How Michigan Cannabis Businesses Are Preparing for an Adult-Use Market
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How Michigan Cannabis Businesses Are Preparing for an Adult-Use Market

This vote will have far-reaching implications, as Michigan already has the second-largest medical marijuana market by cardholder count in the U.S.

December 10, 2018

One of the more significant outcomes of the midterm elections this past November was the legalization of adult-use, or recreational, cannabis in Michigan. Voters in the state passed Proposition 1 by a 56-44 percent margin, and in doing so, created the first recreational cannabis market in the Midwest.

This historic vote will have far-reaching implications, as Michigan already has the second-largest medical marijuana market by cardholder count in the country. With the new law into effect as of Dec. 6, there are many months of rulemaking to come before the state’s adult-use market will be ready to launch.

Proposition 1 was unique in several ways. The initiative allows individuals 21 years of age and older to purchase, possess and use marijuana and marijuana-infused edibles. It also allows Michigan residents to grow up to 12 marijuana plants for personal consumption in their household; that 12-plant limit is one of the highest home grow allowances in the country. The law does, however, impose a 10-ounce limit for marijuana kept at residences. New recreational use commercial licenses were also created, but municipalities will retain significant control over the commercial aspects of legalization, as they have the right to ban or restrict marijuana businesses.

Denise Pollicella is an attorney based out of Howell, Michigan, who has been representing clients in Michigan’s medical marijuana space for a decade. “At the municipal level, we’re going to see a lot of these cities making a decision as to whether they are going to allow commercial licenses for the sale of adult use cannabis,” says Pollicella. She warns, however, that there is still substantial confusion on the local level regarding the process for allowing any kind of marijuana-related business activity. “The impression a lot of these municipalities have is that if they allow medical marijuana, they think they have to allow adult-use businesses, and that is not the case at all. Because of this, I don’t think we will see another large round of municipalities opting in and allowing recreational businesses.”

While the new law is comparable to adult-use statutes in other states, commercial licensing will not happen overnight. The timeline for the rollout will take at least two years before business licensing is open to all persons and businesses who otherwise qualify to obtain a commercial license. Proposition 1 limits the state’s ability to issue new recreational commercial licenses until Dec. 6, 2019, according to Pollicella.

After Dec. 6, 2019, only existing medical marijuana license holders in the state can apply for recreational-use licenses, with the exceptions of the microbusiness license type that the proposition has created and testing lab licenses. The microbusiness is the equivalent of a microbrewery where the licensee is allowed to grow a small number of plants and sell the flower out of the same location.

Among those expectant business owners in Michigan’s adult-use market is former NBA star Al Harrington. As a caregiver in Colorado, Harrington saw firsthand the impact that medical marijuana could have on patients, including members of his own family. “I got into the industry in 2011 as a caregiver in Colorado,” says Harrington. “I really saw the way that cannabis helped my grandmother with her glaucoma. She told me that it was the first time she was able to read her Bible in three years.”

Soon afterwards he founded his own company, Viola Extracts, which is currently operating in Colorado, Oregon, California and in Michigan’s medical marijuana market.

“We have a few locations in Michigan, anchored by a 48,000-square foot-building in Detroit. We’re also looking at additional cultivation locations in other parts of the state, as well as several retail locations. We’ve already gone through the [medical] licensing process for retail, and so we think we were able to get out there early enough to make a big impact in the state.”

Harrington goes on to state that he doesn’t distinguish between adult-use states and medical states when deciding where he wants to locate. “I personally believe that it’s all medical,” he says. “We’re not going to change the quality of our products whether its medical or recreational. We want to make sure that no matter where we end up that our products are still available medically, as we have real people with real issues who don’t necessarily want to be lumped in with the recreational use world.”

Despite the fact that Proposition 1 just passed in November, there is already at least one legislative attempt at changing one of the more controversial aspects of the law, namely the number of plants that can be grown in a residence. Michigan’s Senate Majority Leader Arlan Meekhof has introduced a bill that would ban people from growing recreational marijuana at home.

Additionally, the new law would allow up to 10 ounces of marijuana to be kept in the household for personal use, however even that requirement has some uncertainty surrounding it.  

“Proposition 1 arguably states that you can keep an unlimited amount of marijuana for personal use if you grow it in your home from your own plants. Folks who want to grow as much as possible are going to interpret that as a license to keep pounds of flower in their home, despite the fact that it would be incredibly hard to justify that much for personal use,” says Pollicella.

 It’s hard to overstate the implications of Michigan’s newly minted cannabis legalization law. Michigan is a state of approximately 10 million people, which borders both Illinois and Ohio— two states with medical marijuana laws currently on the books. The combined population of Ohio, Illinois and Michigan is 34 million. Collectively, these three states make up the heart of the American Midwest and contain about 10 percent of the U.S. population. Ohio is a perennial swing state, and it is fair to assume that legalization in Michigan will have a substantial impact on the politics of its neighboring Buckeyes. There is already a strong indication that Illinois will be pursuing adult-use legislation in 2019.  If Ohio were to follow suit, the traditionally purple Midwest could look very green heading into the 2020 general election.

Geoff Korff is president and CEO of Ohio-based Galenas LLC.