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Minnesota Marijuana Businesses Say Tax Increase Could Drive Consumers To The Illegal Market

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“What we saw in California is that the high tax on legitimate cannabis leads straight to the black market. And I’m very concerned that that’s going to have the same or similar impact here.”

A last-minute tax hike on cannabis products passed as part of Minnesota lawmakers’ special session budget compromise may prove to be a boon to illicit dealers.

That’s according to cannabis industry experts, business owners, and at least one prominent DFL lawmaker who say the state’s relatively high cannabis tax will give consumers reason to avoid regulated, legal dispensaries in favor of informal sources on the black market.

Minnesota’s 15 percent state tax on marijuana and other cannabis products is among the highest in the country, trailing only Arizona (16 percent), Oregon (17 percent), California (19 percent), and Washington (37 percent).

“I thought it was the wrong thing to do, increasing the tax,” said Sen. Ann Rest, DFL-New Hope, chair of the Senate Tax Committee. “What we saw in California is that the high tax on legitimate cannabis leads straight to the black market. And I’m very concerned that that’s going to have the same or similar impact here.”

How do Minnesota taxes compare to other states?

Minnesota’s cannabis tax was initially set at 10 percent. The increase was a product of bipartisan budget negotiations between Gov. Tim Walz, Senate Majority Leader Erin Murphy, DFL-St. Paul, House Speaker Lisa Demuth, R-Cold Spring, and the late Speaker Emeritus Melissa Hortman, DFL-Brooklyn Park. The leaders stepped in to try to forge a compromise on the state’s budget after months of gridlock in the Legislature due to a tied House and a one-seat DFL majority in the Senate.

At the time, Demuth said the tax increase was simply “rightsizing” the tax rate to be more in line with other states’ rates. But, research by the Tax Foundation shows that the new rate puts Minnesota above the median tax rate for states that have legalized the sale of recreational marijuana.

Of those 23 states, 14 have a lower cannabis tax than Minnesota. There are nuances, like Illinois’ higher tax on edibles and concentrates compared to marijuana flowers, as well as two states that tax by weight rather than price.

This doesn’t account for Minnesota’s sales tax of 6.875 percent, and any local taxes. In Minneapolis, state, county, and city sales taxes are 9.03 percent. Add that to the cannabis tax and you end up with an effective tax rate of over 24 percent on cannabis products sold in the city.

“I’ve had people pick out their products, ring them up, and then when they hear the final price, they just walk out the door,” said Mark Eide, owner of In-Dispensary, the first recreational dispensary licensed in Minneapolis.

What are the downsides of higher cannabis taxes?

The new 15 percent rate, effective since July 1, affected the tax rate on THC edibles and drinks that most dispensaries and smoke shops have had on their shelves for years, since Minnesota legalized those categories of cannabis products in 2022. Medical marijuana, available in Minnesota since 2014, is exempt from both the cannabis tax and the state sales tax.

THC vapes and marijuana flowers are set to be on shelves as soon as cultivators can grow them or retailers can sign contracts with the tribal nations that have been allowed to grow plants since recreational use of all cannabis was legalized in 2023. This will give consumers more choices, but at higher prices than they are used to getting from the illicit market that has flourished in a state that legalized using cannabis products years ago but is only now licensing recreational retailers.

The price difference, which varies, is not only because of taxes. In addition to having to lease a storefront and pay employees, licensed dispensaries have to go through a regulatory gauntlet, outfitting their stores to fit the Office of Cannabis Management’s specifications regarding security, odor-control, and other aspects of their business. They also have to have their cannabis sent to an approved lab to have it tested and its potency measured and labeled.

All of these have one thing in common, cannabis retailers said: they cost their businesses money that an illicit dealer would not have to pay. And that’s money they largely cannot recoup until they can secure a supplier.

The evidence suggests that when a state has high barriers in a marketplace, whether it’s a limited number of retailers due to regulations, not enough suppliers for the retailers, or high taxes pushing up prices, conditions are ripe for a parallel, unsanctioned market to take some share of that business, said Jacob Macumber-Rosin, an excise tax analyst at the Tax Foundation.

For example, he pointed out that Minnesota has higher taxes on cigarettes than its neighbors, and also has the sixth-highest rate of cigarette smuggling in the nation, according to his organization’s research.

