By Jared M. Reams and Rachel S. Kurth
Gov. Tim Walz signed HF100 on May 30, 2023, after a nearly six-month journey through numerous committees and revised engrossments in the Minnesota House and Senate, making Minnesota the 23rd state to legalize recreational-use cannabis. To get the bill to his desk, the Legislature had to balance a surprising number of competing interests and stakeholders, including consumers, medical patients, social equity advocates, state and local government entities, law enforcement, hemp businesses, medical cannabis businesses, prospective in-state cannabis businesses, and out-of-state players in the cannabis industry.
Fitting a state-sanctioned cannabis market neatly within a federal system in which cannabis remains an illegal controlled substance was also no small hurdle. Overall, the Legislature was thoughtful in its undertaking and left Minnesotans with one of the most comprehensive and, in certain respects, progressive cannabis laws in the nation. Nevertheless, certain gaps and potential conflicts remain in the bill and may require action by the Legislature, newly created Office of Cannabis Management, or both to remedy.
Recreational possession and use
While conflicting information has been widely publicized—and generally accepted as correct—Article 1, section 75 of the bill makes clear that its adult possession and use provisions became effective July 1, 2023. Accordingly, starting in July, individuals over the age of 21 had the legal ability to possess, use, transport, gift (for no remuneration), and cultivate cannabis at home under Minnesota law. The limits are also quite permissive: In public, an adult can possess, transport, or gift up to two ounces of cannabis flower, eight grams of cannabis concentrate, or edibles containing up to 800 milligrams of THC. While a person is at their own residence, the possession limit for cannabis flower increases to two pounds.
Adults can also grow cannabis at home—but unlike limits on possession, plant limits are tied to the residence itself and not to the number of persons 21 and over who live there. Up to eight plants can be cultivated at a single residence by one or more adults, but only four of those can be mature (flowering) at any one time. The plants must also be grown in an “enclosed, locked space that is not open to public view,” so raised beds in the front yard will not be a viable option. Even so, cannabis pollen floating naturally in the air can affect final yield, and most people interested in cultivation will likely be growing indoors for better control.
It appears that in setting the at-home possession limit at two pounds, the Legislature was operating under the belief that each of the four allotted mature plants will produce roughly half a pound of cannabis flower when harvested. This is certainly debatable. Not only is the yield of a single plant highly variable, but the definition of “cannabis flower” under HF100 exacerbates the problem, as it includes “the harvested flower, bud, leaves, and stems of a cannabis plant.” Consequently, a person may violate the two-pound possession limit the instant they pull their four mature plants out of the ground. With this said, the cultivation limits may be intended to account for multiple adults living at the same residence, each of whom would have their own two-pound cannabis flower allowance under the statute and also want to grow their own plants.
The areas in which cannabis products can be legally used are significantly more restricted than where they can be possessed—especially with respect to smoked or vaped products. The law expressly allows adult cannabis use at a private residence (including the yard and curtilage), on private property that is not generally accessible by the public (unless the property owner prohibits it), and at a venue or event that is licensed for on-site consumption. An added restriction on smoking and vaping in these areas is almost hidden within a portion of the bill mostly concerned with medical cannabis: “Except for the use of medical cannabis flower or medical cannabinoid products, the vaporizing or smoking of cannabis flower, cannabis products, artificially derived cannabinoids, or hemp-derived consumer products is prohibited in a multifamily housing building, including balconies and patios appurtenant thereto.” Additionally, as with tobacco, smoking or vaping cannabis products is prohibited in locations covered by the Minnesota Indoor Clean Air Act (MICAA), which, importantly, the Minnesota Department of Health interprets to include private social clubs. And unlike tobacco shops, smokable cannabis retailers were not given a “product sampling” exception for on-site use akin to Minn. Stat. §144.41467(4).
Interestingly, while those areas listed above may be called “protected” locations for use, revisions to the state criminal laws effective August 1, 2023 leave no legal penalty for using cannabis outside of them (namely public spaces not subject to the MICAA). Nevertheless, municipalities can ban that practice by ordinance, and it remains an open question how many Minnesota cities will do just that.
