https://www.oak-law.com/our-team daily 0.75 2025-06-17 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1674617626109-UMYYBJI5ZV9JO88VKQYM/unsplash-image-GoXNygZlftg.jpg https://www.oak-law.com/our-team/mohamed-ghaith monthly 0.5 2026-01-08 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1674618386913-KEAA11YZ1TUQH5SOEHB2/Mo+pic.JPG Our Team - Mohamed Ghaith - Mohamed Ghaith, Esq. - Managing Partner Mohamed Ghaith was born and raised in Dearborn, MI. Mohamed graduated from Wayne State University – Law School in May of 2018. While in Law School, Mohamed achieved academic excellence, being awarded the Bronze Key Award two years in row. His legal education includes internships with the Maurice and Jane Sugar Law Center for Economic and Social Justice and the Arab Civil Rights League. Mohamed gained a deep respect for the law through these internships and they helped him see how the law can be used to protect and empower all people. His work focused on labor, employment and civil rights. At Oak Law (Formally Scott Roberts Law, PLC) Mohamed focuses on aiding clients not just with cannabis concerns, but also with issues related to employment and intellectual property law. His fluency in Arabic and his self-motivated, passionate work ethic makes him an invaluable partner of the Oak Law team. https://www.oak-law.com/our-team/scott-roberts monthly 0.5 2025-04-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/f903231f-8abf-465f-bb8a-820e84056efb/Scott+Profile.jpg Our Team - Scott F. Roberts - Scott F. Roberts, Esq. - Senior Corporate Attorney The founder of Scott F. Roberts Law, PLC, a Detroit-based business law firm, now Oak Law. Mr. Roberts has spent his entire career representing businesses and helping them comply with municipal, local and state regulations. Upon being admitted to the Michigan Bar in 2010, Mr. Roberts went to work as a corporate and healthcare attorney for the Detroit-based law firm of Dickinson Wright. In 2014, he left the firm to start his own business practice, Scott F. Roberts Law, PLC. After passage of the Medical Marihuana Facilities Licensing Act, or MMFLA, Mr. Roberts expanded his practice area to include Marijuana Business Law. Mr. Roberts is a member of the Business Law and Marijuana Law sections of the State Bar. Prior to being admitted to the Michigan Bar, Mr. Roberts attended the University of Miami School of Law, graduating in 2010 with high honors. https://www.oak-law.com/our-team/andrew-haftkowycz monthly 0.5 2025-06-16 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/5bc685d7-9948-45a5-a4c2-6749feee6384/Andy+Haft+Headshot+Professional+1.jpg Our Team - Andrew Haftkowycz - Andrew Haftkowycz, Esq. - Associate Attorney Andrew is originally from Cleveland, OH. Andrew graduated from Ohio University in 2014 and Michigan State University College of Law in 2024. At MSU Law, Andrew served as the Executive Editor of the MSU International Law Review. He also interned with the Ingham County Prosecutor’s Office and represented MSU at the ABA Judicial Clerkship Program, the Talsky Center Student Network, the MSU International Cannabis Bar Association, the MSU Student Bar Association, the Middle Eastern Law Student Association, the Space Law Society, and the Board of Advocates MSU Mock Trial team. At Oak Law, Andrew focuses on cannabis law, election law, municipal law, compliance, and litigation. Andrew focuses on providing clients with meaningful results, and to build connections with all parties in his clients matters to create lasting resolutions. Andrew is fluent in Ukrainian. When he’s not in the office, Andrew is a big fan of surfing, kayaking, longboarding, and cigars. https://www.oak-law.com/our-team/robert-g-hunsicker monthly 0.5 2025-10-28 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/69592ba7-f4e5-474c-bae7-1cf24a88e6c1/robert+pic.jpg Our Team - Robert G. Hunsicker - Robert G. Hunsicker - COO As the Chief Operating Officer of Oak Law, a client-first business, real estate, and cannabis law firm located in Detroit, Michigan. In this role, he champions operational excellence and client satisfaction. With a Bachelor's degree in Operations Management and a minor in Marketing from Oakland University, Robert brings over a decade of experience in hospitality and operations management. He is known for his keen attention to detail and his ability to design and implement effective processes and procedures that enhance efficiency and support sustainable growth. Robert’s expertise extends to financial management, where his strategic oversight ensures that the firm’s operations are both profitable and scalable. Robert’s diverse skill set is further demonstrated through his ownership stake in a real estate brokerage and several other companies. His entrepreneurial spirit and strategic mindset have allowed him to successfully guide these ventures, providing leadership in areas such as business development, market expansion, and operational optimization. Notably, Robert is the owner of Hunsicker Business Solutions, a company he founded in 2017, which offers comprehensive business consulting services to help organizations achieve operational excellence and sustainable growth. His holistic approach to business management, combined with his proficiency in managing complex financial and operational structures, has contributed to the growth and success of each organization he supports. In his role at Oak Law, Robert is instrumental in creating a client-centric culture, actively engaging with clients to understand their unique needs and ensuring that the firm’s services exceed expectations. His ability to balance operational efficiency with exceptional client service sets a high standard for the firm and reinforces its reputation for integrity and excellence. Robert's commitment to continuous improvement and his strategic vision have made him a key leader at Oak Law and a valuable asset in every professional endeavor he undertakes. His dedication to fostering strong relationships and driving organizational success underscores his role as an influential figure in the business and legal communities. https://www.oak-law.com/our-team/natalie-prestegaard monthly 0.5 2026-01-08 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/41273617-8529-42d3-b664-1abe5a64100e/Natalie+P.+bio+pic+good.jpg Our Team - Natalie Prestegaard - Natalie Prestegaard - Law Clerk Natalie Prestegaard is a law clerk with a focus on regulatory compliance, administrative law, and cannabis business licensing in Michigan. She is currently pursuing her J.D. at Michigan State University College of Law, where she serves as an advocate on the Gender and Sexuality Moot Court Team. Natalie is also an active member of the MSU Inn of Court and serves as Treasurer of the International Cannabis Law Society, reflecting her commitment to both professional development and advancing legal discourse in emerging industries. Natalie earned her undergraduate degree in Political Science and History from Hope College, where she focused her studies on systems of oppression and racial equity. During her time at Hope, she served as President of the Pre-Law Society, organizing programs and mentorship opportunities for aspiring law students. In her current role, Natalie supports attorneys and clients on a wide range of legal matters, with particular experience in regulatory compliance, administrative proceedings, and municipal law. Her work includes assisting with licensing through the Michigan Cannabis Regulatory Agency and supporting clients through complex procedural and business challenges. Outside of the legal field, Natalie is a competitive Olympic weightlifter, actively competing at both the state and national level. Her discipline in sport complements her focused and rigorous approach to legal work. https://www.oak-law.com/our-team/category/Associate+Attorney monthly 0.5 https://www.oak-law.com/our-team/category/Chief+Operating+Officer monthly 0.5 https://www.oak-law.com/our-team/category/Law+Clerk monthly 0.5 https://www.oak-law.com/our-team/category/Managing+Partner monthly 0.5 https://www.oak-law.com/our-team/category/Senior+Litigation+Attorney monthly 0.5 https://www.oak-law.com/our-team/category/Paralegal monthly 0.5 https://www.oak-law.com/our-team/category/Senior+Corporate+Attorney monthly 0.5 https://www.oak-law.com/blog daily 0.75 2026-01-08 https://www.oak-law.com/blog/understanding-marijuanas-potential-move-to-schedule-iii monthly 0.5 2026-01-15 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1150910c-caa2-4c99-a5ed-b69934a7b854/unsplash-image-KdC5agsz6ik.jpg Blog - Not Legal, Just Less Illegal: - Understanding Marijuana’s Potential Move to Schedule III President Trump just signed an executive order that could mark a shift in federal cannabis policy. While the order does not legalize marijuana, it does push the federal government toward rescheduling cannabis from Schedule I to Schedule III under the Controlled Substances Act. For cannabis business owners who have been operating under uncertainty for years, this is not just political noise. It is a real development with real consequences, especially when it comes to taxes, banking, financial structuring, cannabis research, and long-term market stability. Here’s what you need to know... What the Executive Order Does & Doesn't Mean On December 18, 2025, President Trump issued an executive order directing the Attorney General to complete the rulemaking process to move marijuana from Schedule I to Schedule III as quickly as federal law allows. This order builds on work that began under the Biden administration, including scientific and medical reviews conducted by the DHHS and the DEA. Those agencies concluded that marijuana has a currently accepted medical use and a lower potential for abuse than Schedule I or II substances. The executive order does not instantly reschedule marijuana, but it signals that the federal government intends to finalize the process after months of delay tied to administrative hearings. Bottom line: Rescheduling is not federal legalization, but this order showcases a meaningful federal cannabis policy shift. Schedule I v. Schedule III Under the Controlled Substances Act, Schedule I substances are defined as having no accepted medical use and a high potential for abuse. Marijuana has been classified this way since 1970, alongside substances like heroin. Schedule III substances are different. They are recognized as having accepted medical use and a lower potential for abuse, with moderate or low physical dependence risk. Moving marijuana into Schedule III would be the first time the federal government has formally acknowledged that cannabis has medical value. That recognition alone is historic and will be paramount in shaping how the industry is treated going forward. The Biggest Immediate Change for Businesses: 280E Relief For cannabis operators, the most significant impact of Schedule III rescheduling is the elimination of Internal Revenue Code Section 280E. Right now, because marijuana is a Schedule I substance, cannabis businesses cannot deduct ordinary and necessary business expenses. Rent, payroll, marketing, insurance, and professional services are largely nondeductible, leaving many operators paying taxes on gross income instead of net income. If marijuana moves to Schedule III, Section 280E no longer applies. That would mean cannabis businesses could deduct normal operating expenses just like any other business. For many operators, this change alone could dramatically improve cash flow, reduce effective tax rates, and free up capital for reinvestment, debt service, hiring, and growth, at a time when state taxation continues to rise . What Rescheduling Doesn’t Change Rescheduling does not legalize marijuana at the federal level. Cannabis would continue to remain a controlled substance under federal law, and state licensed businesses would still operate in conflict with the Controlled Substances Act. Rescheduling does not override state cannabis programs, does not create interstate commerce, does not automatically expunge federal records, and does not instantly fix banking access. Banking, Lending, & Financial Stability While rescheduling does not guarantee access to traditional banking, it may reduce perceived legal risk for financial institutions. Schedule III classification could make banks more willing to work with licensed cannabis businesses and may improve access to loans, payment processing, and other financial services. Similarly, rescheduling creates political momentum. It establishes a framework where Congress may be more willing to advance banking and capital market reform in the future. Rescheduling marijuana to Schedule III meaningfully softens the federal illegality barrier that has historically excluded cannabis operators from the federal bankruptcy system. By rescheduling, marijuana-related activity would no longer be inherently criminal under federal law, undermining the primary rationale bankruptcy courts have relied on to dismiss cannabis cases. Although Schedule III status would not automatically guarantee bankruptcy eligibility, it substantially strengthens the argument that a cannabis debtor’s assets and revenues may be administered without requiring a trustee or court to facilitate ongoing criminal conduct. At minimum, rescheduling makes bankruptcy access more legally defensible and materially more open than it is under the current framework. Research, Credibility, and Industry Legitimacy Schedule I status has long made cannabis research unnecessarily difficult, requiring extra approvals and limiting access to research materials. Moving to Schedule III lowers those barriers and supports expanded research into safety, dosing, and medical applications. For cannabis businesses, more research means better data, safer products, stronger credibility, and a more stable regulatory environment over time. Federal recognition of medical use also reduces stigma and brings federal policy closer to the reality of state regulated markets serving millions of patients. Progress, Not the End of the Road The executive order directs federal agencies to complete the formal rulemaking process, including final rules issued by the DOJ and the DEA. This process will take time, and the details of implementation will matter. Cannabis businesses should work closely with accountants, tax professionals, and legal advisors to understand how and when 280E relief may apply and how to position themselves as the rules are finalized. Rescheduling marijuana to Schedule III does not solve every problem facing