Locked Out:
What Michigan’s Cannabis Licensing Freeze May Mean for Businesses
Michigan’s cannabis industry is no longer in its explosive growth phase, and lawmakers are responding accordingly. In October 2025, Michigan legislators introduced a sweeping package of Senate and House bills aimed at “stabilizing” the state’s cannabis market amid oversupply, collapsing prices, and mounting defaults. If passed, these proposals would reshape who can enter the market, and how businesses operate in Michigan.
For cannabis businesses, the message is clear: the era of open access may be coming to an end. Here’s what you need to know…
Statewide Licensing Caps are on the Table
Since adult-use sales began in late 2019, Michigan’s “open licensing” system fueled rapid expansion, and eventually, market saturation. Wholesale prices have plummeted, with average retail prices falling roughly 73% since 2020, and dozens of businesses sliding into receivership.
Legislators and industry leaders now point to overcrowded licensing as the “smoking gun” of market instability. Senate Bills 597–602, introduced by Senators Jeremy Moss, Sam Singh, and Dayna Polehanki, are designed to address this problem by slowing or halting new market entry.
The proposed legislation would:
Cap retail marijuana licenses at one dispensary per 10,000 residents per municipality
Freeze new licenses for:
Large-scale growers (over 150 plants)
Testing laboratories
Transporters
Allow existing licensees to continue operating, but block new market entrants in oversaturated areas
This structure operates as a de facto moratorium in many of Michigan’s most active cannabis markets. Border towns like New Buffalo and Menominee, where dispensary density far exceeds population, would be effectively closed to new entrants, even as licenses remain transferable among existing operators.
Supporters argue this will stabilize prices and prevent further financial collapse, but critics warn it could entrench existing operators and create regional monopolies or oligopolies, particularly in border towns that rely heavily on cannabis tourism.
What this means for you:
If you already hold licenses in a high-density municipality, your market position may become more valuable. If you were planning to expand, vertically integrate, or enter the Michigan market, that window may be closing, so you should act now.
Three-Fourths Approval Required, But Momentum Is Real
Because these bills would substantially amend Michigan’s voter-approved adult-use marijuana law, they require a three-fourth supermajority in both legislative chambers.
That’s a high bar, but not an impossible one. Lawmakers are openly comparing this proposal to Michigan’s liquor licensing system, which caps licenses to promote long-term stability. With bipartisan concern over market collapse, tax revenue reliability, support from many cannabis industry businesses, and public health risks, the political appetite for cannabis reform is growing and something business should be prepared for.
“Pay at Transfer” Rules Could Reshape Wholesale Transactions
House Bill 4963 tackles a problem many Michigan cannabis operators know well: nonpayment. The bill would require payment at the time of product transfer for marijuana transactions. While growers and processors largely support this change, some retailers warn it could disadvantage smaller operators who rely on negotiated payment terms. However, the bill currently lacks a parallel amendment to Michigan’s medical marijuana law, potentially creating loopholes and enforcement challenges. If enacted, operators should consider rethinking cash flow, contracts, and purchasing strategies.
New Wholesale Tax Pressure Raises the Stakes
All of this is happening against the backdrop of a new 24% wholesale marijuana tax, signed into law to fund Michigan road repairs. Industry challenges the tax in court have thus far failed. Many operators and analysts are warning that this tax could be the final blow for many struggling businesses throughout the state. Some companies have already packed up their operations over tax concerns. Legislators appear to view licensing caps and market stabilization as necessary counterweights to the financial shock this tax will impose.
What Cannabis Businesses Should Do Now
If you operate in Michigan’s cannabis or hemp space, now is the time to be proactive:
Audit your licenses and expansion plans especially if you’re considering new grows or retail locations
Review supply contracts and payment terms in anticipation of pay-at-transfer rules
Monitor municipal density caps if you operate near borders or in high-volume markets
Engage counsel early to protect your market position as the law evolves
Michigan’s cannabis industry is entering a maturity phase and with it comes consolidation, tighter regulation, increased taxes, and higher compliance expectations. While these changes may stabilize the market long-term, they also raise the stakes for operators who fail to adapt.
If you’re unsure how these proposals could affect your business or how to position yourself strategically before the rules change, experienced legal guidance matters. The cannabis attorneys at Oak Law have been helping Michigan operators navigate regulatory shifts since day one. From licensing strategy and compliance audits to enforcement defense and transactional planning, we help cannabis businesses stay protected, profitable, and prepared. If you have questions about how these legislative changes could impact your operation, schedule a consultation to discuss your options.
