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Countless businesses, including tribal nations operating through compact agreements with the state of Minnesotaⁱ, anticipate entering the North Star State’s legal cannabis market in 2026. Since the state legalized adult-use cannabis in 2023ⁱⁱ, issued its first licenses in 2025ⁱⁱⁱ and OCM-licensed retailers opened their doors that same year^iv, investor interest has risen steadily.

Investors should note, however, that the opportunities presented by the rapid growth of adult-use cannabis in Minnesota are as regulated as they are enticing.

The Minnesota Office of Cannabis Management promulgates rules that limit who may become involved with a Minnesota cannabis license as an investor, as well as the degree to which they may actively participate as an investor.v Specifically, the primary concern for any potential investor is whether the individual, partnership, cooperative, limited liability company, or other entity type would qualify as a true party of interest (TPI) as defined in MN Statute § 342.185.^vi

Understanding Passive-Investor Status in Minnesota

Within this framework, there are designated avenues for individuals and entities wishing to participate in Minnesota’s cannabis market as “passive investors.” The passive investment strategy is especially important for those hoping to become involved in more than one cannabis license type. And one key tool in this strategy is the attorney advisory opinion letter.

Attorney advisory opinion letters provide an attorney’s legal opinion on a specific matter for a client and whether the client’s conduct about that matter is permissible. These letters range in structure depending on the area of law and, importantly, do not guarantee a particular outcome for that matter.

Instead of promising the client a particular outcome, attorney advisory opinion letters provide a client with an attorney’s reasoned legal analysis on a matter to help ensure that all relevant legal and/or regulatory requirements have been fulfilled through the client’s course of action. These letters ultimately aim to assure the client that its intended course of action is compatible with all relevant statutory and/or regulatory requirements. That guidance can be crucial in as complex a regulatory environment as Minnesota’s adult-use cannabis market.

To understand exactly how an attorney advisory opinion letter can be utilized, however, it’s helpful to know how the federal government and the state of Minnesota each define passive investment, and who is a true party of interest.

What is a True Party of Interest?

According to MN Statute § 342.18.^vii, a True Party of Interest is limited in what it can accomplish within an investing capacity. TPIs may not be involved as applicants for more than a single license type.
They may not apply for multiple license types if the TPI would be prevented from holding those licenses due to Minnesota’s prohibition on vertical integration, as per MN Statute § 342.18.vii.^viii TPIs are also limited to holding a single license, unless they are otherwise eligible through an explicit statutory exemption.

What Is a Passive Investor?

Passive investors are provided with substantially more flexibility than TPIs with potential investment opportunities. A passive investor is not limited to the single license cap that limits TPIs, nor is it precluded from investing in and/or having an interest in multiple license types.

Rather, a passive investor, pursuant to Minnesota statute, can freely exercise its investment abilities so long as it holds ten percent (10%) or less of a controlling interest in the cannabis business and cooperates with the federal regulations governing ownership interests solely for passive investment as detailed in 31 CFR § 800.243.^ix

Federal Regulatory Requirements for Passive Investors

The federal regulations governing passive investments dictate that a passive investor does not retain any control rights or the ability to exercise control over the adult-use cannabis business. Any attempt by a passive investor to exercise control rights, whether indirect or direct, or any evidence that the passive investor retained direct or indirect control rights, would violate 31 CFR § 800.243(a)(1).^x

Restrictions on Control and Governance Rights

Passive investors may also lose this passive-investment status if, per 31 CFR § 800.243(a)(2), the investor acquires any rights, access, or involvement beyond those typically attributable to a passive investment.x The presence or absence of these rights, access, and/or involvement beyond what is typically associated with a passive investment are detailed in 31 CFR § 800.211(b).^xi
For example, such an investment would not be considered a passive investment if the investor may:

Access material nonpublic technical information
Control and/or nominate rights for the business’ board of directors or the equivalent governing body
Play a role in any substantive decision-making processes for the business.

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Limitations on Purpose and Investor Conduct

Investments made by those seeking to retain passive-investor status must also be made without any additional purpose other than to act as a passive investment. This means that the passive investor cannot possess or develop any ulterior motive beyond making the passive investment after the transaction is completed. See 31 CFR § 800.243(a)(3).^xii Passive investors will also be disqualified and the passive investment itself will be rendered a control transaction under 31 CFR § 800.243(a)(4) if any actions are taken that are inconsistent with the passive-investment guidelines for foreign investors holding 10% or less of the outstanding voting interest in a U.S. business per 31 CFR § 800.302(b).^xiii

Minnesota’s Statutory Definition of a Passive Investor

Minnesota also retains its own definition of passive investors, as per MN Statute § 53B.28, Subdivision 23, to help supplement the federal regulatory requirements.

