In December 2018, Michigan legalized the adult use of cannabis for recreational purposes. Medical marijuana has been legal in Michigan for 11 years, but the rules and regulations governing recreational use are completely separate.
On July 3rd, the Michigan Marijuana Regulatory Agency (MRA), together with Governor Gretchen Whitmer, signed into effect a set of interim rules that regulate the industry. These “emergency” rules will remain in effect for six months. They regulate everything from licensing to social use and fees.
If you live in Michigan or are interested in starting a business there, knowing what these new rules are is of the utmost importance. Although this is a temporary set of rules, it is a good indicator of what lawmakers are aiming for.
What is going on With Cannabis in Michigan?
On Wednesday, Governor Gretchen Whitmer signed a set of emergency rules into effect. These rules will temporarily regulate the state’s recreational marijuana system. This set of rules will regulate everything from licensing applications to capital requirements.
In December of 2018, Michigan voted on the legalization of cannabis. With 57% of the population voting yes, the ballot measure was approved. Since then, a quiet period has taken place, while state authorities establish a legal framework. The first licenses in Michigan’s recreational industry are expected to be offered before the end of the year.
A New Agency
The Michigan Marijuana Regulatory Agency developed the emergency rules. Michigan’s lawmakers chose to establish a government agency devoted specifically to cannabis. Many are calling this an innovative approach. The emergency rules were developed by taking into account the opinions of industry experts – and it shows. The rules put in place will remove many barriers.
The set of rules was developed by the MRA and signed into effect by the Governor. This is the latest step that Governor Whitmer has taken to centralize and modernize the cannabis industry in Michigan.
The state of cannabis regulation used to be much more complex. Governor Whitmer has introduced executive orders which have abolished the politically appointed Bureau of Marijuana Regulation and the Medical Marijuana Licensing Board.
In the place of these bodies, a single, transparent agency has been put into place. And the results are already promising – it seems as if the bureaucratic mess has been resolved. Staffing the agency with qualified experts instead of political appointees has accelerated its work. The regulations being put out are now in touch with the situation on the ground.
Governor Whitmer has previously worked on legislation allowing nurses to prescribe cannabis, as well as bills that have allowed provisioning centers in the middle of re-applying for licenses to stay open. Marijuana was one of the big issues regarding the gubernatorial election which she won – the candidate opposing her was against the legalization of recreational use.
The new set of rules will stay in place while the recreational industry is being introduced to Michigan. Although a permanent set of rules will be put in place later, these emergency rules will still be in effect by the time the first sales of recreational cannabis take place in Michigan.
Many of the new regulations are a good sign of things to come – and the rules themselves remove many hurdles for small businesses.
Capital Requirements and Fees
The most important change is that the capital requirement for marijuana entrepreneurs has been removed. Up to this point, applicants have had to prove that they possess assets worth between $150,000 and $500,000. Removing this barrier will allow those looking to invest in a small venture to do so more easily. Fewer financial documents will be required from applicants.
The license renewal fees for adult-use business will now be divided into three tiers based on volume. If a business is large, it will pay more for licensing renewal, while small businesses will pay less. Up to this point, the flat rate for all business used to be $66,000.
This change will bring in more tax revenue, while at the same time encouraging growth and investment. A more robust market based on small and medium-sized businesses can now thrive in Michigan.
Ease of Doing Business
This new set rules will allow growers who plan to raise under 150 plants to both process and sell their products from the same address. Requiring two different addresses for processing and selling products was one of the bigger barriers for businesses seeking to establish their own supply chains.
Current holders of medical marijuana licenses who apply for adult-use licenses will be expedited through the application process. Home deliveries to private residences will also be allowed. Special licenses for smoking lounges and clubs will also be introduced, changing the face of the Michigan recreational cannabis industry.
The amount of large-scale grow licenses a business can hold has been capped at five. This means that the maximum number of plants that a grower can have is 10,000. Large scale businesses that supply both the recreational and medical market can apply for an excess grow license, allowing them to have even more plants.
Medical marijuana plants can be transferred to recreational facilities to help the recreational market start. Drive-thrus, mobile weed shops and online mail-order sales, however, are banned. Medical and recreational marijuana can, however, now be sold from the same store.
Impact on Small Businesses
All of these changes are geared towards making the cannabis market friendlier for small businesses. This set of rules will help make starting and running a small business easier.
A social equity plan is also in the works – one that would waive or reduces fees for applicants from communities that have been disproportionately affected by the prohibition of cannabis.
The fast-tracking of applications and waiving of requirements for businesses that already deal in medical cannabis will allow established ventures to quickly gain a foothold and expand in the new market.
Reducing fees, removing capital requirements, and making licenses cheaper will make starting a cannabis business much easier than in other states. All of these rules seem very promising – the Michigan recreational cannabis market may soon rival older, more established contenders.