Marijuana plants at a 605 Cannabis grow operation. Courtesy photo.
A Ramsey County judge on Monday delayed the Office of Cannabis Management’s social equity lottery — a day before it was scheduled to take place — after several people alleged they were unlawfully denied from participating in it.
Ramsey County District Court Judge Stephen Smith granted a motion to halt the OCM’s social equity lottery, which will grant 182 preapproval licenses. People who receive preapprovals will be able to jump start their businesses earlier than those who receive a standard license.
Social equity licenses are intended to prioritize business applications from people who have been harmed by marijuana prohibition in the past, as well as veterans and people living in high-poverty areas.
Plaintiffs Cristina Aranguiz and Jodi Connolly in a lawsuit filed Thursday alleged that the state, in an “arbitrary and capricious decision,” denied their applications to participate in the lottery for social equity licenses without explanation and granted other applicants “secret reconsideration” and the opportunity to fix their applications. They asked the court to halt social equity lottery proceedings and reverse the OCM’s decision denying Aranguiz and Connolly a chance to participate in the lottery.
In a court filing, Minnesota Attorney General Keith Ellison, on behalf of OCM, urged the judge to deny Aranguiz and Connolly’s motion to delay the lottery, alleging that the two were involved in a “straw applicant scheme.”
“(Aranguiz and Connolly) worked in concert with others to submit more than 200 related applications for the lottery, for the purpose of flooding the lottery and increasing their chances of success,” Ellison wrote in a response to the plaintiffs’ request for a delay.
OCM received a tip “from a concerned citizen with knowledge of a widespread scheme to game” the social equity preapproval lottery who said that a cannabis operator from Iowa recruited hundreds to apply on their behalf, according to Ellison’s court filing. OCM analyzed all applications from Iowa and found that many used the same email domain name — mncanna.org. That website isn’t active, but the website for the Iowa Cannabis Company has a similar domain name. That company is owned by Tate Kapple.
According to the court filing, OCM matched many of the applications from applicants with mncanna.org email addresses with current employees of Kapple’s Iowa Cannabis Company. Connolly also used a mncanna.org email to submit her social equity application, Ellison wrote.
OCM discovered that each of the applicants was required to enter into an agreement with Kapple that if they should win the social equity lottery, they would sell him their license for $100,000, the court filing states.
An attorney for Aranguiz and Connolly didn’t immediately respond to the Reformer’s request for comment about the state’s straw application allegations or the judge delaying the lottery. Kapple didn’t immediately respond to the Reformer’s request for comment about his alleged involvement.
The cannabis office estimates that the cost to administer the lottery will be about $100,000, mostly incurred by working with a vendor. Delaying the lottery will cost the agency “significant additional expense,” Ellison said in his court filing.
In addition, OCM states that a delay in the lottery may dismantle the preapproval license lottery altogether, as it will take the agency significant time to set it back up and it could negate the benefits of a business receiving a license early.
“There are over 600 social equity applicants whose applications for the lottery have been approved. If the lottery is delayed, they will see diminished or no benefits from the social equity process,” Ellsion stated in his court filing.
Aranguiz and Connolly’s lawsuit is one of several that were filed in the last few days after OCM sent rejection notices to 1,169 of the 1,817 applicants seeking to enter the preapproval lottery, according to the Star Tribune.