the cannabis industry. Federal and state law remain misaligned, and comprehensive reform still requires congressional action, but this order is a critical step forward. If you are a cannabis business owner trying to understand how rescheduling could impact your taxes, operations, or long-term strategy, now is the time to get informed. The experienced cannabis legal team at Oak Law works with marijuana businesses at every stage, from compliance and licensing to restructuring and strategic planning. As federal policy shifts and new opportunities emerge, having knowledgeable counsel can make all the difference. If you or someone you know needs guidance on cannabis business issues, reach out to the team at Oak Law to schedule a consultation and see how they can help protect and position your business for what comes next. Hyperlink to our State tax article. https://www.oak-law.com/blog/what-michigans-cannabis-licensing-freeze-may-mean-for-businesses monthly 0.5 2026-01-12 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/8be62cdd-3d8f-4727-92de-ff1c9f5ed8ec/unsplash-image-h3PWUqxpP_0.jpg Blog - 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. https://www.oak-law.com/blog/the-power-to-tax-is-the-power-to-destroy monthly 0.5 2026-01-08 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/9d2735c9-a662-4a12-a5bd-d847ffb32dd4/unsplash-image-M98NRBuzbpc.jpg Blog - The Power to Tax is the Power to Destroy: - How Michigan Cannabis Businesses can Succeed in an Era of Heighted Taxation In this world nothing can be said to be certain…except death and taxes. Michigan cannabis businesses already juggle licensing, compliance, staffing, and shrinking margins, but starting January 1, 2026, you can add another major line item to that list: a new 24% wholesale marijuana tax. This additional cannabis tax reshapes how cash moves through the entire cannabis supply chain, particularly for vertically integrated and commonly owned operations. If you grow it, process it, and sell it, this law will affect your business from the inside out. The Big Picture As of January 1, Michigan adult-use cannabis will be subject to three separate state taxes: 6% state sales tax 10% retain excise tax NEW! 24% wholesale marijuana tax These taxes don’t replace each other, they stack, and they apply at different stages of the business. Understanding both the financial perspective and the operational perspective is crucial to understanding the new burden created by this tax. Higher taxes generally lead to higher prices, and higher prices often lead to unintended consequences, in this case, pushing consumers towards unregulated markets. When combined, these taxes push the effective tax burden on adult-use cannabis dangerously close to, and in many scenarios to over, forty percent of gross revenue before federal income taxes, local fees, or ordinary operating expenses are even considered. For many operators, profitability will no longer hinge on growth, but on tax architecture. Legally, the wholesaler pays and remits the tax to the Michigan Department of Treasury. Here, you will be considered a “wholesaler” if you are licensed marijuana establishment that makes the first sale or transfer to a retail licensee, including: Growers selling flower to dispensaries Processors selling infused products to dispensaries Microbusinesses and seed-to-sale operations moving product into retail Medical provisioning centers transferring product into adult-use retail Even if the wholesaler passes the cost onto the retailer, the legal responsibility stays with the wholesaler. If the tax isn’t paid, the Treasury doesn’t chase the retailer/dispensary; it goes after the wholesaler. A wholesaler that under-collects, miscalculates, or improperly values taxable transfers may face assessments, penalties, and interest, even where the downstream retailer ultimately benefited from the product sale. The wholesale tax applies once per product, at the first sale or transfer to a retail licensee. That means: Transfers from a grower to a processor = Not taxed Transfers from a processor or grower to a retailer = Taxed Product grown and processed by a vertically integrated business for its own shelves = Taxed The key point is that the tax hits the moment the product becomes retail-ready. Vertically Integrated Businesses If you operate cultivation, processing, and retail under common ownership, you don’t get to skip the wholesale tax just because you’re selling to yourself. For seed-to-sale businesses, the tax is triggered when the product is packaged for retail sale, not when it’s grown, harvested, or processed. In addition, because there is no arms-length sale price between your own entities, the Treasury decides the taxable value by calculating the average wholesale price, which will be published quarterly. You can find the figures for the first quarter of 2026 here. Affiliated v. Non-Affiliated: Importance of Ownership Structure The tax treats transactions differently depending on who’s on the other side of the deal: Non-Affiliated Businesses: If you sell to a retailer you don’t control, the tax is based on the actual price paid, with no discounts (e.g., rebates, trade allowances) permitted to reduce the taxable amount. Affiliated Businesses: If the buyer and seller are under common control (generally more than 50% ownership, directly or indirectly) the tax is based on the average wholesale price set by the Treasury, not your internal numbers. This applies to: Vertically integrated operators Medical provisioning centers internally transferring medical product to adult use; and Microbusinesses What This Means for Your Business Strategy For some businesses, this new Michigan wholesale tax may prompt reevaluation of: Whether vertical integration still makes sense How products are priced internally How costs are absorbed or passed downstream Whether operational efficiency can offset the tax burden Waiting to think about this is risky. The businesses that succeed under this new tax structure will be those that plan early. To start preparing, business can begin by: Mapping out which product transfers trigger the tax Reviewing ownership and affiliate structures Updating contracts and internal pricing policies Building the tax into cash-flow forecasts This tax changes how cannabis businesses make money in Michigan. As Treasury guidance evolves and average wholesale pricing data is published, businesses should expect increased scrutiny, not flexibility, from regulators tasked with enforcing this new revenue stream. If you want help understanding how the new wholesale tax impacts your specific operation, especially if you’re vertically integrated, the experienced cannabis legal team at Oak Law is a trusted resource. From tax exposure to compliance strategy, we help cannabis businesses stay protected, prepared, and profitable. https://www.oak-law.com/blog/keep-calm-and-comply-on monthly 0.5 2026-01-08 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/04d34a69-9378-4790-b90d-99885d1485d6/Keep+Calm+and+Comply+On+Image.png Blog - Keep Calm and Comply On - 12 Rules for Navigating the CRA’s Changes for Cannabis Businesses The Cannabis Regulatory Agency (CRA) just dropped a major set of draft rule changes that every Michigan cannabis business needs to be aware of. While these rules aren’t official just yet, the writing’s on the wall, and savvy dispensary owners, growers, processors, and infused product makers should start prepping now. Why? Because when the final rules hit, it’ll pay off to already be in compliance. Less stress. Fewer surprises. And no scrambling to fix things under pressure. 1. Prequalification Can Now Be Revoked Under the previous rules, it used to be that once you were prequalified, you were good. Now? Not so much. The CRA can now reassess and revoke prequalification if they decide you no longer meet the requirements. So, make sure your financials, background checks, and documentation stay clean and current. If you're applying under the medical framework, you’ll need to show updated bank records, submit fingerprints, and provide proof of funds — no exceptions. 2. License Changes = Paperwork First Planning to update your ownership, business structure, brand names, or even just a DBA? You must submit a written request to the CRA before making any changes. Wait for their written approval first. Don’t just assume it’s all good. Same goes for license renewals: you'll now need to list your full organizational structure and all associated brands upon renewal. 3. Notify the CRA About Almost Everything Lease changes? New TMs? Legal battles? You guessed it...you need to report it. If you’ve got a new contact email or you’re restructuring your business, let the CRA know. It's all about transparency and missing a notification can be a big problem later on. 4. Double-Entry Accounting is Now a Must The CRA is tightening the screws on financial recordkeeping. Double-entry accounting systems are required across the board. If you’re a Designated Consumption Lounge or Marijuana Event Organizer, you must also keep hemp and marihuana revenues separated and reconciled monthly. Basically, document everything. From SOP logs to sanitation checks to packaging runs, if it’s not written down (or logged digitally), it didn’t happen. 5. METRC: Real-Time or Bust You now have 24 hours to enter product info into METRC after receipt. Cultivators? You need to report the exact grow room or area. Processors? You’ll need to track ingredients, methods, and waste. And here's a key one: correct any errors within 7 days, or you could be looking at penalties. 6. Edible Makers: Get Certified If you’re making edible products, you must now employ at least one certified food safety manager with credentials from an approved group like ServSafe, NRFSP, or Prometric. On top of that, you’ll need to: Keep Certificates of Analysis (COAs) for every non-cannabis ingredient. Document every recipe and formulation. Prove your process meets food safety standards. 7. Packaging & Labels Got an Update Labels no longer need to list the strain, but they do need to include: Serving size and dose. Required info for each item in a multi-pack. Packaging must be opaque, resealable, child-resistant, food-grade, and MDARD-compliant. Optional: QR codes for traceability (a great idea if you’re scaling). 8. Infused Products? Keep It Clean Infused products can’t: Resemble candy or snacks kids love. Be shaped like animals, people, or cartoons. Mislead customers about contents or effects. Also, servings must be clearly distinguishable. If it’s a chocolate bar with 10 doses, each square must be easily distinguished. It is the responsibility of both the producer and the seller to ensure edible and infused products comply with these standards. 9. Converted Cannabinoids? Hard No. The CRA has officially banned the synthesis of THC from CBD and other cannabinoid conversions. If you’re making or selling converted products, stop now. This rule goes into effect immediately! 10. Cultivators: Time to Tag Up All plants must be tagged once they hit eight (8) inches, and harvests need to be traceable back to each plant tag. Strain names? Optional for now. Outdoor growers, record what’s grown in each row. Also: All grows must employ a certified pesticide applicator under the update rules. Make sure that credential/certificate is up-to-date, on file, and stored on-site. 11. Employees with Records? Tread Carefully The CRA has outlined how they evaluate job candidates with a criminal record. It's not an automatic “no,” but things like severity, time passed, and risk to public safety will be considered. If someone has a history of distribution to minors or serious offenses, that is a likely dealbreaker. 12. Enforcement Just Got Sharper The CRA now has broader powers, even after your license expires. They can issue immediate suspensions for: Selling untested or unsafe products Falsifying METRC data Using banned ingredients or unapproved cannabinoids Unauthorized changes to ownership or structure Obstructing investigations Employee fraud or serious misconduct Start Now! → Audit your licenses – Is everything current, and correct? → Get your insurance in order – CRA now requires licensees to be listed as the insured and carry at least $100k in liability, with the CRA as a certificate holder. → Clean up METRC – Make sure your entries are accurate and timely and give every employee a unique login if you use integrated software. → Train your team – Especially on SOPs, METRC, and food safety (if you handle edibles). → Talk to your attorney – Keep them in the loop on business structure, DBAs, trademarks, and legal notices. If you’re feeling overwhelmed, you’re not alone. These rule changes are dense, but that’s where we come in. Need help getting compliant or auditing your operations? We’ve got your back. From METRC training to SOP documentation and license modifications, we help cannabis businesses stay protected, productive, and profitable. If you or someone you know is in need of marijuana expertise, the experienced cannabis legal team of Scott Roberts Law is an excellent resource for any cannabis business issues, schedule your consultation today to see if we can assist you with your medical marijuana business concerns. https://www.oak-law.com/blog/conservatism-wins-in-key-marijuana-and-psychedelic-measures-on-state-ballots monthly 0.5 2025-06-13 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/406d016b-d517-4ee7-9783-4be6a88d1e2f/unsplash-image-ls8Kc0P9hAA.jpg Blog - Election Day 2024 - ALL RED: Conservatism Wins in Key Marijuana and Psychedelic Measures on State Ballots It turns out, America is a lot more conservative than the media would have the world believe – this was most apparent from the various state ballot measures legalizing marijuana in 2024. On the eve of November 5, 2024, when Donald J. Trump was elected overwhelmingly to a second term as President, voters in four key Republican states also overwhelmingly voted against legal marijuana ballot measures, … including a surprise outcome in the liberal stronghold of Massachusetts. FLORIDA . . . Not so Fast Recreational Marijuana Legalization LOSES (Amendment 3) Florida voters rejected Amendment 3 (the nation’s most expensive ballot measure of 2024) which proposed state constitutional amendment that would permit the recreational use of marijuana by adults 21 and older. Notably, in Florida, a mere simple majority cannot win – as over half of Floridians voted for the recreational marijuana in Florida at 55.9% approval. That’s because Florida requires a 60% ballot