[THEME MUSIC] NINA MOINI: Our top story, this afternoon, here on Minnesota Now, agreements between Governor Tim Walz and 10 of Minnesota’s 11 tribal nations about cannabis are close to being finalized. They would give a share of the new cannabis industry to tribal nations and businesses they license, both on and off reservation land, and including in urban areas, according to new reporting from MinnPost.
MinnPost reporter Peter Callaghan has been watching these developments closely. The closed-door negotiations have been ongoing since last spring. And, on Tuesday, Peter obtained a draft of the language, and Peter joins us now on the line. Thanks so much for your time, Peter.
PETER CALLAGHAN: Hi. Thanks for having me.
NINA MOINI: Can we take a step back to start, and could you walk us through how these negotiations started?
PETER CALLAGHAN: Well, I think a good way to kind of compare it is way, way back, when the federal government passed the Indian Gaming Regulatory Act, they ordered states to negotiate with tribes for tribal gambling. It’s really the same sort of setup, although this was authorized not by the federal government but by the House File 100 in 2023, the bill that legalized recreational marijuana. It has quite a lengthy section directing the governor to enter into good faith negotiations with the tribes.
But I will tell you, from personal experience and my observations, those sections were sort of lost on a lot of us because we were so focused on everything else in that 150-page bill that we didn’t really notice or sense the implications of it. But since then, the governor has been– governor’s office, his attorneys and now the Office of Cannabis Management have been in these negotiations, compact negotiations with the tribes.
NINA MOINI: And so, when you were able to get this draft copy of the language, what were some of your biggest takeaways from the document?
PETER CALLAGHAN: Well, I think what we wanted to know was what the scope of off-reservation business would be. The state is continuing to struggle to get licenses out and get non-tribal businesses started. A lot of people have talked about that. There have been a lot of stories written about that, and we’re still not there.
Right now, we think that the soonest they might have a lottery to allow licenses is May or June. And then those people have to go through further vetting, and then they’ve got to get up and running and open stores. They also have to grow cannabis, which takes a long time– a year, at least. And if I don’t have a license yet to be a cultivator, I can’t put seeds in the ground. So there’s been some concern about getting this going.
If, as we think happens, if each tribe can create a business that can operate up to five retail stores off reservation and there’s 10 tribes involved, that could be up to 50 stores. The lottery in May is going to allot 75 retail licenses to what we call social equity applicants and another 75 to non-social equity or just general applicants. So it gives you some perspective, 150 non-tribal licenses versus 50 for the tribes. But the key for them is they can get going right away.
NINA MOINI: Right. I remember everybody thought– or the hope was– that by the start of 2025, right, that businesses would be up and running and ready to go. So it’s been quite a process. And in some of your reporting from today, I read that some lawmakers are concerned that this will turn into a pseudo-monopoly for the tribes. What are some of the concerns that you’re hearing?
PETER CALLAGHAN: Well, it was hard to tell at first what the scope was. And now it’s pretty sure, to read it, that it would be capped, right now, at 50 stores and 300,000 square feet of plant canopy. That is a lot. But if you have at even the first round of 150 retail stores– and the state OCM thinks that the state will need 1.5 million square feet of plant canopy to serve the Minnesota market– it certainly gives the tribal enterprises a good healthy chunk.
It doesn’t give them a monopoly, but that early entry into the market is the key. And if those stores are up and running for two months, six months, eight months before non-tribal stores can open, that certainly helps them establish themselves in the market and requires everybody else who gets licensed to come into an established market.
NINA MOINI: Mm-hmm. You mentioned the OCM, the Office of Cannabis Management. And what’s the comment from them about how the negotiations are going?
PETER CALLAGHAN: Well, I think they thought it was still secret. What I’d been getting out of them was they thought that they would be reaching something to announce in March, so this kind of jumped the gun on their reaction. And they just basically said, Yeah, we’re talking. Yes, we’re doing compacts. Yes, we want to have a good robust relationship with the tribes. It was that sort of a statement. They’re not ready to comment yet on what they think the state got out of it and what the tribes got out of it.
