These products can be transported from cannabis
   microbusinesses, cannabis mezzobusinesses, cannabis cultivators, cannabis manufacturers,
   cannabis wholesalers, lower-potency hemp edible manufacturers, medical cannabis retailers,
   medical cannabis processors, and industrial hemp growers to cannabis microbusinesses,
   cannabis mezzobusinesses, cannabis manufacturers, cannabis testing facilities, cannabis
   wholesalers, cannabis retailers, lower-potency hemp edible retailers, medical cannabis
   processors, medical cannabis retailers, and medical cannabis combination businesses. In other words, the transporter is something of a middleman between the supplier and wholesaler tier and between the wholesaler and the retailer. Ultimately, however, it is likely that wholesaler licensees will simply obtain a wholesaler license and a transporter license to avoid this extra link in the chain of custody.
2. Additional Information Required: Applicants for a cannabis transporter license must provide additional information (beyond the standard license application information), including: (1) the number and type of equipment the business will use to transport immature cannabis plants and seedlings, cannabis flower, cannabis products, artificially derived cannabinoids, hemp plant parts, hemp concentrate, lower-potency hemp edibles, and hemp-derived consumer products; (2) a loading, transporting, and unloading plan; (3) a description of the applicant’s experience in the distribution or security business; and (4) evidence that the business will comply with the applicable operation requirements.
3. Surety Bonds: Cannabis transporter licensees will also need surety bonds of various types.
4. Multiple Licenses; Limits: A person, cooperative, or business holding a cannabis transporter license may also hold other licenses, such as a cannabis wholesaler license, a cannabis delivery service license, and a cannabis event organizer license. However, there are restrictions on owning or operating other types of cannabis businesses. As with the other licenses, however, it is not clear how many transporter licenses a business can hold, and whether investors can own an interest in a number of transporter licenses that exceed the number of transporter licenses that a business can hold.

It seems like a transporter license is basically going to go hand-in-hand with a wholesaler license, although there may be independent transporter licensees that offer services to wholesaler and other licensed businesses. 

With respect to operations, transporter licensees are also subject to a number of requirements.

Transportation Manifest

Like a flight that must include a manifest of passengers, so must a transporter maintain a manifest of cannabis and hemp products that it is transporting. This shipping manifest must be with the transporter at all times and the transporter entity must maintain a copy of that manifest. This is likely to prevent ‘spillage’ or products ‘falling off the back of the truck.’ Minnesota is serious about keeping this market subject to state regulation and by requiring these manifests, the state is trying to ensure that no products end up outside of the regulated market. 

1. Chain of Custody Report: In addition to the manifest, a transporter must log the chain of custody so that every employee who touches the product and every vehicle that contains the product is accounted for. 
2. Storage Compartment: One of the items we have heard some concerns about is the need for transporters to have a “locked, safe, and secure storage compartment that is part of the motor vehicle or in a locked storage container that has a separate key or combination pad.” The question is whether a locked and secure truck is a sufficient “compartment” that is part of the motor vehicle or if there must be a compartment inside the vehicle with its own separate lock. We do not yet have an answer to this question but it is likely that the Office will issue rules and regulations that will bring some clarity to this issue.
3. Identifying Logos or Business Names Prohibited: In order to cut down on the possibility of theft, the transporter’s vehicles cannot be marked in any way that would indicate the vehicle is transporting cannabis or hemp products. A transporter may be able to put its own name on the vehicle but only if it does not reference the fact that it is a transporter of cannabis and hemp.
4. Randomized Deliveries: Another requirement intended to prevent theft is that transporter licensees used randomized delivery routes.
5. Multiple Employees: Each transporter vehicle transporting cannabis or hemp products must be staffed with at least two employees, and at least one employee must remain with the vehicle at all times. 
6. Random Inspection: Any time a vehicle that is a transporter licensee’s vehicle is on the road (whether on route to a cannabis business or not) or is at a cannabis business, it is “subject to inspection.” It is not clear whether this inspection right is given to the police or if the inspection right is limited to the Office’s inspectors. This is likely an issue that will be addressed in the rules and regulations yet to be drafted.

Transporting cannabis is not going to be an easy operation. A lot of planning will have to go into the business from an operational perspective, which means the financial plans must account for all of the above requirements (and more).