By completely eliminating the ability of multifamily housing tenants to smoke or vape recreational cannabis products at their homes, allowing landlords to forbid all cannabis products (including edibles) on their rental properties, and allowing municipalities to ban use in all public spaces, there is a legitimate criticism that the Legislature has legalized cannabis only for the wealthy (or at least those wealthy enough to be homeowners). The concern is even greater for medical cannabis patients, because while the bill does not outlaw smoking or vaping medical cannabis in multifamily residences as it does for recreational users, it does not protect medicinal use either, and it appears that HF100 would still allow landlords to prohibit the practice. It remains to be seen whether a property owner must allow medical patient tenants to use edible products, at a minimum, as a reasonable accommodation under Minnesota Human Rights Act. Unfortunately, patients should expect no additional protections under the Federal Fair Housing Act, since cannabis remains a controlled substance federally.
Medical cannabis
Medical cannabis has been legal in Minnesota since 2014, although the program was exceedingly restrictive as to the conditions that cannabis could be used to treat and the forms of cannabis that could be used for the treatment itself, namely pills and derivatives that were not plant material. HF100 greatly expands the forms medical cannabis can legally take, including flower, concentrates, and edibles. While it does not expand Minnesota’s list of qualifying medical conditions for cannabis treatment, it does allow the Office of Cannabis Management to add conditions to the list. The law also prohibits sales tax on medical cannabis products.
Medical cannabis will continue to be regulated by the Office of Medical Cannabis under the Department of Health until March 1, 2025, to avoid interruption for medical cannabis patients while the Office of Cannabis Management is being implemented. Thereafter, the medical program will be controlled by the Division of Medical Cannabis under the Office of Cannabis Management.
Changes to criminal laws
While the legal adult use provisions of HF100 became effective July 1, changes to criminal laws surrounding cannabis in Minnesota were awkwardly delayed until August 1, 2023. In most circumstances, however, the provisions of the statute that permit adult use and possession may nullify vestigial laws that would criminalize the same conduct during the month of potential conflict.
For example, under prior law it was a controlled substance crime in the fifth degree under Minn. Stat. §152.025, subd. 2(1) to “unlawfully possess[] one or more mixtures containing a controlled substance classified in Schedule I, II, III, or IV, except a small amount of marijuana.” Come August 1, HF100 amended that offense to exclude all cannabis products, regardless of amount. But for any cases brought between July 1 and August 1, the use of the word “unlawfully” by the statute will be important. “Unlawfully” is defined to mean “selling or possessing a controlled substance in a manner not authorized by law.” Because HF100 legally authorized adult possession of cannabis on July 1, 2023, that possession cannot violate the statute.
The revisions to Minnesota’s cannabis-related crimes reduce previous penalties for sales crimes across the board, with a maximum penalty of imprisonment of up to five years and fines of up to $10,000 for unlawfully selling more than two ounces of flower, eight grams of concentrate, or edibles containing more than 800 milligrams of THC. Changes to possession crimes are less easily summarized. Penalties will be reduced for the unlawful possession of less than 10 kilograms of cannabis flower, two kilograms of concentrate, or 100 grams of THC within edibles, with corresponding penalties ranging from petty misdemeanors for possession of lower amounts to felonies allowing up to five years imprisonment and fines of up to $10,000 for higher-level violations within those thresholds.
The penalties for possessing amounts greater those discussed above remain unchanged for possession of cannabis flower, while they are harsher for concentrates and may be more lenient for edibles. This is because the previous regime treated all “mixtures” “containing marijuana or [THC]” the same. As an example, under the previous Minn. Stat. §152.021, one would need to possess 25 kilograms of concentrates to be charged for the same first-degree controlled substance offense as a person with 25 kilograms of cannabis flower. Under the revised law, only 10 kilograms of concentrate is sufficient. While edibles containing just one kilogram or more of THC will also qualify for the same offense, the revised law may actually be more permissive because it only takes into account the weight of the THC itself, as opposed to the weight of the entire “mixture” or edible.
