What Will Cannabis Legalization Look Like in Minnesota?

With a stroke of Governor Tim Walz’s pen last week, Minnesota became the 23rd state to legalize recreational cannabis. 

"We've known for too long that prohibiting the use of cannabis hasn't worked. By legalizing adult-use cannabis, we're expanding our economy, creating jobs, and regulating the industry to keep Minnesotans safe," Walz said upon signing the bill. 

Under the Minnesota Recreational Cannabis bill, beginning August 1, 2023, it will be legal for adults over the age of 21 to possess or transport up to 2 ounces of cannabis flower, 8 grams of concentrate, and 800 milligrams of edibles. They may also possess up to two pounds of cannabis flower in a private residence and will be able to grow up to 8 cannabis plants, including no more than 4 mature plants.

The bill proposes that retail adult-use cannabis sales begin during the first quarter of 2025 and states that local governments can limit the number of cannabis dispensaries to one for every 12,500 residents.  

The bill also calls for the automatic expungement of low-level cannabis convictions and for the creation of a cannabis expungement board to review felonies for expungement or resentencing.  

According to the Minnesota state government, Minnesota will continue to have a medical cannabis program, which will be moved from the state’s Department of Health to the Office of Cannabis Management starting on March 1, 2025. Under the new legislation, the annual medical marijuana program enrollment fee will be eliminated on July 1, 2023 and patients will be able to carry out their initial certification visit via telemedicine. The state will also honor medical marijuana licenses from other states as of March 1, 2025.  

“It Had to Go Through the Legislature”

Jason Tarasek, the founder of Minnesota Cannabis Law and the head of the Minneapolis office of the cannabis law firm Vicente LLP, told Rootwurks that the path to legalization in the state was one that required a political shakeup in the statehouse. 

“We’re a pretty liberal state but we don’t have a citizen initiative process like a lot of states, so it had to go through the legislature.” 

The 2022 midterms gave Democrats control of the house, senate, and governor’s mansion, paving the way for Minnesota to become the newest legal recreational marijuana state, Tarasek said. 

Asked to describe what Minnesotans should expect from the legalization bill, Tarasek said “to their credit they’ve crafted a pretty darn good bill. They’ve learned from the mistakes of other states that overtaxed and over-regulated it, and were therefore not able to put the illicit market out of business. We learned from states like Oregon where if you allow too much supply then you’ll have a diversion (of cannabis to the illicit market) problem.”

Tarasek stated that Minnesota is “trying to keep regulation relatively simple and trying to create a craft cannabis industry for Minnesota businesses that should be fascinating to watch as it develops.”

He added, “we had the luxury of going 23rd [to legalize cannabis].”

He also stated that he believes that the first recreational cannabis dispensaries will be open in the state in mid to late 2024. 

What will cannabis taxes in Minnesota be?

A 10% marijuana tax will be taken on all cannabis sales in addition to state and local sales taxes. There will be no additional local cannabis-specific taxes allowed. This is significantly lower than a number of other legal cannabis states, such as Washington where there is an excise tax of 37% of the retail price, or in Oregon, where the excise tax is 17%.  

In addition, medical marijuana sales will not be taxed in Minnesota.

Of the cannabis tax revenue, 80% will go to the state’s general fund and 20% will be earmarked for local government aid. 

What does it cost to start a cannabis business in Minnesota?

The cannabis licensing fees in Minnesota are lower than those in a number of legal marijuana states. 

These include:

According to Jason Tarasek, “we want regular Minnesotans to succeed in this market. We know that multi-state operators are gonna find a way in, we can't keep them out. But we're trying to prioritize smaller Minnesota businesses through the legislation.”

From craft beer to craft cannabis?

According to Minneapolis resident and Rootwurks Enterprise Account Executive Joe Madrid, “the way the bill was written was really good in my opinion in that it allows a lot more competition and a lot more small operators to try to sell their products at local or regional dispensaries.” 

Regarding the “craft beer model” used to describe the future Minnesota legal cannabis market, Madrid said “I think that’s really going to take hold here because Minnesota is a very big craft beer city. You can go to a bar here and there’s probably 30 to 40 craft beers that are on tap.”

Madrid added that people have to some extent already been openly consuming cannabis products in Minnesota - or at least cannabis beverages - which can be consumed in public and in bars under state law. 

He also said that he expects the state’s legal cannabis market to somewhat follow the script that played out in other legal states. 

“I think there’s going to be a lot of run and gun at the beginning, then you’ll see a lot of people fall off and some consolidation will happen.”

He added “and then the cream will basically rise to the top. The people that are doing it right, the people that put out quality products and are educating the consumer base. The people that have educated budtenders, these are the people that are going to stick around.