While Michigan’s legal adult-use cannabis sales are expected to launch sometime in 2020, medical marijuana businesses are still struggling to secure state licenses and remain compliant with ever-changing regulations.
Matthew Abel, attorney with Cannabis Counsel, P.L.C., a boutique marijuana law firm in Detroit, and executive director for Michigan NORML, said many industry stakeholders want to see the medical program succeed before the recreational market takes shape.
“We’re just really eager for this transition period to be over so we have one set of rules,” Abel told Cannabis Business Times. “The rules are everywhere and they’re quite comprehensive, so I think we ought to give these a chance to work before we try to layer more on there. Certainly, there will be some gaps, but the important thing is that we get this system functioning. There are plenty of rules now for that. We can fine-tune it once it’s running, but we’ve spent years writing rules and not so much time implementing them.”
Medical marijuana businesses submitted their initial licensing applications by a Feb. 15 deadline and many are still awaiting approval from the state. A court order extended a state-mandated Sept. 15 deadline for medical marijuana businesses to either become licensed or shut down, and last month, a judge halted the state’s next self-imposed Oct. 31 deadline to issue licenses.
Meanwhile, the program’s emergency rules are set to expire Dec. 15, and state officials are convening to adopt permanent regulations.
“There’s ongoing litigation about the emergency rules,” Abel said. “There was a hearing a couple weeks ago. We’re still waiting for a judge to rule on it, but as it stands, the dispensaries are going to have to destroy any product that’s not in the seed-to-sale tracking system at the end of the month.”
Currently, licensed medical dispensaries can only purchase product that has come through the state’s seed-to-sale tracking system, which has been grown by licensed producers and processed by licensed processors, Abel said. However, temporary operators still awaiting state licensure can continue buying from caregivers as part of the gray area of the state’s old medical marijuana system.
“The temporary operators are not happy pending the shut down, and the people who have licenses aren’t happy because the temporary operators can buy from caregivers, but those who have licenses can only buy from the licensed producers, and there are hardly any of them,” Abel said. “So, if the temporaries get extended, the only ones who are really going to have product are the temporary operators, where the ones who have gone through the process now are going to be hamstrung because they won’t have any product. It’s pretty crazy.”
Meanwhile, in the Nov. 6 midterm election, Michigan voters approved Proposition 1 to legalize adult-use cannabis in the state, which will require a new layer of regulations and licensing.
Prop. 1 allows adults 21 and older to possess up to two and a half ounces of cannabis on their person and up to 10 ounces secured at their residence. It also allows adults to grow up to 12 marijuana plants for personal use. A state licensing system for adult-use cannabis businesses is also outlined in the measure, and municipalities are permitted to ban or restrict businesses as they see fit. Prop. 1 also levies a 10-percent excise tax on recreational marijuana in addition to the state’s 6-percent sales tax.
The measure takes effect 10 days after election results are certified, which took place Nov. 26, according to a Click On Detroit report. This means recreational marijuana will be legal in Michigan on Dec. 6, although businesses still need to be licensed before legal sales can begin.
For the first two years—through the end of 2020—only medical licensees can apply for recreational cannabis business licenses, Abel said. “All of 2019 and 2020, the only licenses issued will be to companies which already have medical marijuana licenses, which are going through that process now. There are less than 100 of them so far.”
The Department of Licensing and Regulatory Affairs (LARA), which has been the regulatory body for the state’s medical marijuana program, will also regulate and license adult-use cannabis businesses, Abel said, unless Gov.-Elect Gretchen Whitmer reorganizes the system when she takes office in January.
Michigan’s medical marijuana program has a five-member board that has the final say in licensing, Abel added, but the recreational marijuana law does not include a board—the governing agency makes all licensing decisions.
“I expect there will be some minor differences there, but once we have permanent rules from the state on the medical program, I would think that the rec program will track it fairly closely,” Abel said. “A lot of people expect it’ll be a full year before the rec licenses roll out, but there’s no reason why the legislature or the department couldn’t just allow those with medical licenses to also sell rec. The only difference is the tax structure, and that shouldn’t be hard to deal with.”
Although it may be too early to tell what trends might emerge in Michigan’s medical market, let alone its impending adult-use market, Abel is hopeful that the new administration will streamline the cannabis business licensing process and get both markets fully operational.
“It’s been really difficult, but the Republicans have been in charge here for eight years and have been fairly hostile to medical marijuana, and now we have a female governor coming in who endorsed Prop. 1 and an attorney general coming in who endorsed Prop. 1, so we’re expecting a little bit smoother sailing,” he said.
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