If efforts to legalize cannabis in Wisconsin and South Dakota end up successful, “the price differential between border states will play a role” in whether the illicit market or regulated market thrives in Minnesota, he said.

In California, one of the higher-tax states, a January report by its cannabis regulator found that only 38 percent of the marijuana consumed in the state comes from the licensed market, with the remainder presumably coming from illicit or unlicensed sources.

Colin Planalp, senior research fellow at the University of Minnesota School of Public Health’s Cannabis Research Center, considers demand for cannabis products to be “somewhat elastic” at the level of the individual consumer.

“An increase in cost for legal market cannabis is likely to reduce demand for legal cannabis,” he said.

That may result in people using less cannabis, growing their own plants, or turning to the illicit market for cannabis, Planalp said.

But illicit cannabis brings with it risks, from financing criminal organizations to putting the buyer in unsafe situations to smoking cannabis that has harmful additives to make it more potent. These differences between legal and illicit cannabis were part of the arguments that led to the legalization of cannabis in Minnesota and other states.

“Minnesota and other states that have legalized cannabis for nonmedical use have set up regulatory systems designed to enhance safety and mitigate certain risks,” Planalp said, noting the required lab testing for pesticides, heavy metals, and other contaminants, as well as the dosage labeling requirements.

“If someone is going to use cannabis products, they should consider obtaining those products through the legal, regulated market, because that’s likely safer, on balance, than obtaining them through the illicit market,” he said.

How are businesses dealing with this?

Businesses are dealing with the cannabis tax increase in various ways.

“We’ve switched to out-the-door pricing, so what you see on the label is the exact price you pay,” said Eide of In-Dispensary in Minneapolis.

“To keep those sticker prices attractive though, we are eating the cost of the entire additional 5 percent tax, and some of the initial tax as well. Now, our prices are lower than they were before the tax increase,” he said.

But to do that, Eide had to take on another job and cut the hours of his only employee, his brother, down to 10 hours a week.

Cory Lake, owner of Lake Group Insurance, which insures cannabis storefronts and other businesses, said that the tax increase has also given pause to investors looking to finance cannabis operations in Minnesota.

“Those with capital in the [Minnesota] industry, or that are considering expanding their investments from other states, are holding off or even pulling back on investments,” he said.

The investment market in the industry is relatively opaque, so it is hard to discern how much capital has been lost, but any decrease in investments could stunt the growth of an industry that has already taken years longer than expected to get off the ground.

This has been due to both state regulatory setbacks and cannabis’ unique position as a federally illegal substance. Its federal status means owners cannot write off any of their business expenses on federal taxes once they start selling cannabis out of a store. It also complicates the banking process, forcing most cannabis businesses to operate in cash only, and makes building owners with bank mortgages nervous about leasing storefronts to cannabis dispensaries.

Jennifer Swanson, owner of Fridley Dispensary, said she had to purchase a separate building after being rejected for leases in Blaine, Bloomington, and elsewhere in Fridley. She says she has put over a million dollars into the recently licensed business.

“And that’s not even counting the product we’ll have to buy once suppliers are available,” she said.

Other retailers are more sanguine about the tax hike, relying on low overhead and customer loyalty to keep consumers visiting their stores without changing their pricing structure.

“Most of our customers use these products to deal with their anxiety, depression, pain, PTSD,” said Sarabear Kelly-Modlin, co-owner of Lucky Strain in New Brighton. “They’re not just looking for a fun night, so they want their products regularly and consistently.”

Also, if the taxes are going to services such as addiction services or school lunches, “most of our customers are all for that. They have no problem paying the additional 5 percent as long as it’s going somewhere good where we can see it.”

But if fall comes, schools open, and they see cuts to public services while having to pay more for their products, she said, “that would be something that would upset us and our customers.”

This article first appeared on MinnPost and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

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Federal Marijuana Legalization Bill Deserves Lawmakers’ Support, Letter From ACLU And Other Groups Says

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A coalition of drug policy reform and civil rights organizations sent letter urging members of the U.S. House of Representatives to cosponsor a recently filed bill to federally legalize marijuana and promote equity.

The letter, led by the Drug Policy Alliance (DPA), expresses support for the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, which was reintroduced by Rep. Jerrold Nadler (D-NY) and about three dozen cosponsors late last month.