As for motor vehicle crimes, the Legislature wisely declined to tie DUI offenses to the mere presence of a THC metabolite in a driver’s system, given that these metabolites may persist in the body for up to 30 days, long after intoxicating effects have subsided. Instead, it will simply be a crime to operate a vehicle under the influence of cannabis, regardless of how that may be proved. Having open cannabis packaging or “hot boxing” in a motor vehicle that is on a street or highway will also remain illegal, just as a similar possession or use of alcohol is proscribed. Keep it in its original packaging or the trunk.
Expungement
In recognition of the past severity and disparity of cannabis crime enforcement in Minnesota, HF100 establishes a temporary Cannabis Expungement Board (under the Office of Cannabis Management); provides for the automatic expungement of certain cannabis offenses, including misdemeanor sale and possession crimes; and allows the possibility of expungement or resentencing for felony offenses on a case-by-case basis. The “automatic” expungement track does not require any action by affected persons to take effect, but it is unclear whether those with felony convictions will need to petition the board or follow some other procedure for board review. Future rulemaking should resolve that question. To be eligible for felony expungement or resentencing to a lesser offense, the cannabis crime at issue (1) must not have involved a dangerous weapons, battery, or assault; (2) must be a non-felony offense or no longer a crime after August 1, 2023; and (3) must have no appeal pending and no further opportunity for appeal.
Cannabis business licensing
Given that Minnesota took 23rd place in the race to legalization, the Legislature faced a real concern that out-of-state entities in established markets would have a competitive advantage over in-state newcomers to the cannabis industry. The dormant commerce clause would likely prevent any residency restriction on licensing, regardless of whether such a policy would be wise in the first place. The Legislature thus confronted the issue with a double-edged sword: It struck down opportunities to monopolize, but with the same blow may have cut the ability for small cannabis businesses to become anything but.
Features of HF100 include a limited pool of licenses, caps on size and production, and vertical integration limits. Size caps limit the square footage of canopy size for cultivators, production numbers for manufacturers, and storefronts for retailers. Vertical integration limits force businesses into one of 16 discrete license types and disallow businesses from holding more than one type of license, with limited exceptions. For example, a cannabis manufacturer could not obtain a cannabis retailer license (which would allow sales directly to consumers) but could obtain a cannabis cultivator license to grow its own supply, as well as an “edible cannabinoid product handler endorsement” to produce edibles. Restrictions on license holders that are businesses will also apply to each of the businesses’ cooperative members, managers, directors, and general partners.
Licenses that allow for vertical integration, such as micro- or mezzo-business licenses, trade the additional permissions for lower size caps. Additionally, while lower-potency hemp edible businesses will not have any vertical integration limits or size caps, they cannot hold any cannabis (read: non-hemp) license, while cannabis businesses can deal in hemp or cannabis products.
The number of licenses to be issued, as well as size caps and the application process itself, has yet to be decided by the Office of Cannabis Management.
Social equity
In addition to expungement, the state has also provided social equity redress within the licensing process. While the Office has yet to decide how many points to attribute to each cannabis business license application criteria, HF100 does require that at least 20 percent of the total awardable points be reserved for social equity applicants. These are individuals who (1) were convicted of a cannabis possession or sale offense prior to May 1, 2023; (2) have a parent, guardian, child, spouse, or dependent who was convicted of a cannabis possession or sale offense prior to May 1, 2023; (3) were the dependent of someone who was convicted of a cannabis possession or sale offense prior to May 1, 2023; (4) are service-disabled veterans or veterans who lost honorable status due to an offense involving the possession or sale of marijuana; (5) for at least the past five years, have been a resident of a census tract or neighborhood disproportionately targeted by cannabis enforcement; (6) are emerging farmers; or (7) for at least the past five years, have lived in a census tract where the poverty rate is 20 percent or more, or in which the median family income did not exceed 80 percent of the statewide median family income (if in a metropolitan area, then 80 percent of the metropolitan median family income).