October 20, 2023

One of the more interesting licenses in Minnesota’s cannabis framework is the event organizer license. 

1. Authorized Actions: An event organizer license will permit the holder to organize temporary cannabis events that last no more than four days. 
2. Additional Information Required: In addition to standard license application information, event organizer license applicants must provide a lot of additional information, including: (1) the type and number of other cannabis licenses held by the applicant; (2) the address and location where the event will take place; (3) the name of the temporary cannabis event; (4) a diagram of the physical layout of the temporary cannabis event showing where the event will take place, all entrances and exits that will be used; (5) all cannabis consumption areas; (6) all cannabis retail areas where cannabis will be sold; (6) the location(s) where waste will be stored; (7) any location where cannabis products will be stored; (8) a list of the name, number, and types of cannabis and hemp businesses that will sell products at the event (and the list may be supplemented); (9) the dates and hours of the event; (10) proof of local approval for the event; and (10) evidence that the applicant will comply with operational requirements.
3. Multiple Licenses: Cannabis event organizer licensees cannot hold testing facility licenses, and cannot hold any lower-potency hemp edible manufacturer or retailer license. It is likely that the law prohibits lower-potency hemp licensees from hosting cannabis events because lower-potency hemp licensees are only in the business of hemp-derived products, not cannabis.

When a cannabis event licensee hosts an event, there are a number of operational requirements that they must meet. 

1. Local Approval: A cannabis event organizer must receive local approval (including any required permits or licenses issued by a local unit of government). This means that local units of government will likely – at some point – implement their own cannabis event license applications.
2. Charging Fees: An event organizer licensee may charge an entrance fee to the event and may also charge a fee to cannabis or hemp businesses in exchange for space to display and sell cannabis and hemp products, but the fee cannot be based on or tied to the sale of cannabis products. In other words, the event organizer will likely charge a flat fee – if the event organizer could make money based on gross sales of vendors, it would be akin to the event organizer actually selling cannabis (albeit indirectly).
3. Security: An event organizer must hire or contract licensed security personnel to provide security services at the event. Security personnel are not permitted to consume cannabis or hemp products for at least 24 hours before the event or during the event.
4. Age Restrictions: Attendees must all be at least 21 years of age.
5. Waste: All cannabis and hemp products not removed by a customer or business must be disposed of in a manner approved by the Office.
6. Transportation of Products: All cannabis and hemp products intended for display, sale, or use at the event must be transported to and from the event by a licensed cannabis transporter, potentially meaning that retail licensees bringing products to the event must still hire licensed transporters to bring products to the event. 
7. Event Sales: Those with retail licenses or endorsements (including the event organizer) may be authorized to sell cannabis and hemp products at the event, but the sales must all take place in a designated area as shown on the diagram submitted to the Office as part of the application. Retailers may also only sell from their authorized space – in other words, sellers cannot roam the event and sell anywhere other than their designated space.
8. Product Sample Restrictions: Retailers at an event may display “one sample” of each plant or type of product available for sale but they must be stored in jars or display cases accompanied with required label information. The samples may not consist of more than 8 grams of flower or concentrate, or an edible product infused with more than 100 milligrams of THC. Attendees are permitted to smell the sample products prior to purchase.
9. Retailer Restrictions: The law imposes some requirements that may be difficult to comply with, including (1) they may not sell to persons who are “visibly intoxicated”; (2) they may not sell more to a person than the person is legally permitted to possess; (3) they may not sell medical cannabis products; (4) they may not give away cannabis or hemp products; and (5) they may not use vending machines.
10. Secured Storage: Aside from the samples permitted to be on display, all products must be stored in a secure locked container that it not accessible to the public and the container may not be left unattended. 
11. Statewide Monitoring System: Cannabis at all events must be accounted for in the statewide monitoring system just like they would have to be accounted for in other licensed businesses.
12. On-Site Consumption: Events may permit on-site consumption in a designated area, but the consumption area may not be “visible from any public place,” and neither alcohol nor tobacco may be used at the event. Moreover, cities or counties may enact and enforce more stringent measures to protect individuals from secondhand smoke or vapor.

The event organizer license comes with significant business opportunities but compliance is going to require serious planning and flexibility.