measure threshold to approve the ballot, meaning if you want to use marijuana in Florida now, you’ll have to keep it medicinal (which is already legal). While Amendment 3 would have expanded access to recreational marijuana, the voters instead chose to keep Florida recreational cannabis free– and in the process losing out on hundreds of millions of dollars in tax revenue. Not even Donald Trump’s endorsement of the measure could bring 60% of voters into the fold to make recreational cannabis a thing in Florida. For now (and the not too distant future), the only cannabis you can legally buy or sell in Florida must be medicinal. NEBRASKA That’s a YES! Medical Marijuana WINS with Initiative Measures 437 and 438 The only state in the 2024 presidential election to approve marijuana legalization were the Cornhuskers themselves. Nebraskans overwhelmingly voted to approve a legal medical marijuana scheme in 2 separate votes. Under Initiative Measures 437 (which won by 70.7%) and 438 (which won by 66.9%) Nebraskans can now purchase medical cannabis from a licensed caregiver with a recommendation from a doctor. Measure 437 allows patients with a doctor’s recommendation to use, possess, and acquire up to five ounces of cannabis – and Measure 438 establishes the Nebraska Medical Cannabis Commission to regulate the system for possession, manufacture, distribution, delivery and dispensing of medical cannabis. Thanks to this measure, Nebraskans added a new cash crop to their international “green thumb” reputation. Great work, Cornhuskers. NORTH DAKOTA That’s a NO from me, boss Recreational Marijuana Legalization LOSES (Initiative Measure 5) North Dakotan eked out a no vote on recreational marijuana with 52.5% of voters rejecting Initiative Measure 5, which would have opened the door to recreational use. This measure would legalize the production, processing, sale, and possession of cannabis for adults 21 and over. The proposed legislation included comprehensive rules that would have created a framework for state oversight, detailed protections for adults using marijuana legally, and would have also upheld employer rights to regulate workplace cannabis use. While North Dakotans already enjoy legal medical marijuana, the economic impact of the no vote means the state will lose out on an estimated $10,227,600 revenue from recreational cannabis sales for North Dakota. Doubtless that the state has creative ways of finding that revenue by other means. SOUTH DAKOTA That’s a NO from me, too Recreational Marijuana Legalization LOSES (Initiated Measure 29) Like it’s big brother up north, South Dakotans also eked out a no vote on recreational marijuana with 56.3 % of voters rejecting Initiated Measure 29, which would have legalized recreational marijuana in a state where medical marijuana is already allowed. The failed measure proposed that adults 21 and up could possess up to two ounces of marijuana and grow up to six plants per person, with a maximum of twelve plants per household. This is the state’s third attempt, and notably, voters approved a legalization measure in the 2020 COVID races, but it was subsequently overturned by the state Supreme Court for violating the single-subject rule (because it tried to legalize both medicinal and recreational in one ballot measure). Another reform proposal was rejected by voters in 2022. For now, if South Dakotans want to get high with cannabis, they will just have to do it the old fashioned way – medicinally (which is legal with a doctor’s certificate). MASSACHUSETTS Chill on the Mushrooms Legalization of Psychedelics LOSES (Question 4) The shock of the night might have actually come from a state which has been a pioneer in legal cannabis. While Massachusettsians . . . (. . . Massachusites? Massholes?) voted to legalize recreational marijuana in 2016 when Trump was coming down the golden escalator, those same voters rejected Question 4, an initiative that proposed to decriminalize the possession, growth, and use of five naturally occurring psychedelic compounds: psilocybin (magic mushrooms), psilocyn (the active compound in magic mushrooms), dimethyltryptamine (known commonly as DMT), mescaline, and ibogaine under regulated circumstances. Oregon and Colorado have already passed similar measures to decriminalize these naturally occurring substances. Notably, these substances have already been decriminalized in some Massachusetts communities like Amherst, Cambridge, and Salem. Adults 21 and older would have been able to purchase these substances through licensed facilitators and grow them at home in designated spaces. The measure would also establish a regulatory framework, ensuring cities and towns could manage the operation of psychedelic facilities without banning them outright. Decriminalizing these psychedelics for Massachusetts would have meant a person would be able to avoid prosecution for the possession of these substances. Psychedelics like the ones proposed have been undergoing lots of research over the past decade into the neurocognitive and mental health therapeutic applications that psychedelic therapy can offer its users, many of whom are unresponsive to mainstream mental health treatments like talk therapy and pharmaceutical intervention. SO WHAT DO WE MAKE OF THESE BALLOT MEASURES? It is pretty simple for anyone to see, no matter what you believe about elections, the law, or drugs: America went through an extremely conservative election cycle in 2024 . . . and the results from these 5 ballot measures should highlight that fact for any voters who are still processing what the hell happened on November 5, 2024. And as always, if you or someone you know is in need of marijuana expertise, the experienced cannabis legal team of Scott Roberts Law is an excellent resource for any cannabis business issues, schedule your consultation today to see if we can assist you with your medical marijuana business concerns. https://www.oak-law.com/blog/part-ii-federal-cannabis-crusader monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/81a99b77-fc6f-45a4-86e5-3598d928fc9e/unsplash-image-C23wtD5hTho.jpg Blog - (PART II: Federal Cannabis Crusader) BRIAN HANNA Taking Michigan’s CRA on a Federal Cannabis Crusade. - (PART II: Federal Cannabis Crusader) Brian Hanna, the executive director of the Cannabis Regulatory Agency (CRA) has been a busy guy lately. From advising the DEA on how the federal government should approach legal cannabis nationwide, to bringing down the hammer on cannabis oils in Michigan, Hanna is on a path to make Michigan Marijuana one of the biggest players in the U.S. and maybe even the world. BRIAN HANNA: Federal Cannabis Crusader While Hanna and his CRA are busy cleaning up Michigan’s cannabis reputation, which took a hit with the federal indictment of Rick Johnson, the former head of the Cannabis license board, it’s not without a purpose. Hanna has seen the writing on the wall with Biden’s Marijuana Proclamation and the DEA’s public comment period on federal rescheduling of marijuana. Brian Hanna has both sought guidance from the DEA in its public comment period – and offered recommendations to the DEA. What does that mean for the Michigan cannabis market? The federal government is preparing to reschedule marijuana, possibly opening up the flood gates into a national commercial interstate market. With the fractured and often non-sensical regulatory schemes that pepper our country in “legal marijuana” states, Michigan currently has a few cannabis regulations that may not make sense in the current marketplace. Hanna has taken the lead with a progressive approach on some of these seemingly non-sensical rules. While requesting clarity from the federal government, Hanna has showcased Michigan as an example of the DOs and DON’Ts of cannabis regulations. In the CRA’s official July public comment to the federal Drug Enforcement Administration (DEA), the CRA outlined the multiple pitfalls Michigan’s cannabis regulators have discovered since 2008. Helmed by Brian Hanna, the CRA issued recommendations to the DEA, including improvements to business tax treatment, opening channels to bankruptcy for marijuana entrepreneurs, and making sensical changes to marijuana’s federal regulations, including interstate import/export regulations and simplifying needlessly complex categories of medical and recreational products. Hanna is attempting a powerplay on the DEA by using 15 years of cannabis regulation data to help shape the federal guidance and regulations in the image of Michigan’s CRA. HANNA on Bank Reform Hanna mentioned the need for Bank reform, which we have reported on extensively at Scott F. Roberts Law. The average startup costs for many marijuana businesses range from $1,000,000 -$1,500,000. Hanna has gone on the record to state that this astronomical number has made the industry inaccessible to a large swathe of the population, and the federal banking treatment of marijuana is the main culprit in this inaccessibility. Hanna has provided the DEA with guidance on how the federal government can change its treatment of marijuana businesses via rescheduling to Schedule III to provide marijuana businesses with the same tax incentives as non-marijuana businesses nationwide. Hanna shares a progressive approach to bringing cannabis businesses into the mainstream – by making them equal to any other business in the United States as far as the IRS is concerned. HANNA’s STATE LAB: The Jewel of the CRA The CRA is investing in a State Reference Lab that will meet the enormous testing demand that has overloaded Michigan’s Safety Compliance Facility market and serve as a check against the results of licensed safety testing facilities, some of which have been accused of inflating THC results. The CRA’s State Lab, which aims to go operational before 2025, will be tracking criminal and illicit products to create another channel for regulatory quality controls upon the industry. The rollout of the CRA’s State Lab, however, poses a complicated issue: centralized control over testing is a large accumulation of power over the commercial viability of a marijuana open market. With Michigan’s history of top-down corruption in cannabis, the CRA State Lab does provide potential for abuse of discretion. There is a need for public comment and disclosure of system controls to reassure Michigan cannabis entrepreneurs that everyone, including Hanna’s regime, is playing by the rules. With that said, Hanna plans to use the State Lab for Product compliance and Testing Measurement Calibration to synchronize an incredibly decentralized cannabis product testing protocol. To put it in stoner terms, how many times have you heard “The stuff they sell nowadays is just WAY too strong for me to handle,” or “sometimes you eat a gummy and you go for a ride, but sometimes you go to Narnia and back.” The anecdotal experience you hear from your cousin or your barber or your old high school gym teacher has been heard by Brian Hanna and the CRA – and they’re doing something about it with the CRA State Lab – both to keep consumers safe knowing the “high” they get is exactly what it is labeled to be… and to make the CRA State Lab produce the statistics the Federal government wants to see when creating a model for national marijuana legalization. HANNA’s Michigan: The Federal Marijuana Gold Standard Hanna wants to create a “Gold Standard” for Panels and lab result standards, and to also gather information from the cannabis industry, in an attempt to inform the federal government of determining the proper national standards to use as the federal government lifts its heel off the country’s neck with cannabis policy. Hanna envisions the Michigan model as a blueprint for national adoption. As the automotive capital of the world—and the leader in all things cherries—Michigan has long set the national standards for industries that influence both the country and the world. Why shouldn’t Michigan also claim the national standard for weed? MMFL-MTRM-A: A Game of Legislative Chicken Hanna also wants to apply the pressure on the Michigan legislature: to fix the damn mess that they left us with the Medicinal MMFLA and the Recreational MRTMA laws – and to put it into one unified act. Hanna himself admits that it all comes from the same plant – the same plant will create identical products, but the capacity, amount, maturity, and day-to-day oversite of those two identical products will be treated very differently (MED vs. REC) because they have two completely different pieces of legislation dictating their government regulation. HANNA Wants One Weed Act to Rule Them All Hanna wants ONE ACT: One overarching piece of cannabis legislation to make a marijuana plant be treated as a single unit of cannabis product between the grower and the consumer. Is Hanna our nation’s next marijuana Teddy Roosevelt? That’s not for Scott F. Roberts Law to say, however we can help you with your cannabis business needs. If you or someone you know is in need of marijuana expertise, the experienced cannabis legal team of Scott Roberts Law is an excellent resource for any cannabis business issues, schedule your consultation today to see if we can assist you with your medical marijuana business concerns. https://www.oak-law.com/blog/brian-hanna-taking-michigans-cra-on-a-federal-cannabis-crusade monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/d4fe95c7-35b6-4618-855a-dd2090b20261/unsplash-image-5EUh-tq31eA.jpg Blog - (PART I: War on Oils) BRIAN HANNA Taking Michigan’s CRA on a Federal Cannabis Crusade. - (PART I: War on Oils) By: Scott Roberts and Andrew Haftkowycz Brian Hanna, the executive director of the Cannabis Regulatory Agency (CRA) has been a busy guy lately. From advising the DEA on how the federal government should approach legal cannabis nationwide, to bringing down the hammer on cannabis oils in Michigan, Hanna is on a path to make Michigan Marijuana the biggest player in the U.S. and maybe even the world. His work in Michigan cannabis has also caused attention from other states, with rumors of him being recruited to lead up cannabis licensing in states that are just rolling out their programs. BRIAN HANNA: Cracking down on Conversion Oils Many big players in the Michigan Cannabis industry are angry, while others are relieved that they can finally compete on a level playing field. At a recent CRA meeting, attendees expressed concerns over the discovery that some vape cartridges and edibles contained unregulated CBD conversion oil and banned pesticides. The process of converting CBD to THC, which is not