NINA MOINI: Yeah, and when we’re talking about what do different stakeholders get out of it, with the tribes getting access to markets, particularly near the Twin Cities and in other places with the higher populations, is it clear what the state would benefit from that, in terms of maybe tax revenue or anything else?
PETER CALLAGHAN: Yeah. OK, that’s a good point, because we can’t– we, when I say that, I really mean the state of Minnesota– cannot collect taxes on reservation. They cannot go in and say, we want a share of your casino revenues.
Some tribes in other states have cut deals with state governments, where they did share revenue. Minnesota never has done that. And so there would be no collection of taxation, just as the stores that are open now. Prairie Island, for instance, has a store open. The state gets nothing out of that.
But this leaves open further negotiations between the tribes and the Department of Revenue as to how and how much revenue would be collected for the State of Minnesota for these off-reservation stores. I think the last thing they would want to do, and certainly the other businesses would want to do, is to have the tribes be able to sell a product without state taxation on them, which would give them sort of a starting 10% price advantage.
NINA MOINI: Have you heard, Peter, from any representatives from some of these tribal nations on their thoughts about how the negotiations are going?
PETER CALLAGHAN: I have calls in too, and I think I will hear from them at some point, but what I’ve been understood is they wanted to have Tribal Council conversation before they commented.
NINA MOINI: And one of the goals for the state– you mentioned the social equity licenses– was to make sure that this was going to be a competitive market that people could break into or people who might have historically been overlooked. Have you talked to any people applying for those types of licenses? Are they concerned?
PETER CALLAGHAN: Well, their concerns, so far, has been so wrapped up in the delay, at the cancellation of the lottery. And that’s what’s really got them riled, and they continued to be upset with Office of Cannabis Management. I mean, it was not OCM who filed suit to stop the lottery. It wasn’t OCM who ruled that this lottery couldn’t be held, but OCM’s decision was that just to cancel the lottery and not sort of fight in court and try to get the court of appeals to overturn the stay on the lottery and to move ahead with the lottery.
So those folks who were made eligible for the lottery, yes, they’re mad at the other providers or the other businesses who sued and blocked the lottery, but now their anger seems to have turned to OCM as to why OCM didn’t push harder for the lottery. Now, again, the soonest they can get even chosen in a lottery is sometime in May, and these are folks who’ve been working on these applications for 12, 15 months.
NINA MOINI: Yeah, there have been a lot of hurdles here. Before I let you go, Peter, what are you going to be watching for in the coming months? You mentioned that May. What are you watching for and wanting to see be resolved and work out in a more organized way?
PETER CALLAGHAN: Well, here’s something that’s interesting is the byplay between this issue now and sports betting, because sports betting is another issue that involves negotiations between tribes and non-tribal interests and the state. And Nolan West, who’s a Republican representative who has been the lead Republican in what will, again, soon be a tied House, said today that he is no longer interested in working on the sports betting issue with the tribes and the governor because of his upset as to how this happened. So if it starts to have implications in other areas where the tribes and the state interact, that could be significant, because we thought that they might have had a deal–
NINA MOINI: Right.
PETER CALLAGHAN: –that worked for everybody on sports betting, this year. We’ve said that for seven years, of course.
[LAUGHTER]
NINA MOINI: Yeah, right.
PETER CALLAGHAN: But I think that’s it. And then what kind of– there really isn’t legislative reaction. They don’t have to approve the compact. This is a government-to-government negotiation, and it only needs the governor’s signature and it does not need ratification by the legislature. So theirs is now to either support, which DFLers have been from what I’ve been able to gauge, or oppose and be upset by this compact.
NINA MOINI: Peter, thank you so much for joining us and sharing your reporting with us. We really appreciate your time.
PETER CALLAGHAN: OK. Good to talk to you.
NINA MOINI: Bye bye. That was Peter Callaghan, staff writer for MinnPost, covering Minnesota politics.
The pending agreements would give a share of the new cannabis industry to tribal nations and businesses they license both on and off reservation land. Read More
