Minnesota is on the verge of legalizing adult-use cannabis, sparking a lucrative new recreational marketplace, but supporters are cautioning lawmakers not to inadvertently snuff out a widely popular hemp industry.
Legislation to legalize adult-use cannabis and regulate its cultivation, processing and sale narrowly cleared the Minnesota House and Senate this week. But there are differences between the two bills as well as other revisions supporters hope to see addressed in a joint committee of lawmakers before the legislation is sent to Gov. Tim Walz, who is expected to sign it.
“It’s been a long process, and I’m excited that we have taken this critical step,” said Rep. Zack Stephenson, DFL-Coon Rapids, after the bill cleared the House Tuesday. “We are going to get this done this year. We are right at the doorstep.”
Sen. Lindsey Port, DFL-Burnsville, said cannabis prohibition has failed and harmed too many lives with a disproportionate impact on people of color. “It is time for us to change course and create a system that works,” Port said after the Senate approved the legislation Friday along party lines.
The bills remain a work in progress. They top 350 pages and have undergone numerous revisions during intense scrutiny over the past few months.
In addition to legalizing cannabis, the bills expunge low-level marijuana convictions and create grant programs to help those most harmed by prohibition start cannabis businesses.
There are also new regulations for the state’s burgeoning hemp industry, which hadn’t attracted much attention until lawmakers agreed last year to put some minor limits on hemp-derived edibles. Those changes effectively green-lit the sale of low-dose hemp-derived THC products.
Now, some hemp producers are worried new cannabis regulations will hurt their businesses and limit how and where they can sell their products.
Hemp growers seem effectively split between those who want to transition to primarily growing full-fledged cannabis and those who want to continue selling hemp-derived products.
“I support the cannabis bill and want to see it passed,” Ben Lipkin, of Carpe Diem in Minneapolis, said at a recent news conference with other hemp growers who were critical of the bill. “However, changes are needed for our community to survive.”
Bridgette Pinder, of Grounded Gardens in St. Paul, a longtime cannabis legalization activist, said her hemp business was just the start of her work in the cannabis industry.
“We knew this was just a Band-Aid until they legalized cannabis,” she said.
Where laws stand now
Cannabis and hemp are practically identical, but there is a legal distinction.
Cannabis contains high levels of tetrahydrocannabinol, or THC, and remains illegal under federal law. It is classified as a Schedule 1 drug, the most dangerous level considered by the Drug Enforcement Agency. Ingesting THC gives users a sense of euphoria — it gets them high.
However, 22 states have legalized cannabis for adult recreational use and others — including Minnesota — allow it for different medical purposes. Since it’s still illegal at the federal level, cannabis businesses operate in a gray area, often accepting only cash for purchases and missing out on federal tax breaks.
In 2018, Congress passed a farm bill that allowed the cultivation of hemp and removed it from the DEA’s list of restricted substances. Hemp plants are nearly identical to cannabis plants, but under federal law they must contain 0.3 percent or less of THC, the substance that gets people high.
Hemp also contains a variety of different cannabinoids, such as CBD, which are now widely sold to treat a variety of different conditions. Hemp processors also produce THC from the legal plants to make low-dose edibles and other products.
Those hemp-derived THC products are typically made using chemistry to convert CBD into what is referred to as delta-8 and delta-9 THC.
Last year, Minnesota lawmakers imposed some regulations on hemp products containing low levels of THC. They include limiting the THC to 5 milligrams per serving, but not requirements for testing or reporting to consumers exactly what is in the products.
Lawmakers also didn’t implement any new taxes as many other states have done.
What would change
Minnesota’s adult-use cannabis bill would make possession and cultivation of the plant legal under state law and regulate its processing and sale. It would create an Office of Cannabis Management that would license growers and businesses and oversee products containing THC.
The cannabis office also would oversee the existing medical cannabis industry as well as many hemp products.
Under the bill, there would be a variety of different types of business licenses including for small and medium cultivators who also want to process and sell products at retail locations.
Larger cannabis growers would be limited to cultivation and processing and would not be able to retail products under the same license in an effort to encourage home-grown Minnesota businesses and discourage large-scale corporate operations.
The state would levy a new tax on cannabis products that’s between 8 percent and 10 percent. Medical cannabis would not be taxed.
Drinks and other edibles with low-dose, hemp-derived THC would face new regulation under the bill including testing and some licensing requirements.
“What we are adding to that low-dose hemp market is regulation because we have seen that it is sort of the wild west out there,” Sen. Port, the primary sponsor of the Senate bill, said Thursday. “There is really no way to ensure what it says on the label is what you are actually getting.”
Hemp farmers’ concerns
A group of hemp growers urged lawmakers during an April 11 news conference to strip all references to hemp from the legislation. They say hemp’s inclusion in the bill will bring unnecessary regulations and possibly restrict current products they sell medicinally.