subject to the same testing as marijuana, poses potential health risks due to the lack of oversight and scientific research. The CBD “Grey-Area” What’s the big deal with CBD conversion oils? The oils are derived from hemp plants (which are federally legal) – meaning Hanna’s CRA doesn’t have the ability to regulate their nationwide production, though CRA does have jurisdiction over hemp products in Michigan. Thanks to this federal treatment, some Michigan cannabis manufacturers have been skirting statewide regulations by converting imported CBD into THC products, and CRA has recently begun cracking down on these companies. Thanks to this legal grey-area, the CBD conversion process is largely unregulated in most of the U.S.. This lack of regulation means state regulatory agencies don’t test for the presence of contaminants like fungus, heavy metals, and pesticides. Hanna’s CRA is worried that it cannot make a guarantee to consumers that all cannabis products sold in Michigan are free from safety hazards to its users. This unregulated CBD-turned-THC has the potential to endanger Michigan cannabis consumers by placing potentially harmful unregulated conversion oils into our dispensaries. This is important because consumers are not in the business of checking whether their vape pen is moldy when they rip it for the first time: they depend on the market and the government to protect them from crappy products, and that’s exactly what Hanna’s CRA is trying to do, by proposing rules to ban the conversion of cannabinoids. While he is actively advocating for an explicit ban, the CBD to THC conversion oil is already forbidden under Michigan’s cannabis regulations, regardless of whether the final product results in THC or THC-A. The prohibition, however, is not explicit and requires an analysis of the laws and regulations. Michigan defines marijuana as including more than 0.3% THC or THC-A, which means there is no THC-A loophole like you see in other states. This is also why Michigan gas stations aren’t flooded with tons of THC-A “hemp” beverages like in other states. Michigan rules also only authorize state licensees to produce or sell marijuana, and THC conversion oil is marijuana under state law. Conversion oil, as opposed to distillate extracted by a State of Michigan licensed processor, has THC that is not derived from a State of Michigan licensed facility. This would violate R. 420.103, but it is clear Hanna wants the prohibition to be more explicit. HANNA: “Destroy All the Oil” If Hanna’s CRA passes the new rules, all CBD conversion oil (and that means every single unit – will need to be disposed of. Trashed. Destroyed…. To the tune of a couple hundred million dollars of product. Operators will be explicitly prohibited from selling CBD conversion oil products, and CRA may even conduct random tests on distillate to determine whether conversion oil is being used. The CRA is actively enforcing regulations and working to close loopholes that allow hemp-derived THC products to enter the market. CRA also recently announced crackdowns on a couple Michigan licensed processors that allegedly brought conversion oil into the state regulated system. Consumers are encouraged to stay informed and advocate for stricter regulations to ensure the safety and quality of cannabis products. HANNA vs. Ghost Tags Hanna’s drive for a national tagging model comes from the CRA’s experience with regulating Metrc, the statewide seed-to-sale marijuana tracking system. Hanna identified that Metrc is a viable alternative to be implemented into a federal legal marijuana tracking model. Federal implementation of Metrc would streamline Michigan’s cannabis economy into an interstate commerce model. With cross border cannabis commerce on the horizon, that would turbocharge Michigan’s cannabis economy, making it a significant marijuana manufacturer, exporter, and innovator, regionally and nationally. Hanna recently identified “ghost tags” as an enemy of the CRA. “Ghost tags” are a nickname for Metrc plant tags with improper or subversive data to hide the location and amounts of cannabis products operators in the state. “Ghost tags” let cannabis operators get more (and even unregulated/untested) products into state dispensaries. This is common among outdoor operators, which can claim that a certain amount of product originated from a Metrc tag, even though no such product exist or the amount of such product is greatly exaggerated. This phantom product is then used to mask the source of unlicensed product. The need for a trustworthy interstate tracking and tagging system reinforces Hanna’s war against “ghost tags” in Michigan, to thwart any illegal or criminal schemes to put unregulated (and potentially contaminated) weed into consumer hands. For cannabis entrepreneurs operating in Michigan, this raises increased scrutiny on your operations. In one instance, a large outdoor cultivator has regularly had MSP helicopters fly over the farm to check that all the Metrc tags correspond to actual plants, as opposed to “ghost” plants. It is crucial for Michigan cannabis operators to not only meet the state minimum compliance standards, but to have internal quality controls that can withstand today’s (and tomorrow’s) cannabis regulations. It doesn’t take much for one slip-up – one possibly “high” manager – to create a serious CRA violation (possibly carrying criminal penalties). If you are worried that your current cannabis quality controls are lacking, set up a consultation with Scott Roberts Law today to stay ahead of the CRA and to get ahead in the Michigan Marijuana Business. https://www.oak-law.com/blog/mct-oil-and-cannabis-new-michigan-requirements monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/e5b5105a-ac78-4801-bc8a-bd8c340eea91/unsplash-image-Qd37vTyByBs.jpg Blog - MCT Oil and Cannabis: New Michigan Requirements - New Michigan Requirements On October 1st, 2024, the Michigan Cannabis Regulatory Agency (“CRA”) will require cannabis vape cartridges to be tested to MCT (medium-chain triglyceride) oil. MCTs are naturally occurring fats found in coconut and palm oil, and MCT oil is typically naturally derived from one of these two types of oil. MCT is thought to have potential health benefits when consumed as food, though may have negative health effects when inhaled. Prior to October 1st, CRA was conducting testing of various vaporizer cartridges and reaching out to licensees who tested positive for MCT oil, but without taking corrective action. Now, CRA will officially be requiring vaporizer products pass testing for MCT oil. This includes both vape cartridges as well as disposable pens but does not include other concentrates and “compound concentrate products” such as infused pre-rolls, caviar joints, etc. A product that tests positive for MCT oil cannot be remediated. For many Michigan cannabis licensees, this is all too familiar of a situation. CRA enacted similar testing requirements for another distillate cutting agent—Vitamin E Acetate, after numerous news reports of Vitamin E Acetate causing negative health effects in consumers. However, unlike the Vitamin E Acetate testing, CRA announced this new testing requirement well in advance and alerted licensees who tested positive in advance of implementation. MCT Oil in Terpenes Michigan MRTMA and MMFLA processors who do not add MCT oil to their vapes may think they are in the clear and have nothing to worry about. This is likely most Michigan cannabis processors as use of MCT Oil is fairly rare—we are aware of only a handful of cannabis processors in Michigan who utilized MCT Oil prior to the new testing requirement. But don’t be surprised if a product tests positive for MCT oil even if you don’t use it as an ingredient in your cartridges. That’s because it is often used in terpene mixes as it has many properties that make it ideal for terpene extraction as well as stabilizing and preserving the extracted terpenes. To make matters worse, we know of some terpene suppliers that utilize MCT oil in their botanical terpenes without actually listing it as an ingredient. Even more utilize MCT oil but at least list it as an ingredient to their terpene mix. That means that as a Michigan cannabis processor, you have to carefully screen your terpene suppliers to ensure that they do not utilize MCT oil in their terpene mix. From our anecdotal experience, MCT Oil in terpenes is enough to cause failed tests for individual vaporizer cartridges. In at least one instance, there was enough MCT oil present in a terpene mix to test above CRA’s threshold where MCT oil was not actually listed as an ingredient in the terpene mix by the terpene manufacturer. MCT Oil and Michigan Cannabis CRA’s concern about MCT oil first came to light in the beginning of 2024. At the time, CRA claimed that there was a “citizen group” that was pushing this issue, though despite many references to this group by CRA and news articles, no group was ever identified. With that said, articles about MCT oil began appearing in Michigan publications around the same time that CRA started its own background testing for MCT oil, making clear that there was a coordinated effort to stop the use of MCT Oil in Michigan cannabis products. CRA sited potentially safety concerns as the reason for testing for MCT oil. It seems like CRA is erring on the side of caution, as the research on vaping MCT is extremely limited as of the time of this article. Most studies that have looked at MCT have only looked at it as a food product, as its use as an inhalant is relatively recent. With that said, having a regulatory agency take precautions to protect the Michigan consumers’ health and safety is exactly the sort of thing CRA should be doing. I think I can speak for most Michigan cannabis consumers in saying we would rather not be the guinea pigs in terms of testing the safety of MCT oil in vape products. Michigan appears to be ahead of the curve in banning the use of MCT oil, with very few states testing for MCT oil in cannabis products, Colorado being the most notable one to already do so. Conclusion Starting October 1st, 2024, Michigan was start testing vaporizers for MCT oil, similar to how it tests Vitamin E Acetate, and a failed test for MCT oil cannot be remediated. Unlike the Vitamin E Acetate testing, CRA has given Michigan cannabis licensees reasonable advanced warning about testing for MCT Oil. However, licensees should be careful here, as MCT Oil is present in my terpene mixes, even if its not listed as an ingredient. Thus, a Michigan licensee can fail for MCT Oil without having ever knowingly used it as an ingredient.For questions on Michigan cannabis laws, please contact the Cannabis Business Lawyers at Scott Roberts Law to schedule a legal consultation. https://www.oak-law.com/blog/michigan-cannabis-cultivators-have-something-new-to-celebrate monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/a3e776b4-468f-4ac6-8846-3af406c12d57/unsplash-image-gdTxVSAE5sk.jpg Blog - Michigan cannabis cultivators have something new to celebrate - Growing cannabis indoors is energy-intensive Michigan cannabis cultivators have something new to celebrate. The state’s largest utilities, DTE, Consumers Energy, and Lansing BWL – that together make up 90% of the state’s electricity customers – are giving away even more incentive and rebate dollars to businesses that install energy-efficient equipment. In fact, projects installed as far back as two years ago may be eligible. Eligible equipment includes LED grow lights or LED space lighting, efficient HVAC and dehumidification systems. Historically, indoor cannabis cultivation – or any indoor crop – uses a staggering amount of power, especially when LED lights are not utilized. For any number of reasons, many cannabis cultivators use 1000W High-Intensity Discharge (HID) fixtures, such as High-Pressure Sodium (HPS) or Ceramic Metal Halide (CMH), to provide their plants with photosynthetic light energy. The enormous heat these powerful fixtures produce, plus extreme outdoor temperatures, put enormous stress on powerful HVAC systems. Add in fans, pumps, reheaters and other electronic equipment, and even a small cannabis grower can easily spend tens of thousands of dollars in utilities each year. For many growers, these utility bills can comprise about a third to a half of their annual operating expenses. Why your utility wants to pay you to use less energy Believe it or not, utilities such as DTE, Consumers Energy, Lansing BWL, and other utilities actually want you to use less energy, not more. Because of changes to the utility regulations in 2008, Michigan utilities are financially incentivized to deliver energy savings to their customers, not just more energy. This means that they generally are more concerned with helping you reduce the strain on their electrical infrastructure than selling you more kilowatts and therms. In fact, these utilities budget millions of dollars annually to encourage their customers to use less energy. Most of this money is earmarked for direct payments to their customers to install energy-saving equipment, such as insulation. However, this does also include rebates for LED grow lights that many Michigan marijuana growers have come to love. How much money can I get for my LED grow light, HVAC, or dehumidifier project? Of course, every utility company is going to be different. But as a rule, the more power your project is projected to save compared to an inefficient existing or hypothetical alternative scenario, the greater your rebate check will be. Note that the savings are not just reflected in the amount of energy used by each light as light systems such as HPS also emit substantial heat, which causes increased electricity usage from a facility’s HVAC system as well. How do rebates work? Many cannabis cultivation or dispensary energy-efficient technologies may be eligible for a rebate. The main opportunities for growers to make big bucks are to to install a technology that has demonstrated energy-savings benefits, such as: LED grow lights Highly efficient HVAC systems Standalone dehumidifiers Building automation systems Water conservation and water recapture equipment Hallway and office lighting LED exterior lighting Lighting controls Kitchen equipment, and more. Who is eligible for a rebate? Any legally-operating business with a commercial electric or gas meter is eligible for an energy efficiency incentive or rebate. Unlike most tax rebates and government sponsored programs, cannabis growers are not only eligible but even encouraged to apply for