Minnesota’s new cannabis licensing process is under legal scrutiny after two women filed a lawsuit alleging unlawful denials of their applications for social equity licenses. The plaintiffs, Cristina Aranguiz and Jodi Connolly, claim the state’s Office of Cannabis Management (OCM) denied their applications without explanation, while other applicants were given a chance to correct their submissions. The lawsuit is now seeking to halt the upcoming social equity lottery and reverse the OCM’s decisions.
Background of the Social Equity Program
Social equity licenses were created as part of Minnesota’s broader effort to address the harms caused by marijuana prohibition. These licenses prioritize applicants who have been disproportionately affected by past cannabis laws, including people from low-income communities, veterans, and people with previous cannabis-related convictions. The aim is to create more inclusive opportunities in the emerging cannabis industry.
However, Aranguiz and Connolly’s experience suggests that the state’s process may not be as fair and transparent as intended. Their lawsuit accuses the OCM of an “arbitrary and capricious decision” to reject their applications without providing a clear reason.
What Happened to Aranguiz and Connolly?
According to the lawsuit filed on Thursday, Aranguiz and Connolly followed all the application requirements set by the OCM but were still denied participation in the lottery. Both women were left in the dark about why they were rejected.
Connolly, in particular, was not even notified directly by the OCM. She had to discover her rejection by accessing the application portal herself. The lack of communication has left both plaintiffs frustrated and confused about the reasoning behind the rejections.
The lawsuit alleges that the OCM is playing favorites by granting certain applicants “secret reconsideration,” allowing them the opportunity to fix mistakes in their applications—something Aranguiz and Connolly were never given the chance to do.
The Social Equity Lottery
This legal battle comes ahead of Minnesota’s social equity lottery, set to take place on Tuesday, November 26. The lottery will award pre-approvals to 182 applicants out of the 648 still in the running for a social equity license. Applicants who win pre-approval will have a significant advantage in securing funding and investors for their cannabis businesses.
In total, 1,169 of the 1,817 applicants have already been rejected, and many others face uncertain futures as they await the lottery results.
OCM Responds to Lawsuit
In a statement issued late Friday, the OCM strongly criticized the lawsuit and the plaintiffs. The agency accused Aranguiz and Connolly of being part of a “scheme” to manipulate the licensing process by submitting “straw applicants” in an attempt to unfairly influence the lottery.
The OCM’s statement claimed the plaintiffs were involved in efforts to “flood the zone,” a strategy where multiple fake applications are submitted to skew the lottery results in favor of certain applicants. The agency suggested that the plaintiffs’ legal action was part of a broader attempt to manipulate the system.
However, Aranguiz and Connolly’s lawsuit counters these accusations, emphasizing that they both complied with all of the OCM’s rules. The suit claims that other applicants were given preferential treatment, and that the OCM has created a process that allows some people to challenge their rejections while denying the same right to others.
OCM’s Handling of Appeals
Minnesota law does not allow applicants to appeal their denials for participation in the pre-approval lottery. However, the lawsuit claims that an informal appeals process exists for applicants who are able to reach out to OCM officials directly.
The plaintiffs argue that a few applicants—who were able to bypass the formal process—had their denials reversed after personally contacting OCM Interim Director Charlene Briner. According to the lawsuit, Briner referred these applicants to OCM’s Chief Regulatory Officer Max Zappia, who personally called them to inform them that their denials would be overturned.
This “secret” appeals process, the lawsuit claims, is inconsistent and unfair, as it allows only certain applicants to challenge their rejections while others are left without any recourse.
Aranguiz’s Denial and the Issue of Disclosure
Aranguiz’s rejection appears to have been based on a failure to disclose a “purchase option agreement” she had in place. While Aranguiz acknowledges this omission, she argues that the disclosure wasn’t required under Minnesota cannabis law because the agreement was contingent on state approval.
Her legal team argues that this was a technical oversight, not an intentional attempt to mislead the OCM. However, the OCM’s stance on the matter has been firm, claiming that the lack of proper disclosure violated state rules.
Aranguiz and Connolly’s lawsuit is only the latest in a series of challenges to Minnesota’s social equity licensing process. Other cannabis lawyers are reportedly considering similar legal action on behalf of clients whose applications were also denied under questionable circumstances.
What’s Next for the Plaintiffs and the Licensing Process?
The outcome of this lawsuit could have significant implications for Minnesota’s cannabis industry. If the court agrees with Aranguiz and Connolly, it may force the OCM to revise its process for issuing social equity licenses and ensure that all applicants are treated fairly and transparently.
In the meantime, the lottery will proceed as scheduled on Tuesday, and the OCM has made it clear that it will continue to push back against what it sees as attempts to manipulate the process.
