30 days to respond: DEA says Minnesota's dual medical and adult-use licenses keep a Minneapolis dispensary out of federal medical marijuana registration

The Drug Enforcement Administration has told a Minneapolis cannabis dispensary that it cannot receive federal registration as a medical marijuana business, and the reason it gave has little to do with the store itself. According to an order to show cause first reported by the Minnesota Star Tribune on Oct. 30, DEA said Minnesota's licensing system, which lets the same business serve both medical patients and adult-use customers, puts its licensees outside the federal medical marijuana framework created under rescheduling.

The dispensary, In-Dispensary in downtown Minneapolis, has 30 days to request a hearing to dispute the decision, or it can submit a corrective action plan, according to the Star Tribune and Marijuana Moment, which also reviewed the order.

The order arrived the same day the Justice Department said that DEA had granted its first federal registrations to more than 900 medical marijuana dispensaries, all in seven states that do not currently run adult-use sales.

What the order says

The order was signed by Cheri Oz, assistant administrator of DEA's Diversion Control Division, Marijuana Moment reported. In it, the agency said it "cannot permit any applicant operating under" Minnesota's law to have access to the federal registration that comes with the Trump administration's medical marijuana rescheduling move.

DEA said the state's "dual-purpose marijuana license, permitting both medical and non-medical dispensing falls outside the recent promulgated definition of 'state medical license'" in federal policy, according to Marijuana Moment. The Star Tribune reported that the new federal definition covers a state license that authorizes the manufacture and sale of marijuana only for medical purposes.

The agency also said Minnesota's "state regime fails to provide 'robust protections' against diversion, as non-medical use of marijuana remains prohibited under federal law." The Star Tribune reported that DEA considers any recreational cannabis sales by a medical cannabis licensee to be diversion under the federal Controlled Substances Act.

"For DEA to sanction or bestow the imprimatur of legitimacy upon such conduct by granting a registration would be inconsistent with the [Controlled Substances Act] as well as United States' treaty obligations," the order says, as quoted by Marijuana Moment.

Two more objections: veterans and hemp products

DEA did not stop at the dual license. The order also objects to a Minnesota rule that lets some patients qualify for medical cannabis without a written certification from a doctor. Specifically, Marijuana Moment reported, the order points to military veterans "who merely submit their veteran identification and an attestation that the veteran has been diagnosed with a qualifying medical condition."

A third ground in the order is that Minnesota's law "permits dispensaries to dispense synthetic marijuana products," which Marijuana Moment said refers to hemp-derived cannabinoids.

None of the reasons listed in the order pertained to violations of state law by the business, the Star Tribune reported. They focused on how Minnesota's regulatory structure conflicts with federal law.

What the owner was told

Mark Eide, the owner of In-Dispensary, told the Star Tribune that several DEA agents visited him Friday morning, Oct. 30, to deliver the order. The store is state-licensed and serves both the recreational and medical markets, the paper reported.

"They said they are giving me this because the DEA sees it as not in the public interest to let me have the medical [cannabis registration]," Eide said, according to the Star Tribune. "They said they are serving a lot of other people today with this same document."

It was unclear whether other Minnesota businesses received similar letters, the paper said.

The first 900 registrations

The timing matters because of what DEA did the same day. On Oct. 30, the Justice Department said DEA had begun issuing federal registrations to qualifying state-licensed medical marijuana dispensaries, starting with more than 900 businesses in Alabama, Florida, Mississippi, South Dakota, Texas, Virginia and West Virginia.

The department's release said applicants must operate under a state medical marijuana framework "consistent with federal law and the United States' international treaty obligations," and that "State licensure alone does not automatically grant federal registration."

Each of the seven states in the first round permits only medical cannabis sales, with the exception of Virginia, which passed legislation to legalize adult-use sales this year but has not yet begun licensing, Marijuana Moment reported. Most of the 24 states that have authorized both recreational and medical cannabis sales, including Minnesota, "appear to have been shut out of the process so far," the Star Tribune reported.

Illinois and Michigan, the two states Hemp Law Watch covers most closely, both run medical and adult-use markets and were not among the seven states in the first round. Neither report says whether businesses in those states received orders; the order reported so far is addressed to a Minnesota business.

How Minnesota and others responded

The Minnesota Office of Cannabis Management told the Star Tribune it is aware DEA has sent letters to dispensaries in Minnesota and across the country, but said it has not received any communication from DEA about the state's medical or adult-use programs.

"Importantly, the letter does not impact the state law that authorizes Minnesota's medical cannabis and adult-use cannabis programs. Medical cannabis remains available to patients in the state," the office said. "Minnesota is committed to fostering an equitable cannabis industry that prioritizes public health and safety, consumer confidence, and market integrity, and we believe our regulatory program can serve as a model for other states."

Gillian Schauer, executive director of the Cannabis Regulators Association, which includes 45 state and territory governments, said in a statement to the Star Tribune that DEA sent orders to businesses in a wide range of states, including some that have legalized only medical cannabis, and that state regulators did not receive notice about the orders.

"Many questions remain about the implementation of the DEA registered system for medical marijuana," Schauer said.

What lawyers say it means

Neil Willner, a New York-based attorney with Vicente LLP who focuses on regulatory compliance, told the Star Tribune he had not seen anything like the order since the April move of state-licensed medical cannabis to Schedule III.

"They appear to be testing whether a state can be disqualified as a whole, rather than judging an individual applicant," Willner said. "This letter is very curious and certainly troubling."

Edina-based cannabis attorney Carol Moss told the paper the biggest impact is financial: businesses in states with combined medical and recreational markets will not get the tax advantages that Schedule III provides to federally registered medical cannabis businesses. Companies that make or sell Schedule I substances, including recreational cannabis, face much higher federal tax burdens because federal law prohibits them from deducting many business expenses, the Star Tribune explained.

"Even if the business isn't involved in recreational cannabis, if they are just in the state they miss out on this benefit," Moss said. Because the problem is state law, she added, there is probably not much the dispensary can do to correct it.

What happens next

Eide can request a hearing with an administrative law judge within 30 days or submit a corrective action plan, the Star Tribune reported. Separately, a DEA hearing on broader marijuana rescheduling beyond medical cannabis recently concluded testimony, Marijuana Moment noted. Because adult-use programs do not use written physician certifications, Marijuana Moment said it is unclear whether or how adult-use businesses could receive federal registration even if broader rescheduling is adopted.

Hemp Law Watch will follow whether DEA issues similar orders in Illinois, Michigan and other dual-market states, and whether any recipient requests a hearing.

This article is for information only and is not legal advice.