Michigan’s Adult-Use Rules Put Cannabis Pioneers Out in the Cold

Michigan cannabis laws

[Canniseur: Politicians and bureaucrats promoting big business with deep pockets is infuriating. There are viable alternatives, but the creators of the regulated cannabis market in Michigan seem not to care. The current regulations and draconian fees work against small businesses gaining a foothold within the cannabis industry. We believe Michigan should create laws that encourage a craft cannabis market, rather than a McD’s type market. Read The Michigan Cannabis Market is in Deep Trouble for more on Michigan’s current cannabis crisis. ]

Michigan’s first adult-use cannabis stores are expected to open near the end of 2019, but many of the state’s medical marijuana pioneers could find themselves shut out of the new retail industry.

The state’s new adult-use rules require seriously deep pockets. That shuts a lot of locals out of the game.

The state has been in a scrambling-for-licenses stage since the passage of a statewide adult-use legalization initiative in Nov. 2018. Early indications are that those licenses are going predominantly to a few of the state’s biggest players—and not to the smaller caregivers who built the medical industry over the past ten years.

Michigan’s Marijuana Regulatory Agency (MRA), which oversees both the existing medical marijuana industry and the coming adult-use retail sector, released its rules and regulations for the recreational cannabis market earlier this month. While the new regs included a number of welcome deviations from the state’s draconian medical marijuana rules—such as eliminating the steep financial equity requirements for license applicants—the more restrictive medical regulations will remain in place for most applicants until late 2021. In other words: Forward steps are being made, but the state continues to tilt the field away from smaller entrepreneurs and experienced cannabis hands.

Take, for instance, the rules around cannabis farming.

Big Players Dominate

For medical cannabis farmers, the state is offering three classes of licenses: A, B, and C. Class A licenses are for small craft-scale growers with 500 plants or less. Class B are for moderate-scale commercial farmers with 1,000 plants or less. Class C is reserved for the biggest growers, with up to 1,500 plants.

Consolidation is happening fast. One company now holds eight grow licenses.

So far, the state has issued 67 grow licenses in the Class C category. Only 9 Class A licenses have been issued so far, and only one Class B license has been claimed.

This may be the most telling statistic: Those 67 Class C licenses, reserved for the biggest growers, are held by only 29 different growers. Eight companies hold multiple licenses. Green Peak, Michigan’s fastest-growing cannabis company, now holds 12 Class C growing licenses. Attitude Wellness, a Green Peak competitor, holds 9 Class C licenses.

“We’ve seen four and five applications for the same entity being approved simultaneously,” says Rick Thompson, a leading cannabis advocate and organizer of the Michigan Cannabis Business Development Conference.

Legacy of the Notorious MMFLA

Thompson is referring to the practices of the medical market’s now-defunct Medical Marijuana Facilities Licensing Act (MMFLA) Board. That board, appointed by the state’s previous governor, Rick Snyder, gained a reputation as the most anti-cannabis cannabis licensing board in the nation. It was comprised of two retired police officers, a pharmacist, a career Republican, and an automotive executive.

When Gov. Gretchen Whitmer succeeded Rick Snyder, she dissolved Snyder’s notoriously anti-cannabis board.

The MMFLA process was notoriously unfriendly to anyone with limited financial means. Application fees ran upwards of $10,000, and a grow license could run nearly $50,000 on top of that. The state also required applicants to prove they had access to financing in the $150,000 to $300,000 range. Add to that the hefty fees charged by legal firms and consulting services, which are practically a necessity to prepare a proper application. “No small business could afford the expense up front,” says Thompson, “so bigger businesses have dominated the medical licensing process.”

MMFLA board members also gained a reputation for rejecting applications from longtime cannabis professionals for seemingly arbitrary and capricious reasons. When Gov. Gretchen Whitmer succeeded Snyder earlier this year, one of her first cannabis-related acts was to dissolve the MMFLA Board.

The legacy of that board remains, though. The big players who made it through the MMFLA licensing process have been scooping up market share by purchasing independent licenses, just as smaller dispensaries are being bought out by bigger retailers across the state.

Big Fish Gobbling Up Little Fish

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