Michigan Marijuana Market Outlook

Positive Election Outcomes

Two pieces of good news have resulted from the elections in Michigan. First, Democratic candidate Gretchen Whitmer has been elected governor, taking the place of Republican Rick Snyder. While not as obstructionist as Florida’s Governor Rick Scott, Snyder was opposed to legalization and has hampered the rollout of the state’s existing medical program by failing to work with the legislature to remedy problems with the Medical Marihuana Facilities Licensing Act (“MMFLA”). With a new, pro-legalization governor in place, Michigan may finally be able to pass legislation clearing up issues with the MMFLA Board that have plagued the program since its inception and resulted in only a small number of licenses being issued since the MMFLA entered force in 2017.

Michigan voters also approved Proposal 1, legalizing adult-use marihuana across the state and authorizing the Department of Licensing and Regulatory Affairs (“LARA”) to issue business licenses. Another less publicized aspect of Prop 1 is that is the law legalizes industrial hemp in Michigan and authorizes LARA to regulate the production and sale of industrial hemp and hemp-derived products.

Program Summary

Users of recreational marihuana must be at least 21 years old. Smoking and public consumption are prohibited unless authorized by the local government and conducted in an area off limits to persons under age 21. Any adult age 21 or older may possess up to 2.5 ounces. Possession in the home is not limited, but any excess over 2.5 ounces must be stored in a secure container or other secure area. Adults may have no more than 15 grams of concentrate. Anyone may gift recreational marihuana to any adult age 21 or older, as long as they do not receive any remuneration. Home grow is allowed for up to 12 plants per premises.

Business Licensing

LARA will handle all aspects of licensing and regulation for retail marihuana businesses. LARA will issue licenses for growers, processors, retailers, secure transporters, and safety compliance facilities. LARA may not limit the number of state licenses available, may not require customers to provide retailers with more information than is necessary to verify their age, and may not prohibit co-location of vertically integrated businesses. Vertical integration is allowed for most licenses but is prohibited for transporters and safety compliance facilities. Licensed premises may not be within 1,000 feet of a pre- existing public or private K-12 school, although municipalities may reduce this distance requirement if they wish.

Local Regulations

Localities may completely prohibit or limit the number of establishments operating in their boundaries; may adopt restrictions on public signage; and may regulate time, place, and manner of operation, and production, manufacture, sale, or display, of marihuana accessories. Local ordinances may not prohibit transportation through the locality, nor may they prohibit vertical integration or co- location that is authorized under state law.

Localities may require businesses to obtain a local license but may not impose qualifications for licensure that conflict with state law. If a locality limits license numbers, it must select license winners through a competitive process. This is similar to the current framework for medical licenses, where municipalities generally require businesses to obtain a local license and place limits on the number of licenses available, making it a significant challenge to secure a business location in desirable areas of the state. To implement local licensing, localities may charge a fee of up to $5,000 per license.

Excise Tax

All sales by microbusinesses and retailers are subject to an excise tax of 10% of the sales price. Revenues from this tax are divided amongst the municipality where the licensee is located, the county where the licensee is located, the state school aid fund for K-12 education, and the Michigan transport fund for repair and maintenance of roads and bridges.

Contact our team of cannabis business consultants today to get started in Michigan!