Social equity cannabis license lottery on hold amid litigation

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Minnesota’s cannabis license lottery set for Tuesday, Nov. 26, has been halted by a lawsuit. Some have praised the decision, calling for a fairer process.

After recreational marijuana use was legalized last year, the Minnesota Office of Cannabis Management (OCM) has enacted various processes and policies for establishing a marijuana market. Minnesota’s social equity cannabis license lottery was set to issue retail and delivery cannabis licenses to people determined to have suffered disproportionately from past marijuana prohibitions. Social equity applicants included those who had been convicted or a family member convicted of a possession or sale of cannabis offense, among other things.

Two of those applicants, Cristina Aranguiz and Jodi Connolly, applied, but their applications were denied on Nov. 18. Connolly says that she received no explanation, and Aranguiz claims that she was told that she failed to disclose partnership agreements or promissory notes, documents she denied having. It was not just Aranguiz and Connolly who had applications denied. Some 1,500 applicants were narrowed down to just 282.

Aranguiz and Connolly claim that they followed the requirements of the Minnesota statute.

“Contrary to OCM’s assertions in the media, Plaintiffs’ applications are not the result of ‘shenanigans’ or inadequate documentation,” the complaint reads.

The lottery faced multiple lawsuits. David Standa, partner in the cannabis law practice group at Greenspoon Marder, filed two suits on behalf of Green Leaf MN LLC and Wild Domain LLC. Standa claimed that both of this clients’ due process rights were violated.

Green Leaf submitted an application to the OCM for reapproval, but was told that it “is not eligible to appeal or request a hearing.” The complaint read, “In denying Plaintiff’s preapproval application on plainly erroneous grounds, the OCM has deprived Plaintiff of its right to participate in the preapproval lottery.”

In the case of Wild Domain, the applicant allegedly submitted an incomplete application but fixed the issues upon being notified. Nevertheless, the application was denied. “The OCM’s handling of Plaintiff’s application has been flawed from the start and has violated Plaintiff’s due process and equal protection rights in a myriad of ways,” the complaint reads.

In an order Monday, Ramsey County Judge Stephen Smith stayed the social equity lottery.

“Based on counsel’s arguments, the court finds good cause to stay the social equity lottery and allow plaintiffs to file certiorari pursuant to Minn. Stat. § 606.01. The court is mindful of the separation of powers implications here and does not make this decision lightly,” Smith wrote. “But given the extraordinary circumstances presented by the timing of OCM’s application decisions and the filing of these cases, a fair and reasoned decision by the Court of Appeals is not possible without a stay of the lottery.”

Minnesota Office of Cannabis Management stated that it was “disappointed” by the decision and stands by its process 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.”

Standa lauded the decision. “I am pleased that the court has agreed with our position and halted the lottery. The applicants in this case were simply asking for a fair process—one that provides clear standards and an opportunity to appeal when access to the lottery is denied,” said Standa. “Social equity applicants, including those harmed by the War on Drugs, deserve a transparent, just process in securing a foothold in Minnesota’s emerging cannabis industry.”

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