a rebate! When should you submit your project application? In short, as soon as possible! Really, the ideal time to engage your utility around your energy efficiency rebate is before you decide on your final project. But, incredibly as of this writing, DTE and possibly others are paying out retroactively for projects installed since January 2022. This is unheard of in the utility energy efficiency world and may not last long. If you think you may have installed an energy-saving piece of equipment in the past year or two, reach out to the utility or to a Trade Ally right away. Another reason not to delay is that the program budget and terms may change from one year to the next. Utilities always re-evaluate their programs, so there is no guarantee that the program will be around next year. How can a rebate Trade Ally help A Trade Ally is a qualified third-party partner who can handle all aspects of your application submission. They make sure that the utility has all the information they need to give you credit for all of the savings your project deserves – and get you paid accordingly. Their job is to translate utility-speak into plain English and back again. Even if you are not required to work with a Trade Ally on your application, it is often advantageous to do so, as they will know the programs well and can help you take full advantage of your rebate opportunities. How can a Trade Ally help me get my rebates for LED grow light, HVAC or dehumidifier? A good Trade Ally will spend time with you to understand your project. For example, let’s look at how the Enlighten Your Grow Trade Ally team works with their clients to get them their maximum LED grow light rebate, HVAC rebate, standalone dehumidifier rebate, or better yet a facility-wide rebate. They will first meet with you to discuss your overall goals and project objectives to understand how to position your project to earn the most money. They will review the program’s terms and conditions with you and make sure that you understand how the program works and expectations for you, the utility, and the Trade Ally. They will package your proposed project data to develop a scenario that maximizes your rebate opportunity. For more complex projects, they will build an energy model for your facility proving to the utility how the unique attributes of your design will save you energy. They will steer your project through the maze of a utility’s different energy efficiency programs to identify the most lucrative pathway for you. They will serve as the point person with the utility, saving you hours of time dealing with utility bureaucrats, often getting you more money than you would on your own and reducing the uncertainty of your incentive check. Finally, they will ensure that you get paid as quickly as possible by avoiding common obstacles that slow down the rebate process. It’s never too early to think about how to get your incentive, but if you wait too long, you may miss your chance. Sam Milton is the Owner of Climate Resources Group, a company that brings energy and sustainability solutions to growers nationwide. Visit our blog for more information on energy and sustainable for cannabis companies. https://www.oak-law.com/blog/president-bidens-proclamation-rescheduling-cannabis-is-a-b-f-d monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/47072e85-2cca-4623-89e5-d718737dd3dd/unsplash-image-AN7CTlQaRs8.jpg Blog - President Biden’s Proclamation: Rescheduling Cannabis is a B.F.D. - Rescheduling Cannabis is a B.F.D. On Thursday, October 6th, 2022, President Joseph R. Biden made history with one of the most important proclamations to ever occur in cannabis. The Proclamation included pardoning Simple Marijuana Possession Federal Offenders as well as a recommendation that states follow suit. While it didn’t get as much attention in the news media as the pardons, the proclamation also addressed rescheduling cannabis. Specifically, Biden is calling on the Secretary of Health and Human Services to officially review how marijuana is scheduled under federal law. The president even went so far as to point out that fentanyl is scheduled as safer than marijuana – and that this fact makes “no sense”. While many commentators have talked about descheduling, there wasn’t much talk about rescheduling going into this announcement. However, President Biden’s announcement on rescheduling is a BIG F#@KING DEAL for cannabis businesses. It has the potential to be the biggest change to ever happen to the U.S. cannabis industry, and in this article, we will explain why that is. Why Rescheduling Matters for Marijuana Businesses Schedule I Currently, Marijuana is a Schedule I substance under the Controlled Substances Act of 1970, which means it has a high potential for abuse and no recognized medical use. This significantly hampers the use-case for cannabis, and is the largest roadblock for cannabis entrepreneurs in cannabis-legal states who want to improve their business. It also means that IRS Code Section 280E applies to cannabis. §280 states: “No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.” What this means is that cannabis companies are prohibited from deducting ordinary business expenses from gross income if that income is associated with the “trafficking” of a Schedule I or Schedule II Controlled Substance. This is also why cannabis companies don’t actually make nearly as much money as most people believe they do. Schedule II-V Drugs in Schedule II-IV still have various degrees of regulatory control, but are able to be dispensed through prescription. Schedule V are drugs with low potential for abuse such as Robitussin. While marijuana being moved to Schedule II would not alleviate the severe tax burdens cannabis companies currently have, it would allow for medical research and testing, which would put a slow burn on eventual federal medicinal marijuana recognition and legislation. The holy grail is for marijuana being moved to Schedule III, IV, or V. This would effectively lift draconian 280E tax burdens on cannabis companies. The effect of this is hard to understate. Most of the publicly traded cannabis companies that are not profitable under GAAP standards would instantly become profitable. Mom and pop single license cannabis companies that are currently struggling to get by could turn into profitable cash-flowing businesses overnight. To illustrate further, I like to use a simple example. Let’s say we have a dispensary that makes $2M in revenue. You would think they are rolling in money, right? They likely are not. First, half of the revenue typically goes to costs of goods sold—mainly purchasing the cannabis and cannabis products for resale to the customer. That leaves $1M in gross profit. Now, let’s assume the company pays about $100,000 in rent, $500,000 to employees, including budtenders, security, managers, etc., and another $100,000 in various other costs, like accounting, insurance, and having an amazing cannabis business attorney. That would leave a $300,000 profit, right? Wrong. Because of 280E, this dispensary is taxed as if it made $1,000,000, not $300,000. So it’s tax bill may be right around $300,000, which also means this dispensary made ZERO profit for the year after it paid taxes because of 280E. But before we all get too excited, it is important to see the hurdles ahead for getting to this promised land. The ADMINISTRATIVE Rescheduling Route Currently, rescheduling is a process statutorily controlled by the DEA. In order to move a substance through CSA scheduling: The DEA must seek an opinion from the Secretary of Health and Human Services (HHS), which is what Biden stated he would do. The HHS Secretary then petitions the Attorney General (AG), who supervises the DEA, for a rescheduling order, which Biden’s proclamation alluded to. The AG then forwards the request back to the HHS Secretary to authorize a scientific and medical evaluation of the substance, along with a recommendation in a timely manner. This process is done via the FDA pursuant to 23 USC 811(b-c). The AG will often run a parallel request through the DEA and compares both findings consecutively ROADBLOCK: Medical evaluation requires medical research (double-blind studies), which are hard to come by because of the Schedule I nature of cannabis. This is why Congress consistently finds rescheduling marijuana a pipedream. Upon the findings, the AG will act to either stay the scheduling, reschedule marijuana, or remove it from scheduling altogether UNINTENDED OUTCOME: If Marijuana is moved to Schedule II-IV, it may complicate distribution in recreational states, because Marijuana will federally be recognized as a prescription medication (aka doctor’s visits), which will restrain the recreational adult-use market for obvious reasons. However, since it’s currently illegal under federal law anyways, this may not be as much of a roadblock as it first seems. Cannabis: A Schedule III Future? President Biden stated on his twitter that he wants his administration to review marijuana rescheduling. While there is no guarantee this will happen in a timely manner, and also no guarantee it is simply rescheduled to Schedule II, many observers believe there is a future where cannabis becomes a Schedule III or lower drug with this proclamation. Indeed, it would be quite the rug pull by President Biden to announce rescheduling only to Schedule II. Now, if the Attorney General, through the HHS Secretary, finds that appropriate marijuana scheduling is Schedule III or IV, then the Green Rush of the 2020s is back-on-track, because cannabis companies will be taxed like any other legitimate enterprise. All of a sudden, unprofitable companies become profitable overnight, and MSOs have additional money to invest. The Silver Bullet While Administrative chicanery provides prospective relief to cannabis businesses, the overwhelmingly easier option is simple: Congress. Congress has the power of the pen to state that Cannabis is a decriminalized substance, the business of such which should be considered legal. Congress has already attempted, through the SAFE Banking Act and CAOA, to help codify cannabis legislation and keep the industry moving forward. This Congressional action can cure the tax disputes companies, banks, and insurers currently face, and additionally will settle the interstate commerce prohibitions that have mired the cannabis industry from finding its wings. However, to be frank, Congress sucks. If we wait on Congress to act on rescheduling or descheduling, it could be years or even decades. Thus, the announcement by President Biden provides hope that this may come even sooner. And its clear the industry believes this may be the case—cannabis stocks jumped as much as 50% upon the President’s twitter announcement. Until we know more, the cannabis industry will simply have to play wait and see. Nonetheless, it’s hard as a cannabis business owner or professional not to be excited by this announcement. Even if it simply gets rescheduled to Schedule II, it’s still a much needed and long-awaited step in the right direction. https://www.oak-law.com/blog/no-good-deed monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/c7ffaec3-51df-46b9-8576-0e02d1e7d621/unsplash-image-6Yp99zMrsAI.jpg Blog - No Good Deed… Restricting Medical Dispensaries with Detroit’s New Ordinance - Restricting Medical Dispensaries with Detroit’s New Ordinance Restricting Medical Dispensaries with Detroit’s New Ordinance Will Hurt Medical Marijuana Businesses, and Their Business Partners If you follow the Michigan cannabis industry at all, you are well aware that the City of Detroit has just passed an updated ordinance creating a recreational licensing program and is finally bringing recreational cannabis to the city. The ordinance has long been awaited as Michigan and Detroit legalized and then respectively opted into recreational cannabis in 2018. However, the city still does not have any recreational cannabis businesses within it. As a result, Michigan’s largest economy (Detroit) has effectively been kept out of one of the fastest growing industries in the country. This delay means Detroit has missed out on potentially millions of dollars of tax revenue over the last four years. Nevertheless, the city has finally crafted an ordinance that will allow for the business owners to apply for and receive recreational cannabis business licenses. However, there are many who may not appreciate this specific licensing structure. The city aligned its ordinance close enough to other municipal adult-use ordinances and Michigan statutes that it prevailed under legal challenge. Despite their legal win, one aspect of the new Detroit ordinance runs contrary to the outcome many industry observers hoped to see for medical marijuana provisioning centers (i.e. medical dispensaries that have been operating and employing Detroit residents since the MMFLA was passed). This ordinance language is found in § 23-6-38(e), which states a requirement that any current operator of a medical cannabis dispensary will not be able to apply for a recreational license until January 1 of 2027. The reasoning behind this forced waiting period is likely to give a chance for new business owners to enter the city and apply for recreational licenses without competing with experienced medical dispensary entities. However, this runs counter to what most (if not all) medical provisioning center operators in the city assumed would occur when Detroit finally crafted a viable adult-use ordinance. While medical operators believed they would be first in line to receive recreational licenses because they were experienced with government compliance, the Detroit is structured to give more chances to newcomers in the industry by restricting experienced, (and most importantly) compliant cannabis entities from even applying. The fact is that medical cannabis businesses in Detroit have been compliantly operating for many years – they know the industry dos and don’ts – and are best equipped to handle cannabis businesses that benefit city, government, and taxation interests. This is often what has occurred in Michigan municipalities that have transitioned from a medical only program to a med and rec scheme – perhaps the city recognized what would occur if it allowed the experienced medical businesses to compete for rec licenses – they would properly win available licenses from being the most viable candidates. Regardless of the reasoning, it is a harsh reality for medical business owners who have invested millions in anticipation of maturing their