John SchroyerThis story has been updated with a new statement from the Minnesota Office of Cannabis Management on Monday.
An anticipated lottery originally scheduled for Tuesday morning in Minnesota to determine initial cannabis business permit winners has been delayed indefinitely, after a state judge ruled in favor of several applicants who had filed suit against the state after being culled from the pool of lottery participants.
“There’s no lottery tomorrow,” Ramsey County District Court Judge Stephen Smith said Monday morning after a roughly hour-long hearing on a requested temporary restraining order against the Minnesota Office of Cannabis Management, which he granted, Minnesota Public Radio reported.
OCM officials warned prior to the hearing that if delayed the lottery may not be held at all, given the cost and logistical hurdles, putting the next steps of the recreational marijuana market rollout very much in question.
An OCM spokesperson on Monday said that the Tuesday lottery had been canceled as a result of the ruling, but in a statement, the agency reiterated that “we stand by the process used to review applications.”
“Minnesota’s approach has always aimed to protect the integrity of a social equity license, and the rigorous review also allowed us to identify and prevent bad actors from entering the system. State statute sets high standards for applicants to successfully complete applications while also filtering out those with malicious intent,” the OCM said in a release. “We remain committed to launching an equitable, sustainable, and responsible adult-use cannabis marketplace in Minnesota.”
Lawyer David Asp, who represents plaintiffs Cristina Aranguiz and Jodi Connolly against the OCM, argued to Smith on Monday that the agency had rushed the lottery process, and in doing so had not given stakeholders a chance to appeal their rejections after the OCM yanked 1,169 social equity license applications for various reasons. The move left 648 applications eligible for the Tuesday lottery, in which 182 “preapproval” permits were going to be up for grabs.
“The state doesn’t dispute that our client will suffer irreparable harm if this order isn’t entered. That’s usually one of the main issues in an injunction, but it’s not a dispute here. Our clients will be harmed,” Asp said, according to MPR. “The harm on the OCM side is entirely of their own making.”
OCM Interim Director Charlene Briner had told press last week that some of those applicants were trying to game the system.
An attorney for the OCM, Ryan Virgil Petty, countered during the Monday hearing that the agency was following a licensing and lottery process laid out by the state legislature.
“The Legislature chose for this pre-approval process to be an efficient and expedient one, and part of that is evidenced by the fact that there is no appeals provided for for the pre-approval process, whereas in the final license approval process there is an availability for reconsideration,” Petty said.
“There wasn’t any hiding the ball here. There wasn’t any attempt to restrict the ability of applicants to challenge their denials,” Petty added.
The hearing was in response to four lawsuits filed on Friday by various individuals and companies seeking adult-use cannabis lawsuits, including one lawsuit by Aranguiz and Connolly, another by Wild Domain LLC, another by Green Leaf MN LLC, and a fourth by Hendo Industries LLC, Northern Illusion LLC, Milstagrams LLC, Better Bud Co. LLC, and Thrifties LLC.
The OCM responded on Friday to two of the legal actions, and said in a statement addressing the Northern Illusion lawsuit that it “stands by the process used to review applications for license preapproval.”
The Aranguiz and Connolly action in particular was filed by “the face of a scheme to use hundreds of straw applicants to gain unfair advantage in the lottery,” the OCM said in another press release.
“This attempt to flood the zone and place their thumb on the scale at the expense of legitimate social equity applicants is disturbing,” the OCM said. “These kinds of spurious tactics have been used in other states and are well-known to anyone paying attention to the evolving cannabis industry nationwide – and precisely what social equity advocates and authors of Minnesota’s cannabis legislation cautioned about and thoughtfully prepared against in state law.”
“We look forward to details of the complaint becoming widely known to the public, because the details will show a deliberate attempt to subvert state law,” the OCM said. “This is precisely why the office set a high standard and exercised great care in reviewing the more than 1,800 applications, and why we look forward to continuing our work to launch the cannabis market with legitimate businesses operators who are prepared to follow the law.”
No future hearings in any of the four cases have yet been scheduled, according to court records.
It’s not yet clear when the lottery will be rescheduled, or when the state may move on other license types that were not being contested, such as testing labs, transporters or wholesalers. The Tuesday lottery was intended for those applying for retail, cultivation and manufacturing permits.
