Buy A T-shirt, Get Busted: Loophole In Minnesota Cannabis Market Could Cost Retail Operators A 5-Year Ban

Minnesota's budding cannabis market is facing regulatory hurdles as businesses attempt to exploit legal loopholes, sparking action from the state's Office of Cannabis Management (OCM). 

With cannabis licenses set to be issued in 2024, investors should be aware of the significant challenges posed by regulatory enforcement, market entry delays and compliance risks.

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Busted!

Despite cannabis legalization in Minnesota, with the exception of tribal reservations, businesses are not yet legally permitted to sell cannabis until licenses are issued next year.

However, some hemp stores and smoke shops have been attempting to bypass these regulations by offering cannabis as a "gift" with other purchases such as a T-shirt or subscription service. 

The OCM, under the leadership of interim director Charlene Briner and enforcement director Margaret Wiatrowski, has responded by cracking down on these illicit sales.

Read Also: EXCLUSIVE: Is Washington DC’s ‘Cannabis Gifting’ Economy Coming To An End?

Label Trouble, Sticker Shock

The OCM has confiscated nearly 190 pounds of illegal cannabis flower, with a retail value of approximately $564,000, from 116 locations statewide. In addition, hemp-derived products, valued at nearly $878,000, have been destroyed. 

Over 34,000 units of edibles and vapes with THC levels higher than legal limits have been confiscated. Common violations include improper labeling, such as missing FDA and child safety warnings, and products lacking QR codes with essential testing data. 

Five-Year Ban

Businesses caught engaging in illegal transactions face severe consequences. The OCM has issued citations and fines, with repeat offenders receiving a five-year ban from obtaining cannabis licenses. 

The OCM is taking steps to ensure compliance across the board, hiring additional inspectors, and ramping up its enforcement efforts.

Delays In Social Equity License Lottery

Another point of concern for investors is the delayed rollout of social equity licenses. Over 1,800 social equity applicants have submitted applications, hoping for an early start in Minnesota's cannabis market. However, the lottery to determine which applicants will receive these licenses has been postponed until the end of 2024, pushing back the timeline for the market launch.

The complexity of the application review process is cited as the primary reason for the delay. The OCM is tasked with evaluating ownership structures, business plans, and financial backing to ensure that social equity applicants are not being used as fronts for larger corporations. Additionally, the law prohibits individuals from owning more than one license.

Cultivators, in particular, face additional pressure as the later the licenses are awarded, the longer it will take for crops to be planted and harvested, delaying product availability for retailers in 2024.

Read Next: EXCLUSIVE: Can Minnesota Keep Its Cannabis Industry Local Amid Out-Of-State Pressure? Legal Expert Weighs In