This marks the fourth session in a row that Nadler has put forward the proposal. It passed the House twice under Democratic control while the sponsor served as chairman of the Judiciary Committee, but it did not advance last session with Republicans in the majority.

“The MORE Act is the leading comprehensive marijuana reform bill in the House that ends federal prohibition, addresses the collateral consequences of federal marijuana criminalization, and takes steps to ensure the regulated marketplace is diverse and inclusive,” the letter—which was also signed by groups such as the ACLU, National Association of Criminal Defense Lawyers, National Association of Social Workers, Service Employees International Union and Southern Poverty Law Center—says.

“For generations, marijuana’s placement on the [Controlled Substances Act, or CSA] has disproportionately inflicted harm upon communities of color and poor people,” the groups wrote.

They noted that the Trump administration is actively considering a proposal to simply reschedule cannabis, which they described as “a policy that would continue federal cannabis criminalization and its harm.”

With that reform pending, it’s “more important than ever for Congress to advance comprehensive legislation to deschedule marijuana from the CSA,” the letter says. “To be clear, as long as marijuana remains anywhere in the CSA, it will still be criminalized at the federal level.”

“Recent news reports have suggested that President Trump may move marijuana to Schedule III of the CSA. While this move would eliminate an unfair tax penalty on the marijuana industry and would be of symbolic importance by recognizing that marijuana has accepted medical use, little else would change. In fact, rescheduling marijuana from Schedule I to Schedule III of CSA will maintain the criminal penalties and collateral consequences that are in effect today. To fully address the conflict between state and federal laws, marijuana must be descheduled from the CSA.”

Other signatories on the letter include Cannabis Regulators of Color Coalition (CRCC), Doctors for Drug Policy Reform, JustLeadershipUSA, Last Prisoner Project (LPP), Law Enforcement Action Partnership (LEAP), Lawyers’ Committee for Civil Rights Under Law, Minority Cannabis Business Association (MCBA), Mission Green, NORML, Students for Sensible Drug Policy (SSDP), Supernova Women and more.

Here are details about the key provisions of the MORE Act: 

  • The bill would deschedule marijuana by removing it from the list of federally banned drugs under the CSA. However, it would not require states to legalize cannabis and would maintain a level of regulatory discretion up to states.
  • Marijuana products would be subject to a federal excise tax, starting at five percent for the first two years after enactment and rising to eight percent by the fifth year of implementation.
  • Nobody could be denied federal public benefits based solely on the use or possession of marijuana or past juvenile conviction for a cannabis offense. Federal agencies couldn’t use “past or present cannabis or marijuana use as criteria for granting, denying, or rescinding a security clearance.”
  • Noncitizens could not be penalized under federal immigration laws for certain cannabis activity after the enactment of the legislation.
  • The bill creates a process for expungements of non-violent federal marijuana convictions.
  • Tax revenue from cannabis sales would be placed in a new “Opportunity Trust Fund.” Half of those tax dollars would support a “Community Reinvestment Grant Program” under the Justice Department, 10 percent would support substance misuse treatment programs, 40 percent would go to the federal Small Business Administration (SBA) to support implementation and a newly created equitable licensing grant program.
  • The Community Reinvestment Grant Program would “fund eligible non-profit community organizations to provide a variety of services for individuals adversely impacted by the War on Drugs…to include job training, reentry services, legal aid for civil and criminal cases (including for expungement of cannabis convictions), among others.”
  • The program would further support funding for substance misuse treatment for people from communities disproportionately impacted by drug criminalization. Those funds would be available for programs offering services to people with substance misuse disorders for any drug, not just cannabis.
  • While the bill wouldn’t force states to adopt legalization, it would create incentives to promote equity. For example, SBA would facilitate a program to providing licensing grants to states and localities that have moved to expunge records for people with prior marijuana convictions or “taken steps to eliminate violations or other penalties for persons still under State or local criminal supervision for a cannabis-related offense or violation for conduct now lawful under State or local law.”
  • The bill’s proposed Cannabis Restorative Opportunity Program would provide funds “for loans to assist small business concerns that are owned and controlled by individuals adversely impacted by the War on Drugs in eligible States and localities.”
  • The comptroller general, in consultation with the head of the U.S. Department of Health and Human Services (HHS), would be required to carry out a study on the demographics of people who have faced federal marijuana convictions, “including information about the age, race, ethnicity, sex, and gender identity.”
  • The departments of treasury, justice and the SBA would need to “issue or amend any rules, standard operating procedures, and other legal or policy guidance necessary to carry out implementation of the MORE Act” within one year of its enactment.
  • Marijuana producers and importers would also need to obtain a federal permit. And they would be subject to a $1,000 per year federal tax as well for each premise they operate.
  • The bill would impose certain packaging and labeling requirements.
  • It also prescribes penalties for unlawful conduct such as illegal, unlicensed production or importation of cannabis products.
  • The Treasury secretary would be required to carry out a study “on the characteristics of the cannabis industry, with recommendations to improve the regulation of the industry and related taxes.”
  • The Bureau of Labor Statistics (BLS) would be required to “regularly compile, maintain, and make public data on the demographics” of marijuana business owners and workers.
  • Workers in “safety sensitive” positions, such as those regulated by the Department of Transportation, could continue to be drug tested for THC and face penalties for unauthorized use. Federal workers would also continue to be subject to existing drug testing policies.
  • References to “marijuana” or “marihuana” under federal statute would be changed to “cannabis.” It’s unclear if that would also apply to the title of the bill itself.