In determining how many points to award to a business based upon social equity factors, the Office will consider the number or ownership percentage of its cooperative members, officers, directors, managers, and general partners who qualify as social equity applicants. Additionally, while a conviction for a cannabis offense remains a social equity category, the Office has authority to decide whether any felony conviction would be entirely disqualifying for an applicant.
Quasi-social equity factors will also play into the application process, with an undetermined amount of points awardable to retired military personnel who do not otherwise qualify as social equity applicants, as well as those who would expand cannabis-related services to an underrepresented market, including the medical cannabis market.
Sunset period for hemp businesses
To avoid interruption for businesses selling hemp products, such as the THC seltzers and gummies presently found on shelves in Minnesota, the Legislature decided to keep the “edible cannabinoid product” law passed last summer on the books until March 1, 2025. After that date, the Office of Cannabis Management will issue licenses to make and sell the revised version of these products, called “lower-potency hemp edibles.” Importantly, all retailers that wish to continue selling edible cannabinoid products to consumers during the interim period must register with the Minnesota Commissioner of Health by October 1, 2023 (through a process that has not been established at the time of this writing).
Because the product and registration requirements are different for edible cannabinoid products than for lower-potency hemp edibles, there may be a heightened risk of confusion by law enforcement authorities investigating compliance. As an example, lower-potency hemp edibles cannot contain delta-8 THC, while edible cannabinoid products can, and while sellers of edible cannabinoid products must register with the Office of Cannabis Management, as discussed above, lower-potency hemp edible retailers must register with local units of government.
Despite their differences, the competing regimes are intended to regulate the same kinds of products (hemp-derived edibles), and there is nothing about those products or their packaging that indicates which set of laws they are being sold under. Additionally, because HF100 is less than forthcoming in its text regarding the sunset period for edible cannabinoid products and continuation of Minn. Stat. §151.72, it is possible that some law enforcement entities acting in good faith will have no idea that the edible cannabinoid product statute is still effective. Attorneys representing hemp businesses should apprise their clients of this unfortunate situation.
Tribal compacts
Despite personal use provisions having become effective in July, it is not expected that retail cannabis locations will be licensed and able to offer products for sale until early 2025. To those looking for cannabis products before then, keep an eye out for tribal governments exercising their sovereignty to regulate cannabis within their tribal jurisdiction, or for compacts between tribal governments and the state of Minnesota, which can allow for an accelerated path to retail sales across jurisdictional lines. Certain tribal governments have already begun the negotiation process. A tribal government (with more agility than the state) could begin regulating a cannabis market within its borders without waiting for the Office of Cannabis Management’s bureaucratic formation and provide options to consumers that do not exist elsewhere in Minnesota. (Shortly after this article was completed, Red Lake Nation announced that it would begin selling recreational cannabis in August. Without a compact, products are legal for sale and use only within tribal boundaries.)
The waiting game
While HF100 accomplished much in its 300-or-so pages, the newly created Office of Cannabis Management has its work cut out in the coming months. Rulemakings related to personal use, business licensing, expungement, and several other key provisions of the bill can be expected in the near future, and the decisions will be impactful. In the meantime, Minnesota has fallen into limbo, with legal possession and use but no legal sales, and an excited (or perhaps anxious) prospective industry that is unsure how to direct its energy. But when the law is at its most obscure, one thing becomes clear: Lawyers are important.
JARED REAMS is a cannabis lawyer who advises businesses regarding compliance, licensing, transactions, and litigation. As a partner at Eckland & Blando LLP in Minneapolis, Minnesota, Jared has extensive experience representing clients in highly regulated industries, and along with his work in cannabis law, also represents clients involved in government contracting and finance.
RACHEL KURTH is an associate attorney at Eckland & Blando, where she assists clients, including hemp and cannabis businesses, in all matters related to contracts and regulatory compliance, from initial negotiations to contractual disputes. She graduated from Mitchell Hamline School of Law in 2022.