Lipkin, one of the owners of the CBD business Carpe Diem, worries the bill will regulate the potency of hemp products in a way that will not allow him to sell some of his most popular tinctures, essentially a hemp extract.
“It takes a ton of education and trust in us as a company to put out great products that people can afford,” Lipkin said. He noted that people from across the U.S. purchase products that are currently compliant with federal laws. “They rely on us.”
They also argue the added tax rate, expected to be anywhere from 8 percent to 10 percent, will make their products less affordable for people who are using them to treat different maladies. Under the bill, topical products are not subject to the added tax, but ingestible products are included.
Ted Galaty, who owns Willow’s Keep Farm and operates Hemp Maze Minnesota outside of Zumbrota, said treating hemp products like cannabis is unfair.
“They’re going to gain a lot from taxing hemp,” Galaty said. “It’s going to be passed down to the consumer.”
There are also concerns from hemp farmers who want to start a full-strength cannabis business about what regulations and restrictions they would face if they want to operate both. The way the bill is written, licensed cannabis businesses could also deal in hemp, but hemp growers would be limited in how they can offer cannabis products.
“There’s always room for conversations, but this is a good bill for the hemp industry,” Stephenson said. “There’s been a lot of important accommodations to make sure that industry can continue to grow and thrive.”
Support from hemp retailers
A lot of hemp growers, processors and retailers support the bill and say they remain optimistic the version that becomes law will treat the hemp industry fairly.
David Tolchiner, who owns “PotShotz,” a Midway bar that serves hemp-derived THC drinks, says the added taxes are necessary in order to properly regulate and expand the growing industry. He also owns the neighboring Midway Saloon and hopes to further grow into the cannabis industry.
“I think they made an error in the way they rolled it out,” Tolchiner said of the bill that passed in 2022 that led to the explosion of the hemp-derived THC industry. “They didn’t realize some of the things that could happen and now they have a chance to resolve it.”
Shawn Weber, president of the Minnesota Hemp Growers Cooperative, said some hemp farmers’ concerns are misinformed or overblown.
“They lack faith and hope,” Weber said of farmers with regulatory concerns, all of which he is confident will be addressed in the coming days. “If you are growing or processing hemp there will be zero change. If you are manufacturing and retailing you will need to be licensed.”
Other concerns
Hemp farmers are far from the only group with questions and concerns about legalizing adult-use cannabis.
There are the obvious health and safety issues about the state legalizing a substance the federal government says is illegal and dangerous.
“Never before have we passed a bill that is going to harm a large group of people,” Sen. Jim Abeler, R-Anoka, said during the floor debate.
Additionally, there’s widespread consternation from law enforcement over the lack of a test for cannabis intoxication that mirrors existing screenings for alcohol.
Supporters of the bill note there’s funding for law enforcement to figure out the best ways to police THC intoxication and that screenings for other types of drug use don’t exist. They also note there’s money for substance abuse prevention and treatment.
There are also questions about whether the community-focused equity portions of the bill will actually benefit residents who were most hurt by marijuana prohibition. The costs of entering the industry and operating a business will still be too high, critics say.
“This bill ignores Minnesota hemp farmers’ and small businesses’ investments in the cannabis industry and disproportionately burdens them with complex licensing and compliance structures, fees and taxes,” said Nekima Levy Armstrong, a civil rights attorney and founder of the Racial Justice Network.
Todd Harris, co-founder and CEO of Plift, a hemp-derived THC beverage company, added: “The communities who were most impacted by the ‘War on Drugs’ are the ones who are going to get left behind.”
In contrast, Republicans condemned providing taxpayer support to incentivize cannabis businesses.
Some local leaders are frustrated they cannot put an outright ban on cannabis businesses in their communities. The bill has been amended several times to allow communities to use their zoning codes to regulate where those businesses can be located.
“I think it is wrong to preempt our local jurisdictions,” said Sen. Eric Pratt, R-Prior Lake, during Friday’s floor debate. He noted that communities have more say over tobacco and alcohol. “We are stripping away the ability of our local communities to say whether they want these retailers or not.”
Backers of legalizing cannabis say local prohibitions will only encourage the underground market. They say regulated, affordable products are key to having a safe and sustainable industry.
“This bill is comprehensive, to say the least,” Port said, noting she had more than 100 community meetings and 14 committee hearings. “Now is our time to undo decades of ineffective prohibition.”
What comes next
In the coming days, House and Senate leaders will appoint a joint committee that will try to iron out the discrepancies in the bill and address many stakeholders’ concerns. After they come to agreement, both chambers will have to vote again on the bill.
Gov. Walz says he is committed to signing the legislation. If he does, cannabis would be legal to possess on Aug. 1. It would take roughly a year to create the Office of Cannabis Management and roll out licenses so dispensaries could open.