Getting a bill like the MORE Act through the GOP-controlled House and Senate is a tall task, however. And while Trump previously endorsed a Florida legalization ballot initiative, he’s given little indication he’d be willing to end prohibition altogether at the federal level.

A pending proposal to simply move cannabis from Schedule I to Schedule III under the CSA is still in flux—though the president did recently say a decision was imminent.


Marijuana Moment is tracking hundreds of cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.


Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

Numerous voices within Trump’s circles have expressed differing opinions on the reform.

Most recently, for example, Ben Carson, Trump’s former secretary of the Department of Housing and Urban Development (HUD), said a move to reschedule marijuana would play into plots to “destroy this country.”

Trump’s former press secretary Sean Spicer and his long-time advisor Roger Stone recently traded diverging takes on the prospect of the administration moving forward on marijuana rescheduling.

Stone separately made the case for reform in an op-ed for Marijuana Moment last month.

Retired boxer Mike Tyson, meanwhile, recently spoke about the need for federal marijuana rescheduling on a podcast hosted by the wife of White House Deputy Chief of Staff for Policy Stephen Miller—saying he’s expecting “good news” on the issue soon.

In June, the retired boxer also took to Fox News and delivered a message to the president, urging him to reschedule, and ultimately legalize, marijuana.

That interview came days after Tyson led a letter alongside other professional athletes and celebrities promoting cannabis reform that was sent to Trump, calling for rescheduling marijuana, expanding clemency and allowing licensed cannabis businesses to access the banking system.

Meanwhile, Trump’s former senior advisor Kellyanne Conway has been the “biggest champion” of marijuana rescheduling within the president’s “inner circle,” a GOP congressman recently told Marijuana Moment.

Photo courtesy of Brian Shamblen.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Become a patron at Patreon!



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Rhode Island Opens Applications for 24 Adult-Use Dispensary Licenses

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[PRESS RELEASE] – WARWICK, R.I., Sept. 12, 2025 – The Cannabis Control Commission  (CCC) opened the application period for adult-use cannabis retail licenses, marking the beginning of the largest expansion to Rhode Island’s cannabis industry. The commission is authorized under the Rhode Island Cannabis Act to license up to 24 retail establishments statewide, divided equally across six geographic zones, making this announcement a defining moment in shaping the state’s cannabis marketplace.

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“Today’s announcement represents years of work, collaboration and preparation to ensure Rhode Island has a cannabis marketplace that is safe, transparent, and equitable,” CCC Chairperson Kim Ahern said. “The release of this application and launch of our submission portal is not only about opening doors for businesses but about creating meaningful opportunities for Rhode Islanders while keeping public health and public safety at the center of everything we do.”

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With only 24 retail licenses available statewide, the launch of the application process is expected to draw significant interest from prospective applicants. Together with the Social Equity Applicant Status Certification Portal, which opened in August, the application process reflects the CCC’s deliberate steps toward building a cannabis industry that prioritizes economic opportunity, equity and fairness in Rhode Island.

