The State of Minnesota's Cannabis Industry

April 20, 2025

4/20 is, in some ways, the new year for the cannabis industry, and so a fitting time to reflect on how much progress Minnesota’s cannabis industry has made and how far there is yet to go.

In Minnesota, entrepreneurs and enthusiasts have been waiting a long time, since May 2023, when we became the 23rd state to legalize recreational cannabis use. Minnesota’s bill went farther than most in seeking to create a market with lots of small businesses and a leg up for social equity applicants – including both people with old convictions and veterans. Our system draws on Minnesota’s love of craft breweries and will include hundreds of unique microlicensees. As a friend of mine put it, we’ll have (the cannabis equivalent of) Budweiser like everyone else, but we want to make sure we have Surly on down, too.

Today, we are still on the cusp of finally opening state-legal dispensaries and other licensed businesses. Roughly 3,500 applicants are moving through the complex licensing process created by the Minnesota Legislature and OCM (the Office of Cannabis Management), and comprehensive rules for the industry have been proposed, commented on furiously, and adopted at last.

I believe we are only weeks away from the very first microlicensees in Minnesota opening their doors. Many more will open in the next six months – first a trickle, then a flood of small businesses. In the meantime, as we work through the licensing process, other parts of this industry have been able to move ahead.

In the past year, we’ve seen the development of a variety of classes and community for homegrowers - and I expect a banner spring as Minnesota’s gardeners continue to embrace growing their own. Largescale, homegrown events like the Legacy Cup in September attracted huge crowds, and national cannabis conferences who came to Minnesota elevated our nascent industry.

In fact, the national industry is watching Minnesota closely – both to see how our experiment of trying to make space for small business holds up, and because we are the center of the hemp-derived THC beverage industry.

Trailblazing Beverages

In Minnesota, hemp-derived THC drinks and edibles are now so ubiquitous as to be unremarkable: every liquor store has a section, and many Minnesotan brands are now sold throughout the country through partnerships with Total Wine and others.

States like Texas are now debating whether to ban or regulate hemp-derived THC products. Indeed, without regulation, they are seeing unsafe products proliferate at gas stations and smoke shops in the same way that Minnesota did back in 2022. I urge other states to follow Minnesota’s lead and establish sensible regulation with testing and enforcement of these products. I’m proud to say that once Minnesota did so, consumers have embraced our safe products and we have had no serious

consumer health effects to my knowledge.

This fall, a new licensing process and statutory and rule changes will apply, and hemp-derived THC brands who are staying in that industry will also have to adapt, once again.

Predicting the New Growth - and Challenges Ahead

The exciting energy this 4/20, however, is around the adult-use industry – which, in spring-appropriate fashion, is just about to burst out of its seed. By 4/20 next year, Minnesota will have hundreds of dispensaries, supplied by licensed cultivators and manufacturers of vapes and edibles. I’m already imagining the fun bus tours next 4/20.

I also expect that, unfortunately, not all of these fledgling businesses will survive. The ones that do will have more than just cannabis to sell; they will create loyal customers willing to pay more than the cheapest price in town. (In each legal state, we have seen the price of flower fall precipitously in the second year after dispensaries open, as more cultivators get online so supply increases dramatically.) Or perhaps the winners will distinguish themselves through location, or good

financial planning.

Other current applicants will never open their businesses. In some states, more than half of approved social equity licensees have never opened their doors. The search for appropriate real estate is one difficult piece, especially with many landlords and cities still nervous about including cannabis businesses.

But even with a good space, fledgling businesses need capital - to secure and build out that space, to buy inventory to sell, to hire people - before they make their first dollar. The monies that the Minnesota Legislature allocated back in May 2023 as grants to make loans and provide education for small licensees will finally start being available this fall, and it is none too soon. Licensees will have an advantage if they have deep pockets, or can find angel investors or friends and family to take

the risk of investing.

Big Business in Minnesota Cannabis

Because, do not forget, this is a race to open and establish market share – not only before other Minnesota small businesses, but before the enormous out-of-state cannabis businesses derided as MSOs (multi-state-operators) can come in.

Fledgling cannabis businesses will also have to navigate restrictive and expensive compliance requirements for their buildings and setting up their operations, which will make it difficult for small players and those new to the industry to succeed. I’m seeing a flood of consultants and service providers come to Minnesota and, like other Minnesota industry players, am working to distinguish the ones with good advice and good hearts from the ones who come to prey on dreams.

It also remains to be seen how the competition develops with tribal-licensed cannabis businesses, who have been able to move quickly and get a head start, and the two medical cannabis companies currently allowed in Minnesota, both of whom are MSOs and eager to open for adult-use.

Don’t forget the black market, now known as the “legacy market” in some circles. Underground growers have been risking prison and growing quality products for decades. Will they choose to transition to the legal market with its compliance costs and taxes? As a consultant, I am helping some navigate the bureaucracy of going legit. In states like California and New York, a substantial part of the cannabis market continues to be on the illegal side, meaning less taxes for states and otherwise undermining legalization policy goals.

The State of Federal Regulation

Finally, the shadow of federal illegality over this market continues. The hope of getting cannabis moved from Schedule I of the Controlled Substances Act, which seemed so likely a year and a half ago under President Biden, is totally up in the air. And so Minnesota businesses are preparing to have to pay the extravagant 280E taxes, which make it so hard to make a profit in cannabis.

This is not an industry for the faint of heart. But it is a fascinating and fast-moving one, and I’m glad to be here.

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Jen Randolph Reise is a passionate advocate for small entrepreneurs in Minnesota’s emerging cannabis industry. An attorney by training, she is the founder of North Star Cannabis Consulting, where she helps guide clients through the complexities of license applications and building compliant and successful businesses. Jen also writes a newsletter about and for the Minnesota cannabis industry, and frequently shares her insights on cannabis law and policy through prominent podcasts, op-eds, and panel discussions.