Passive investors under this statute refer to those investors which:

Lack the requisite authority to elect the majority of those exercising managerial authority over the licensee
Are not employed by and do not have any managerial duties pertaining to the licensee
Do not have any direct or indirect power to exercise a controlling influence over the management or policies of a licensee
Attest to these requirements to the relevant authority in a signed written document or other equivalent method as established by Minnesota statutory law^.xiv

How Attorney Advisory Opinion Letters Support Passive Investors

Whether an investor in Minnesota’s adult-use cannabis market constitutes a passive investor is not solely determined by whether the investor retains a controlling interest in the business at or below the 10% threshold.

Instead, an investor’s status as a passive investor, in addition to adhering to the 10% threshold, is heavily influenced by the regulatory and statutory complexities of whether the investor procures any control or access rights inconsistent with the federal regulations and associated Minnesota statutory rules.

When attempting to address a matter involving a heightened level of regulatory and/or statutory complexity, such as the issue of retaining passive investor status, an attorney’s advisory opinion letter can help provide the requisite analysis and subsequent clarity to ensure that a passive investor retains its passive-investment status.

Use of Advisory Opinion Letters in Transactions

In a transactional setting, attorney advisory opinion letters typically discuss an attorney’s legal opinion on whether the transaction in question is permissible under relevant statutory and/or regulatory requirements.^xv These letters focus on the deal’s associated risks, whether any changes are necessary to maintain the transaction’s permissibility, and any additional details needed to assure the client that its intended course of conduct will be allowed.

Advisory opinion letters help clients by providing them with an idea of how a transaction will take place to keep it within the requisite legal and/or regulatory boundaries while also ensuring that it does not run afoul of the limitations set forth by relevant statutory law and regulatory requirements, ensuring that investors intending to be passive investors stay passive investors.

Application in Minnesota’s Adult-Use Cannabis Market

Within the specific context of passive investors for Minnesota adult-use cannabis businesses, attorney advisory opinion letters focus on maintaining the controlling interest at the 10% threshold while highlighting that the passive investment does not grant the passive investor any control or access rights inconsistent with Minnesota statutory law and federal regulations.

These letters specify the contractual mechanisms that help limit the control and/or access rights of passive investors, which will be highly fact-intensive depending on the client’s needs, while also emphasizing that the size of ownership alone does not create passivity in the investment.

The investor must include this attorney advisory opinion letter detailing the proposed ownership structure and how the passive investor would fit into this ownership structure with the proposed investment plan, subject to review by the Minnesota Office of Cannabis Management.

Considerations for Passive Investors in Minnesota

Minnesota’s cannabis regulatory framework makes clear that passive-investor status depends on more than ownership percentage alone. Investors must carefully structure their interests to avoid control, access, or governance rights that could convert a passive investment into a regulated ownership position under state or federal law.

Attorney advisory opinion letters help address this complexity by analyzing proposed ownership structures, contractual rights, and regulatory risk before a transaction moves forward.

When prepared thoughtfully, these letters can provide clarity to investors and regulators alike, support compliant deal structures, and reduce the risk of unintended regulatory exposure.

ⁱ Red Lake Nation Enters Into Cannabis Compact With State of Minnesota, Lakeland PBS (Dec. 16, 2025), https://lptv.org/red-lake-nation-enters-into-cannabis-compact-with-state-of-minnesota-2/.

ⁱⁱ Cannabis Law, Minn. Off. of Cannabis Mgmt., https://mn.gov/ocm/laws/cannabis-law.jsp; Minnesota Legalization Law 2023 Detailed Summary, Marijuana Pol’y Project, https://www.mpp.org/states/minnesota/minnesota-legalization-law-2023-detailed-summary/.

ⁱⁱⁱ Nick Longworth, This is Minnesota’s first license for a recreational cannabis cultivation business, Fox 9 (June 18, 2025), https://www.fox9.com/news/mn-cannabis-cultivator-business-license-retail-dispensaries.

^iv Alyssa Chen, Minnesota’s first non-tribal recreational dispensaries open two years after legalization, Minn. Reformer (Sept. 22, 2025), https://minnesotareformer.com/2025/09/22/minnesotas-first-non-tribal-recreational-dispensaries-open-two-years-after-legalization/.

^v Minn. Off. of Cannabis Mgmt., https://mn.gov/ocm/.

^vi Minn. Stat. § 342.185 (2025).

^vii Minn. Stat. § 342.18 (2025).

^viii Minn. Stat. § 342.18 (2025).

^ix Minn. Stat. § 342.185 (2025); 31 C.F.R. § 800.243 (2026).

^x 31 C.F.R. § 800.243(a)(1) (2026).

^xi 31 C.F.R. § 800.211(b) (2026).

^xii 31 C.F.R. § 800.243(a)(3) (2026).

^xiii 31 C.F.R. § 800.211(b) (2026).

^xiv Minn. Stat. § 53B.28 (2025).

^xv Legal Opinion Letters Part 1: What Is A Legal Opinion Letter?, McGrath & Spielberger, PLLC, https://mcgrathspielberger.com/legal-opinion-letters-part-1-what-is-a-legal-opinion-letter/.

https://www.jdsupra.com/legalnews/the-assistance-of-attorney-advisory-5698812/