Purpose

• The bill changes who counts as a true party of interest in cannabis businesses. Specifically, it would exclude municipal cannabis stores (and those who contract with cities or counties to operate them) from being considered true parties of interest. This is meant to modify oversight and eligibility considerations related to cannabis licensing and ownership.

Main provisions

• Amends Minnesota Statutes 2024, section 342.185, subdivision 1, definitions section used for cannabis licensing oversight.
• Introduces and clarifies key terms:
  • Control: the power to independently direct the management, managers, or policies of a cannabis business.
  • Financial institution: listed types of banks and similar lenders under state or federal jurisdiction.
  • Financier: any non-financial-institution or non-government entity that provides money to a cannabis business or license applicant with an expectation of repayment (with or without interest).
  • Gross profit: sales minus the cost of goods sold.
  • Revenue: income from the main operations before costs or expenses.
• True party of interest: defined as a person who, alone or with another business, has one or more of these interests in a cannabis business:
  • i) sole proprietor
  • ii) general partner in a general partnership
  • iii) general or limited partner in a partnership or LLC, etc.
  • iv) member or manager of an LLC
  • v) corporate officer, director, or equivalent in a private corporation
  • vi) privately held corporation stockholder
  • vii) part of a multilevel ownership structure
  • viii) rights to revenue, gross profit, or net profit from a cannabis business
  • ix) right to exercise control over a cannabis business
• Exclusions from being a true party of interest:
  • i) Fixed rental payments
  • ii) Employees earning salary or wages (if no ownership or control)
  • iii) Bonuses/commissions up to 10% of sales in a period, with written terms
  • iv) Ownership solely for passive investment under applicable federal rules
  • v) Individuals with commissions for selling a business or real property
  • vi) Consultants with flat or hourly pay under a written contract
  • vii) Service contractors (e.g., branding or staffing) as long as they don’t gain ownership or control
  • viii) Financial institutions
  • ix) Persons who contract with a city or county to operate a municipal cannabis store under section 342.32 subdivision 5
• The bill preserves existing references to key statutes and regulatory definitions, including the referenced municipal store provisions.

Effects and implications

-Reduces regulatory requirements for municipal cannabis stores by removing them from the “true party of interest” framework. -Potentially shifts oversight and reporting focus away from municipal operators and related contractors toward other ownership groups and financiers. -Provides clearer boundaries around who can be considered a true party of interest, including specific carve-outs for passive investors, employees, contractors, and certain financial arrangements. -Clarifies that certain compensation structures (e.g., small commissions) and passive investments do not count toward ownership/control in determining true party of interest.

How it changes current law

• Narrows the scope of who is treated as a true party of interest in cannabis businesses by adding explicit exclusions, notably the contract-based relationship with municipal cannabis stores.
• Strengthens or clarifies definitions of control, revenue, gross profit, and financier to support the updated true party of interest framework.
• Aligns with existing federal and state definitions for passive investment and ownership structures while creating a distinct exception for municipal operators.

Potential ambiguities or questions (for further consideration)

• How will licensing authorities apply the new exclusions in practice, especially in complex ownership structures?
• What criteria will be used to determine if a municipal store contract falls under section 342.32 subdivision 5, and how will this interact with other oversight rules?
• How will the changes affect existing licenses or ongoing financing arrangements involving municipal operators?

Relevant Terms - true party of interest - control - financial institution - financier - gross profit - revenue - ownership interest - passive investment - multilevel ownership structure - municipal cannabis store - section 342.32 subdivision 5 - Minnesota Statutes 2024 - cannabis license - affiliated or contracted entities - private corporation - nonprofit corporation - nonprofit ownership rights - passive investment exemption - 31 CFR 800.243