businesses into recreation dispensaries. For many medical entities, the strategy was to operate a successful medical cannabis entity for a time, participating in city investment and establishing themselves with the CRA and other regulatory agencies, to make their process of getting a recreational license that much smoother to bring a rec dispensary online. Unfortunately, it appears that this strategy will not bear the fruit these businesses believed it would. Thus, the investment that these medical provisioning centers represent to their owners is likely to be lost over the next 5 years. Being unable to apply for and add recreational options to their medical storefronts is very likely to put many if not all of the medical operators out of business. The medical industry simply cannot compete with the recreational industry as far as sales and revenues are concerned. The medical industry has steadily been shrinking statewide in every state that has also legalized adult-use cannabis. There will always be a minimum basis of medical patients given the myriad of medicinal properties cannabis has with more being discovered, but the simple fact is that purchasing recreational cannabis is… simpler. Not having to go through the expensive certification process with a physician, not having to complete the application with the state, and no patient registry card fee has resulted in many Michiganders opting to just not renew their status and purchase recreational cannabis. The result is a precipitous drop in medical sales and a far greater increase in recreational sales – there is currently a 6:1 ratio of rec sales to medical sales. What this looks like at street level is the decline of medical operators of all kinds, or at least those that are prohibited from partaking in recreational sales. Most municipalities do not have restrictions on medical entities adding recreational capacity to their operations, from cultivators and processors to testing facilities and dispensary locations, they handle both medical and recreational cannabis. Without the ability to break into the recreational industry as it picks up speed in Detroit, many medical cannabis businesses are preparing for the worst. There are currently 62 active medical dispensary licenses in the city of Detroit, more than any other Michigan city. Those 62 licenses represent so much more than just 62 businesses being threatened by the recreational ordinance restrictions, they represent the hundreds of employees associated with these businesses, they represent the contracts they have with cultivators, processors, laboratories, and transporters in the industry that help to sustain those businesses and their employees. Those licenses also represent the hundreds of thousands of dollars those businesses have invested in the Detroit community with the hope that they would be able to acquire recreational licensing and expand their established medical businesses. As of now, the future is unclear for medical dispensary owners. The way the new ordinance currently reads, medical dispensary owners will have to find a way to survive until Jan. 1, 2027 to even apply for recreational retailer licensing. This provides no guarantee that they will win a license from those applications, or if there will even be any retailer licenses available at that time. There could be provisions added to the ordinance that would offer some sort of protection to medical dispensary owners, but without a strong advocate base and the numerous delays the ordinance has already undergone, any further changes to it seem unlikely. This may spell turbulent seas ahead for medical dispensary owners, and it shouldn’t be done alone. The experienced cannabis legal team of Scott Roberts Law is an excellent resource for any cannabis business issues, schedule your consultation today to see if we can assist you with your medical marijuana business concerns. https://www.oak-law.com/blog/sign-of-things-to-come monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/ba66d0e1-adf6-4a18-8379-33bde25a3ad0/unsplash-image-XmMsdtiGSfo.jpg Blog - Sign of Things to Come? - Fluresh LLC Obtains Largest Cannabis Commercial Financing Ever It is no secret that one of the largest obstacles for business owners in the cannabis industry is financing. The investors are certainly there at every level, from the individual angel investor, to medium-sized state investment firms, to large-scale commercial banks and blue-chip investment lenders. The issue arises at the large-scale banking level because those banks and investment firms are federally regulated entities – and cannabis is a federally illegal substance under the Controlled Substance Act (CSA) – meaning that despite numerous state legalizations, those entities cannot invest in any business that works with, or in any way touches, cannabis. Nevertheless, the finance industry is nearing a point where it can no longer ignore the mountainous profits that could be garnered by investing in cannabis. This is evidenced by a growing number of state financial institutions that are not FDIC backed and as a result are increasingly willing to lend to cannabis companies. The chief practical concern amongst financial entities is risk, and obviously there is no larger risk than the possibility that an entire business, or even an entire industry, could be shut down by the federal government as an illegal operation selling an illicit products. But as more states legalize either medical or recreational cannabis programs, this fear seems to be dissipating and local banks are taking notice. Fluresh LLC The signal for better days to come regarding cannabis financing came in the form of the largest commercial financing deal ever completed for a cannabis company. The deal, which is backed by an undisclosed “federal regulated commercial bank headquartered in southeast Michigan,” is a $48 million financing deal. The deal is composed first of a $25 million Bank Note for aggregate gross proceeds with a variable interest rate set at 5.75% currently with a maturation date of December 2024 and secured by Fluresh property in Adrian, MI. The second part of the deal is $23 million in the form of private debt consolidation on its Grand Rapids, MI property, allowing Fluresh to reduce its number of creditors to just this unnamed southeast MI commercial bank. This is crucial for the business as many smaller private investor loans usually involve much high interest rates that can cripple growth when payments are due. Assuming its deal with Fluresh LLC goes well, it would only be logical for this mystery commercial bank to extend financing to more cannabis operations, but they may be hesitant because doing so still technically remains an illegal activity for federally regulated financial institutions. Currently, this means that for every transaction this federally regulated bank makes with an entity or business that works with cannabis, they must create a suspicious activity report which may restrict the transaction or in the very least make it less attractive to the bank. Ultimately, this entire situation dynamic begs the question: What is the federal government waiting for when it comes to permitting commercial banks to work with cannabis? SAFE Banking Act Aside from blanket legalization, The Secure and Fair Enforcement Banking Act (SAFE Banking Act) is the simplest solution to cannabis banking concerns at the federal level, as the 62% of American voters who think marijuana should be legalized wait for Congress to legislate. The SAFE Banking Act is an order from Congress to the Justice Department and Financial Crimes Enforcement Center (FinCEN) to stop policing financial institutions for the sole reason that they are suspected to be invested in cannabis operations. Such legislation would be game changing for the cannabis industry as it would allow the full potential of the American finance industry to fund painfully profitable businesses – painful for federally regulated banks because such businesses are usually the exact type of entities commercial lenders want to loan to. So, What Is The Government Waiting For? The simple answer is that it is not waiting, but instead is being delayed by its own internal processes and a small group of staunch conservative senators that refuse to make the popular choice. The SAFE Banking Act has been passed by the US House of Representatives a total of 6 times either as a standalone bill or as a part of a larger bill, the most recent of which came as a standalone in April of 2021 with 321 votes for the bill. The bill has been floating in limbo for well over a year, but the US Senate has still not introduced the bill for a vote. This may be part of a larger strategy for senators that do not believe there is currently enough support for the bill, but the lack of transparency regarding the status of the bill leaves many of its supporters frustrated and confused as to why there has been no Senate action. Looking Ahead The hopeful takeaway from this record-setting commercial financing award to Fluresh is that the proverbial floodgates are giving way to a deluge of FDIC-regulated lenders eager to get into business with profitable entitles within the cannabis industry. You’ll often hear professionals in many commodity-based industries discuss what it takes to become the ‘Coca-Cola’ of that industry. No matter the business features to mold such marketing success, there is no mistaking Coke’s accomplishments without admiring its large-scale commercial lending. Currently, the shift is happening slowly, as only forward-thinking lenders, who refuse to see cannabis as an unseemly risk, are forecasting that federal legalization is imminent. Investing in/lending to successful cannabis businesses will be a no-brainer decision once either: The SAFE Banking Act is passed, or Blanket federal legalization occurs. For now, it remains within the jurisdiction of banks with gumption and vision. For business owners in the industry, this loan represents a goal to strive for – consolidating debts owed to smaller private lenders and getting rid of the exorbitant interest rates they were forced to accept from those lenders. It poses a holy grail financing option as a saving grace for a small business. For now, however, it is a waiting game – waiting to see if the SAFE Banking Act will pass the Senate or if the industry will have to wait for blanket federal legalization. Waiting on Washington is like watching paint dry, but with public sentiment so strongly in favor of legalizing cannabis, the wait should be a short one. https://www.oak-law.com/blog/new-federal-court-ruling-delta-8-thc-is-not-an-illegal-substance monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7d514413-941b-40bb-9114-4191baf19130/unsplash-image-BBZDOHhYU2s.jpg Blog - New Federal Court Ruling: Delta-8 THC is NOT an Illegal Substance - Delta-8 THC is NOT an Illegal Substance A very recent decision by the federal court for the Ninth Circuit of Appeals in California granted an injunction that has the potential to give delta-8 THC legal status across the U.S. The issue of the case, AK Futures v. Boyd Street Distro, focused on a claim by AK Futures that the defendant was illegally selling a counterfeit version of its properly-trademarked products without AK’s consent. In its defense, Boyd Street Distro claimed that it indeed could sell the “allegedly-counterfeit” products because these products contained delta-8 THC, making them federally illegal and therefore impossible to be protected by trademark. Thus, the crux of the issue hinged on whether or not delta-8 THC is considered federally legal or illegal under the 2018 Agriculture Improvement Act (Farm Bill). The language of the ’18 Farm Bill allowed for the legal production of industrial hemp, recognizing its versatility and functionality as a viable alternative to many industrial plastics and fibers. The goal of the Farm Bill was to remove the barriers that hemp producers experienced while the plant was considered a controlled substance. To accomplish this, the Farm Bill provides a clear definition of hemp and allows for its production at an industrial scale. However, this statutory definition of hemp focuses solely on the concentration of delta-9 THC, which is the main psychoactive component of cannabis. Congress defines hemp as any derivative, extract, or cannabinoid originating from the cannabis plant that does not contain any more than 0.3% delta-9 THC. What the industry has critically noted from this language was the lack of a ban on THC, creating a loophole for delta-8 THC products. If the Ninth Circuit was persuaded by Boyd Street’s argument, that would require them to consider delta-8 as a cannabis derivative closer to psychoactive cannabis than it is to the legalized industrial hemp. This would in turn make the products Boyd Street was selling federally illegal products, but it would also make any trademark or trademark claims by AK Futures null and void because they could not hold federal trademark rights on illegal substances. The court, however, did not consider the products federally illegal. Instead, the court granted the injunction for AK Futures, relying on the plain meaning of the language in the ’18 Farm Bill. The plain language interpretation of these portions of the Farm Bill simply removes hemp from the definition of “marijuana” in the Controlled Substances Act. The court was compelled to comfortably categorize delta-8 THC as ‘hemp’ since the delta-8 THC concentrate at issue was properly understood as a derivative, extract, or cannabinoid that originated from cannabis and contained less than 0.3% delta-9 THC. This classification ultimately means that in the eyes of this federal appeals court, delta-8 THC is not an illegal substance, so AK Futures’ trademarks are perfectly valid and deserving of the injunction it requested. Because the court did not deem the language ambiguous, it did not defer to other means of statutory interpretation such as applicable federal agency perspective. Nevertheless, the court opined that if it did consider the DEA’s perspective, it too would support the position that delta-8 THC is not an illegal substance. What the court is not doing here is making a declarative opinion that all delta-8 THC is and shall be legal in all the United States, and it would be a regulatory danger to think it was. What the court is doing is refusing to interpret the law beyond what Congress has written. The fact is that the term “delta-8 THC” does not appear in the language of the ’18 Farm Bill or the Controlled Substance