“Rhode Island’s cannabis market is poised for growth, and this application is helping us do exactly that,” Gov. Dan McKee said. “As we expand the cannabis industry here in the Ocean State, we’re opening the doors to new investment, new good-paying jobs, and new opportunities for our economy.”

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Adult-use retail licenses will authorize sales of cannabis products to adults 21 and older. By releasing the application and opening the submission portal simultaneously, the commission is providing applicants with a transparent process while reinforcing its commitment to accountability and access.

“Today’s release of the adult-use retail license application reflects the commission’s commitment to equity and accountability,” Commissioner Layi Oduyingbo said. “This framework provides applicants with the information they need while reinforcing our responsibility to safeguard public health and consumer safety.”

Commissioner Robert Jacquard said, “The commission aims to make this application process as business-friendly as possible, while upholding standards that will protect public health.”

To ensure the process is fair and accessible, the commission and Cannabis Office will provide technical assistance resources and ongoing guidance for prospective applicants. Applications will be accepted until 4 p.m. on Dec. 29, 2025.

“This is a milestone that reflects the dedication and perseverance of so many people,” Cannabis Office Administrator Michelle Reddish said. “From lawmakers and advocates to community members and our dedicated staff, countless individuals have helped build the foundation for this moment. By publishing the application today, we are taking a historic step toward building a cannabis marketplace that serves consumers, supports equity and advances public health in Rhode Island.”

The adult-use retail license application is available on the commission’s website at www.ccc.ri.gov/auapp.



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Can LSD Battle Anxiety? The Answer Is Yes, According to Science

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Hands down, one of the drugs that has received the worst press in the decades marked by the War on Drugs has been LSD. All sorts of things have been said about this molecule: that it drives you crazy, or suicidal, that it remains stored in your body forever, that it irreparably damages the brain… Fortunately, we now have professionals investigating the matter, with a scientific perspective rather than a moralistic or prohibitionist one.

One of the latest findings on the subject seems to directly contradict one of the great myths about LSD: instead of leading to insanity, this compound could reduce anxiety. This is according to a study by Mind Medicine (MindMed) Inc., a biopharmaceutical company that has been researching psychedelic compounds for mental health for many years. While the preliminary results were released in 2022, they were officially published this month in the Journal of the American Medical Association.

This isn’t the first time MindMed has embarked on studying this topic: it had already achieved positive results with LSD for anxiety on another occasion. In fact, the FDA granted Breakthrough Therapy designation for generalized anxiety disorder (GAD) to the company’s proprietary drug candidate, MM120, a pharmacologically optimized formulation of LSD.

LSD and Anxiety: What the MindMed Study Says

The company conducted a multicenter, randomized, double-blind, placebo-controlled Phase 2b study at 22 outpatient psychiatric research centers in the US. The effects of a single dose of MM120 (lysergide D-tartrate, LSD) were analyzed in 198 adults with moderate to severe generalized anxiety disorder (GAD). Participants experienced sustained improvements in their condition over the 12-week observation period.

According to the company’s press release, this is the first randomized, placebo-controlled trial evaluating a single treatment at four dose levels (25, 50, 100, or 200 µg), without any psychotherapeutic intervention.

The optimal dose of MM120 was determined at 100 µg. This demonstrated a “clinically and statistically significant improvement vs. placebo, and a 65% clinical response rate and 48% clinical remission rate” at the end of the experiment.

Likewise, tolerance to the medication was positive, with the expected adverse effects of an LSD experience remaining mild to moderate and lasting only one day.

During the study, participants receiving medication for their condition had to discontinue such treatment under the supervision of the study professionals. Furthermore, on the day of dosing, they were offered “standardized music and eyeshades and could lie down, move freely around the room, read, write, or draw.” It should be noted that the study protocol explicitly prohibited participation in psychotherapy.

Dr. Maurizio Fava, one of the study’s authors, stated that “this study is a true turning point in the field of psychiatry… For the first time, LSD has been studied with modern scientific rigor, and the results are both clinically meaningful and potentially paradigm-shifting for the treatment of GAD. GAD affects 26 million adults in the U.S., yet no new medications have been approved since 2007—and first-line treatments fail 50% of patients.”

Thus, scientific innovation continues to advance against the willful ignorance of prohibitionists, working tirelessly to ensure patients have access to the relief that traditional therapies fail to provide.

This article was first published on El Planteo.



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