Tribes could get early foothold in Minnesota marijuana market, each open 5 off-reservation pot stores

Minnesota’s 11 tribal nations each would be allowed to license up to five retail cannabis dispensaries outside their reservations under long-awaited compacts with the state, according to a draft of one such agreement obtained by the Minnesota Star Tribune.

The compacts could give tribal businesses — some of which have been operating on reservations since Minnesota’s law legalizing adult-use marijuana took effect in August 2023 — an even greater advantage over state-licensed marijuana businesses.

“I can’t comment on specifics of the compacts, but I think Minnesota will look different than a lot of states in terms of the role the tribal nations will play in our market,” interim Office of Cannabis Management director Eric Taubel told a state House committee Tuesday.

Minnesota will not start issuing most cannabis business licenses until later this spring, when the state’s Office of Cannabis Management (OCM) is expected to hold license lotteries. It could take weeks or even months after those lotteries for the state-licensed cannabis businesses to open.

Nearly 200 social equity applicants who sought cannabis microbusiness licenses — which allow the holder to cultivate, process and sell marijuana products — through a now-canceled preapproval lottery could open businesses sooner. Unlike some other license types, state law does not limit the number of microbusiness licenses issued.

“As we near the execution of the first few compacts, we are also quickly approaching the anticipated adoption of rules, which would make it possible for OCM to begin issuing licenses to the 200 social equity applicants that qualified during the license preapproval round – including 193 microbusinesses that could be in position to open storefronts this spring as well," OCM spokesman Josh Collins said in a statement Wednesday.

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Collins said last week that the state’s first tribal compact agreement is likely to be finalized by March.

The off-reservation dispensaries could help accelerate the rollout of Minnesota’s marijuana market. The state’s goal of opening its first retail stores by early 2025 appeared to be in jeopardy when the OCM abandoned an early license lottery for social equity applicants due to litigation.

Five Minnesota tribes currently operate marijuana businesses: White Earth Nation, Red Lake Nation, the Leech Lake Band of Ojibwe, Lower Sioux Indian Community and Prairie Island Indian Community. At least two other tribes are planning to enter the industry, including the Mille Lacs Band of Ojibwe and the Fond du Lac Band of Lake Superior Chippewa.

Zach Wilson, CEO of Waabigwan Mashkiki, the White Earth Band of Chippewa’s cannabis business, told the Star Tribune last week that the tribe hopes to be the first to open an adult-use marijuana dispensary outside reservations. The tribe bought the former JL Beers building in Moorhead last May. It is undergoing renovations, with plans to open as an adult-use cannabis dispensary by mid-March.

The Prairie Island Indian Community is also negotiating a state compact. Prairie Island Indian Community Tribal Council President Grant Johnson said in a statement that they “look forward to finalizing terms so that the Tribal cannabis operations can further support the State’s legal cannabis market.”

Under the draft compact, each tribe could license multiple marijuana cultivation facilities with a cumulative total of 30,000 square feet of plants outside of reservations, as well as one business that processes raw cannabis into other products.

Tribally licensed businesses would be able to negotiate future agreements with the state to collect and share tax revenue from cannabis sales, according to the draft. They would be exempt from rules barring many state-licensed cannabis businesses from controlling the whole supply chain, from cultivation to retail sales, known as vertical integration.

Tribes would be required to own at least 51% of their licensed businesses outside of reservations, according to the draft, opening the door to partnerships with other tribes, state-licensed businesses or out-of-state operators. In contrast, applicants for the state’s social equity cannabis licenses are required to own 65% of a business.

State and tribally licensed businesses would be allowed to buy and sell cannabis products to one another. All cannabis sold outside tribal lands would be required to be tested by a state-licensed facility to ensure it meets state standards for potency and potential contaminants.

The OCM would be authorized to seize products that pose a risk to public health and safety outside tribal lands. The draft compact lays out a process for resolving disputes between the state and a tribe using mediation and arbitration.

Tribally licensed cannabis businesses would not be permitted within 1,000 feet of a school or within 500 feet of day cares, residential treatment facilities or playgrounds or athletic fields in public parks, according to the draft. They would also be exempted from local cannabis ordinances, unless those rules are less restrictive than those in the compact.

The draft compact was met with fierce criticism from Minnesota business owners and other stakeholders in the state’s cannabis community. They argued the agreements will throttle the state’s goal of helping those who were harmed by cannabis prohibition enter the legal marijuana market.

“The biggest threat to an equitable cannabis market isn’t tribal compacts — it’s the OCM’s failure to stand up the state-related market,” said Leili Fatehi, a lobbyist and partner with the cannabis consulting firm Blunt Strategies who organized a group of plaintiffs that is currently suing the OCM. “While tribes are rightfully moving forward under their compacts, social equity applicants — who were promised a fair shot — are stuck waiting as OCM disregards its statutory obligations and the state’s own commitments.”

Those concerns were echoed by Nathan Young, CEO of the Minneapolis hemp company No Coast Wellness. He said the draft’s lower ownership requirements and vertical integration provisions will give tribal businesses major advantages over state-licensed social equity cannabis businesses that may still be months away from opening.

“Ultimately, I am supportive of any Minnesota tribe entering the state cannabis market and competing for [market] share,” Young said. “But the competition has to be on a level playing field. There can’t be two sets of rules.”

State Rep. Zack Stephenson, who carried the recreational marijuana bill through the House in 2023, said the tribes can help the state meet early market demand. “A lot of tribal nations have been building significant grow facilities,” Stephenson, DFL-Coon Rapids, said during the House committee hearing Tuesday.

Minnesota-licensed cultivators will not be able to start planting until later this year.

Stephenson said legislators who crafted the 2023 law sought to create a market that prioritizes small and Minnesota-based businesses.

“If you end up with a model that gives a big advantage to tribal nations and microbusinesses, that pretty much fits right in with what we were trying to do in the beginning,” he said.

Kim Hyatt of the Minnesota Star Tribune contributed to this report.