Act, so to extend an interpretation that it is an illegal substance would be improper. According to the Ninth Circuit, Congress’ silence on the matter is something Congress itself will have to address, and until then it is unwilling to declare the substance illegal. Lawmakers may have inadvertently created this loophole for delta-8 THC, but if that were the case, they would have to correct the mistake. Relying on the absence of language expressly making delta-8 THC illegal, and not affirmative language making it a legal substance, the decision would appear to not supersede state laws that validly address the legality of delta-8 THC. As of 2021 Michigan is one such state, where House Bill 4517 makes delta-8 THC a regulated substance under the state’s Cannabis Regulatory Agency. Even if the presumption now is that delta-8 THC is to be treated as a legal substance, separate from “marijuana” on the Controlled Substance Act, a dedicated state law should still be able to prohibit the product completely or enforce governmental regulation on the product as a psychoactive compound, as was done in Michigan. This will change if and when Congress decides to add definitive language making delta-8 either legal or illegal. https://www.oak-law.com/blog/from-canna-ballot-to-canna-business-opt-in-petitions-and-city-elections monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1e9902bf-7fca-4723-9618-3ded9ebc995a/unsplash-image-1UY8UuUkids.jpg Blog - From Canna-ballot to Canna-business: Opt-In Petitions and City Elections - Opt-In Petitions and City Elections By: Scott Roberts and Andrew Haftkowycz Whether we call it Marijuana, Marihuana, or Cannabis, Michiganders statewide have voted (several times now) to give themselves the right to have and enjoy Marijuana legally inside the state. But what does that mean exactly as far as the right to establish a business that grows, sells, and distributes cannabis (marijuana, or marihuana)? What you may not know is how cannabis business licensing in your cities and counties work. For aspiring cannabis entrepreneurs, this is where things get complicated. Unless you live on the West Coast, many (and in some cases most) people in your town are still not too keen on having a fully operational cannabis store within city limits. Be it the smell, or the thought of little Timmy smoking weed on the corner, a lot of municipalities go to great lengths to make sure that their town will not have a cannabis dispensary. What Are Your Options? Opt-In The Michigan Regulation And Taxation Of Marihuana Act (MRTMA) has a provision that permits all Michigan municipalities to “completely prohibit or limit the number of marihuana establishments” in their city, village, or town. This means cities can either “Opt-In” or “Opt-Out” of cannabis business licensing within their local government. While MRTMA (the state law) gives citizens the green-light to enjoy cannabis, these “Opt-In” provisions punt the question of cannabis businesses to City Hall – putting cannabis entrepreneurs at the mercy of the City Clerk and the City Council. While booming metropolitan areas with younger, more liberal demographics have no problem telling the mayor “Yes” on dispensaries in their town, the opt-in/opt-out battle becomes more decisive in sleepier rural towns, as well as in more up-scale suburbs with more conservative demographics. To put this in perspective: just because Detroiters want legal marijuana, it doesn’t mean Grosse Pointe does. Municipalities that have already voted to opt-out of marijuana licensing can cause lots of frustrations to citizens and prospective entrepreneurs alike. However, thanks to MRTMA’s language, the state allows citizens of these municipalities to be heard come Election Day. Petition For a Greener Future Initiatives and Referendums Initiatives and Referendums processes are built into just about every city charter. These procedures allow citizens to: Draft an ordinance petition Gather signatures toward the petition File the petition with the City Council Get the petition on the ballot for voting This is the standard route to change laws at the local level. Word of Warning If it sounds too good to be true, it is. While the petition process exists for cannabis entrepreneurs to change a city’s code of ordinances, it can be difficult to actually move your petition forward. Every city is different, and the Initiatives and Referendums section with a City Charter reflects the values of that city. Depending on the city, you may be at the mercy of the city charter’s obscure rules for gathering signatures and meeting deadlines. Some cities are very relaxed with their process, and other cities require the petition signature circulators (not just the signers) to all be qualified electors of that municipality. You need to go through this Initiatives and Referendums section with a fine toothcomb to make sure you are ready to commit to their standards. Knowing exactly how your target city has written their Initiatives and Referendums clause will make or break your campaign to Opt-In for cannabis business licenses. Make sure you have experienced professionals that can properly research these regulations (and work tirelessly to make sure your signatures are gathered properly). If you do decide to take on your local government to adopt an Opt-In ordinance for cannabis business licensing, it will be your mission to become very familiar with the petition process. Deadlines… Don’t Just Sit There, Stupid! The Initiatives and Referendums process has built-in deadlines on purpose. Think of these deadlines as an immune system that protects the community from onerous citizens who want to change the law too drastically. However, issues arise when City Hall does whatever it can to subvert the will of the voters (using minority-rule so Main Street can’t have a dispensary). Whether these cities operate above-board, or have ulterior motives, the plain text of that charter governs (mostly). For instance, some cities require a 10-day period for the City Clerk to officially file a petition once they receive it. That means if you get your petition in on-time, the City Clerk might wait an additional 9-days to “file” the paperwork (per the city charter), but then claim that the petition is non-compliant, and thus cannot be filed because it is past the deadline. Now imagine a city with a 45-day period… Remember: Marijuana is still very taboo in polite society, and if a City Clerk or the City Council does not favor cannabis personally, they will pull every lever possible to avoid cannabis touching “their” Main Street. Early Bird To make sure the law is on your side, plan ahead with your petition. Start as early as possible with your petition circulation (up to 180 days before the deadline), so that by the time the City Clerk wants to use the built-in city charter period, you still have a good month or two to get latent signatures. Home Rule vs. MRTMA Cities do have an interest in protecting their communities, and to make laws that protect the community’s values. And this, like other things the government does, can be abused. The trick is to know when the city has overstepped its authority. Home Rule City Act The Home Rule City Act (HRCA) was established in Michigan to give cities agency and police power that reflected the citizens and the community. This act allowed cities to dictate, among other things, how elections and ballot initiatives operate. Put simply, it gave City Hall more power to enforce their laws, not just Michigan’s laws. When petitions are involved, a city will claim that they have the power to make certain Initiatives and Referendums rules that are much stricter than what the state requires. Some cities can require upwards of 25% of qualified electors in the municipality to reach the signature threshold, however, this only applies to an issue that only touches interests of the city, not the state. State Law Supersedes City Law The HRCA does have its limits, which can be found right at the end of the HRCA statute stating “No provision of any city charter shall conflict with or contravene the provisions of any general law of the state.” So, for an issue like cannabis licenses that require CRA involvement, the HRCA must bow to the MRTMA’s requirements. This means that the MRTMA provision stating that cannabis business license ordinances will go to electors “at the next regular election when a petition is signed by qualified electors in the municipality in a number greater than 5% of the votes cast for governor by qualified electors in the municipality at the last gubernatorial election,” that means the city must comply. If a City Clerk denies a MRTMA cannabis business licenses ordinance petition based on a signature threshold in conflict with MRTMA’s 5% threshold, the state law will trump the city law. Befriend the City Clerk… or Die Trying To become a consequential cannabis entrepreneur in a new municipality, you will need to demonstrate that you are a legitimate businessperson who the city can rely on. And that means you will be dealing with the City Clerk. A lot. It is important that you develop a rapport with the City Clerk (be it by email or in-person), because they are the gatekeepers in your quest to petition for a city’s Opt-In. Even if you fall out of their good graces, there are still ways to navigate these consequential waters. Canvassing One duty the City Clerk is trained to use against ne’er-do-well petitions is to canvas for improper signatures. Canvassing means to check that all the signatures are real and not just taken off a row of gravestones at the local cemetery. It is an important feature of our democracies, yet if a signature falls just outside strict compliance with the petition rules (think misspelling a street name strict), then the City Clerk can reject that signature (and petition) outright. The City Clerk can also wait the full 10-day period to let you know about the rejection. Two remedies can be deployed to avoid this petition catastrophe. The first (mentioned above) is to give yourself ample time to get alternate signatures, but the second is to get as many signatures as possible. Even if 50 signatures get rejected, it won’t matter if you are 300 signatures over the threshold. Go big. Do not stop your signature circulation until your ballot has been officially approved by the City Clerk, and you have an official form stating your petition is on the ballot. Ministerial Duties Another tactic the City Clerk might use is denying your petition on the content of the petition. Things get complicated when a municipality decides to fight a cannabis Opt-In petition, because the law is murky on what the City is actually allowed to do. Some courts have found that a City Clerk has a ministerial duty to canvas signatures, but that the duty ends at the signatures. Despite this duty, there are countless court cases where a City Clerk rejects the petition stating that it is illegal or non-compliant with the municipality’s laws. The thing is: the City Clerk is not authorized to make that determination (that is a mixed question of what the citizens think, and what the city attorney finds). If you do find yourself in conflict with a City Clerk violating their ministerial duty, you may have a cause of action for a writ of mandamus, in which case you should find proper legal representation with a firm that is experienced in handling cannabis clients and cannabis litigation. The experienced attorneys of Scott Roberts Law Firm have been servicing the legal needs of business owners in the cannabis industry since 2014, making them a top choice to address any cannabis business problem. Our team can help you get your company moving in the right direction. https://www.oak-law.com/blog/best-practices-to-remain-compliant-with-the-cra-in-mi monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7011fcbc-2a4c-419d-b78d-e3885b691f6d/unsplash-image-rxpThOwuVgE.jpg Blog - Best Practices to Remain Compliant with the CRA in MI - Remain Compliant with the CRA The Cannabis Regulatory Agency of Michigan (CRA), formerly the Marijuana Regulatory Agency (MRA), is virtually the same agency post name-change. In an effort to recognize the proper scientific name of the product it monitors, the Cannabis Regulatory Agency has released a new set of Best Practices for all CRA stakeholders. These new practices will add to the prior regulations updates released by the MRA last year. The new Best Practices release follows on the heels of the rebrand from MRA to CRA –the new set touches on nearly every aspect of how to stay compliant in the cannabis industry of Michigan. Destruction The CRA details the proper destruction-of-products methods for noncompliant & unmarketable products. To properly dispose of unusable products, documentation of the destruction must be recorded, including the full Michigan Enforcement Tracking Reporting & Compliance (METRC) tag number, the reason for destruction, and photo/video evidence of the actual destruction of the product required to be kept on a waste/destruction log. After destruction, the package(s) must be properly reduced to 0 on METRC and entered as “waste” for the reason code along with the date of destruction. Even though documentation is not required to be sent to the CRA, all of the above materials must be available to the Agency upon request. Any product placed on administrative hold must obtain CRA approval before destruction, as the product(s) may be needed for further investigation. The following is a CRA checklist for creating the photo/video evidence of a destroyed product. PHOTO/VIDEO EVIDENCE: The CRA must be able to identify the destroyed product and the actions taken by the licensee within the photo/video evidence. photo/video evidence. Make sure the destruction is taking place with a clear camera view The frame should be free of obstructions All staff destroying product should be behind the product to not obstruct the view The product should be shown in its storage container before any product is removed. The METRC tag number should be visible (if possible, hold it up to the camera). The weight or count should be shown prior to destruction, either by weighing the product or by placing the individual items in groups (i.e., 10, 20, etc.) to clearly demonstrate the number of products on hand that are being destroyed. Transfers Any transfers of cannabis products must be traceable in the METRC system. To properly transfer marijuana products from one licensed business to another, the product must have an up-to-date package/transfer tag. This tag will be assigned to a finished product and must be consistent throughout its transfer to the correct finished product. For plant products and intermediate products (which are used to finished product), the original source package tag is not required to be retained, because a new package/transfer tag will be issued for the final finished product. Labeling Requirement Variations Cannabis business-to-business transactions vary depending on the CULTIVATOR-TO-CULTIVATOR Requirements for transfer tags: Business or trade name License number Package/transfer tag assigned by METRC Name of the strain Date of harvest Seed strain Universal symbol PRODUCER-TO-PRODUCER Requirements for transfer tags: Business or trade name License number Package/transfer tag assigned by METRC Universal symbol CULTIVATOR/PRODUCER-to-SALES LOCATION (Requirements are more complex as they are being directly marketed and sold to consumers.) Business or trade name License number Package/transfer tag assigned by METRC Business or trade name & Marijuana license number of packager of the product (if different from the product of the product) Date of harvest (if applicable) Name of strain (if applicable) Net weight (US or Metric) THC and CBD concentrations (within 10% accuracy from licensed potency-testing lab) Activation Time of the product (in writing or with a picture) Name of the licensed compliance lab that tested the finished product Universal symbol for marijuana products published by the CRA A warning that MUST include all the following statements on any final cannabis product “It is illegal to drive a motor vehicle while under the influence of marihuana”. “National Poison Control Center 1-800-222-1222.” For products being sold by a marihuana facility that exceed the maximum THC levels allowed for products sold under MRTMA: “For use by registered qualifying patients only. Keep out of reach of children.” For all other products: “For use by individuals 21 years of age or older or registered qualifying patients only. Keep out of reach of children.” In clearly legible type and surrounded by a continuous heavy line: “WARNING: USE BY PREGNANT OR BREASTFEEDING WOMEN, OR BY WOMEN PLANNING TO BECOME PREGNANT, MAY RESULT IN FETAL INJURY, PRETERM BIRTH, LOW BIRTH WEIGHT, OR DEVELOPMENTAL PROBLEMS FOR THE CHILD.” Product Categories – Production Batch Changes Cannabusiness people know very well that the final forms of many marijuana products are not derived directly from cannabis flower. Many products are created from cannabis concentrate, known as production batches. These production batches must be assigned new package tags for complaint usage to make new products like vaporizer cartridges or infused edibles. Those finished products must be given a new final package tag to make it compliant. Weight is Key The main takeaway from this practice is to confirm that the weights of the products are marked on the package tags at every stage. This provides transparent data to the CRA on what and how much of the product is being used in both the production batches and the finished products. Samples A large area of concern for the CRA comes from the concept of product samples. Obviously, samples are a great way to attract and retain customers (both individuals and licensed cannabis businesses who want to sell your products). Compliant samples avoid some of the more stringent requirements described above for regular cannabis product transfers. The CRA monitors when, where, how, and to whom samples are provided to offer this relaxed treatment. Trade Samples Trade samples are samples that a cultivator or processor/producer may send to a cannabis retail location to market the product and secure purchase orders. These types of samples do NOT need to use a licensed secure transporter if the sample size does NOT exceed 15 ounces of cannabis flower or 60 grams of cannabis concentrate. Samples must still be entered into METRC as a “sample”, of course, but the sample must be adjusted in METRC to account for how much “sample” is being distributed out of the source package by quantity. The adjustment reason is marked as “trade sample,” and must include the license number for the receiving cannabis business and the quantity of product being distributed. A producer or cannabis sales location receiving a trade sample may distribute the trade sample to its employees to determine whether to purchase the cannabis product. A producer or cannabis sales location is limited to transferring a total of 1 ounce of cannabis, a total of 6 grams of cannabis concentrate and cannabis-infused products, with a total THC content of 2000 mgs, of internal product samples to each of its employees in a 30-day period. All licensed cannabis businesses providing samples to either other cannabis businesses or to employees of their business must keep up-to-date internal records of all allotted samples. Keeping accurate records of samples provided will eliminate the potential compliance issues many businesses experience with over-providing samples and risking their license in the process. Internal Product Samples Internal Product Samples require have even oversight for compliant transfers. These sample transfers to employees may be performed by cultivator, producer, marijuana sales location, marijuana microbusiness, or Class A marijuana microbusiness. These types of sample batches may NOT be transferred or sold to another licensee or consumer. All internal samples DO need to be entered into METRC as internal samples to remain compliant. To record internal product samples in METRC, adjust the source package down to account for the product being distributed. The adjustment reason is marked as “internal product testing samples.” Each employee’s name, METRC ID, and quantity of product received will need to be included in the note for the adjustment reason. All cannabis businesses are required to keep internal records of how much product was provided to each employee. METRC Transfer Codes and When to Use Them ADULT-USE AFFILIATED TRANSFER: For transfers between adult-use licenses with same ownership ADULT-USE SEEDS AND SEEDLINGS: For adult-use cultivators to bring in seeds or seedlings from individuals aged 21 or older CAREGIVER: For medical cultivators to bring in seeds, seedlings, tissue cultures, or cuttings from a registered caregiver EDUCATIONAL RESEARCH LICENSE TRANSFER: For transfers to an Educational Research License EXTERNAL CANNABINOIDS: For acquiring hemp-sourced cannabinoids from businesses that do not hold a marijuana license GROW TO GROW BETWEEN MEDICAL AND ADULT-USE: For equivalent license transfers between cultivators HEMP CBD R&D CONVERSION TRANSFER: For bringing hemp-sourced CBD from a business that does not hold a marijuana license for the purposes of R&D IMMATURE PLANTS BETWEEN MEDICAL AND ADULT-USE: For transferring immature plants between equivalent medical & adult-use licenses under same ownership INFUSION TRANSFER: For transferring plant material for extraction when an upfront price has not been negotiated MEDICAL AFFILIATED TRANSFER: For transfers between medical licenses with same ownership MICROBUSINESS TRANSFER: For allowable transfers of seeds, tissue cultures, and clones (which do not meet the definition of a plant) to a microbusiness. PROVISIONING CENTER AND RETAILER BETWEEN MEDICAL AND ADULT-USE: For equivalent license transfers between sales locations PROCESSOR TO PROCESSOR BETWEEN MEDICAL AND ADULT-USE: For equivalent license transfers between producers TEMPORARY EVENT: To create a manifest for product going to a temporary event. | This transfer must be voided after the manifest is printed. TEMPORARY EVENT – RETURN: To create a manifest for product returning from a temporary event. | This transfer must be voided after the manifest is printed. TESTING TRANSFER (to Safety Compliance Facilities): For transfers to Safety Compliance Facilities (SCF) where the SCF is the transporter TRADE SAMPLE TRANSFER: For trade sample transfers to another license where the shipping facility is the transporter (if carrying more than 15 ounces of marijuana or 60 grams of concentrate, a secure transporter is required) WHOLESALE: For transfers between licenses when the product is being sold with an upfront price negotiated. | Prices should not be listed as rates-per-pound and should be the price paid for the product. Shipping Errors All errors made during shipping and receiving must be corrected. Physical and electronic inventory must match exactly to be compliant. Examples of common errors include: receiving more or less than what is stated on the manifest receiving product not on a manifest It is NEVER acceptable to correct the errors by adjusting the packages. All errors should be reported to METRC support for assistance with correcting them compliantly. The CRA will not approve virtual manifests directly to licensees. If the only correction for the error is to amend a virtual manifest, METRC support will reach out to the CRA for approval. Facility Inventory Errors All inventory errors must be corrected. Physical and electronic inventory must match exactly to be compliant. Examples of common errors include: Not creating products as production batches Adjusting down package sizes instead of creating a new package Packaging errors during the harvest process. All errors should be reported to METRC support for assistance with correcting them compliantly. Navigating these issues can be overwhelming for most small-medium business owners. For this reason, it is recommended that any entity looking to enter or expand their operations in the cannabis business compliantly should contact the experienced cannabis law attorneys at Scott Roberts Law today. https://www.oak-law.com/blog/protect-your-neck-with-sops-how-your-cannabis-company-can-thrive-in-the-face-of-cra-and-employee-pressures monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/17ad6758-3923-4c0e-bbfb-f5ce86368b2d/unsplash-image-hPNr511ZTJU.jpg Blog - Protect your Neck with SOPs: How Your Cannabis Company can Thrive in the Face of CRA and Employee Pressures - Protect your Neck with SOPs By: Scott Roberts and Andrew Haftkowycz What are SOPs? Standard Operating Procedures. Whether you are familiar with the term from years in other industries, or have never heard the term before, a Standard Operating Procedure is a step-by-step guideline created by your company’s management team that lists all written instructions for how an individual part of your business’s operation is to function. At its best, an SOP is a foolproof training tool which allows new employees to quickly pick up tasks and guarantees that these employees will use the same diligence as the company’s most seasoned professionals. This is important for dealing with standardized processes, like nutrient and chemical mixtures that require precise measurements. At its worst, an SOP can spell licensing and regulatory disaster if your company does not have well-maintained records, personnel who update and distribute SOPs, or a complete lack of established SOPs. A cannabis business without a sufficient SOP library available to employees can force the CRA’s hand to suspend or revoke a license (or issue a fine anywhere between $10,000 all the way up to $3,000,000). What do SOPs Accomplish? An SOP should outline every required step of a process that a facility employee needs to: complete the task, and be in compliant with the latest regulations. An SOP is useful only if the weakest person on the team can read it and follow each step from A-to-Z without needing to seek clarification (unless the SOP tells that employee to do so). While endless examples of SOPs can be found online, the format should be basic and practical. Think of SOPs as a “living document”. Things change. The CRA reverses course on a certain restriction, or maybe the boss decides to “simplify” the check-out process for premium customers. We call it “innovation”; however, it can become a real headache if these “innovations” go undocumented inside the old SOP. A good accounting of SOPs can mitigate these headaches by making sure that the managing staff of your business: understands the need for accurate and updated SOPs, and actually makes updates to the SOPs. Along with updating, good SOPs also need to be communicated. You can’t reasonably communicate every-single-change to every-single-employee with 100% precision, but you can implement processes to get you closer to perfection. Some methods used by competing industries include: Digitizing their SOP handbooks Providing a “comment” section where employees can log changes Saving them in accessible “dropbox” libraries that employees can access Using flowcharts, checklists, quizzes, videos, and links to training manuals STATE-OF-THE-ART: placing QR Code stickers around the facility These methods allow employees to scan and access SOP instructions wherever they are in the facility to make sure they don’t accidentally add the wrong plant mixtures and cost your company $50,000 in unusable products or add unwanted attention from CRA on your business. Why your Investors will love your SOPs Investors and Shareholders are complex creatures, but they consistently look for one thing: RISK. In an industry as new and risky as cannabis, attracting reliable investors can be a hassle, and often obtaining a license or a property can rest on finding reliable investors. Giving the investor adequate assurance that their capital investments in your company will not evaporate into extreme overheads or ridiculous fines is increasingly important as the industry grows and saturates. A surefire way to ease investor anxiety is to offer well-crafted SOPs that have practical plans for mitigating risk, creating operational safety, and most importantly, showing that the business plan they are investing in has been thoroughly examined. The stronger the SOP, the more likely that an investor will trust their investment to give them good ROI. Why your Employees will love your SOPs Admittedly, most young entrepreneurs who have dreamed of entering the cannabiz are not seduced by dreams of endless “Standard Operating Procedures”. While you won’t attract top talent advertising that your Dispensary or Grow Facility offers “good SOPs”, it will help keep your workers happy in their jobs. Many companies run into turnover problems at some point, and the cannabis industry has an even higher turnover rate than most other emerging markets. A lot of this has to do with the actual job. It turns out that running inventory per CRA regulations is not nearly as “sexy” a job as many aspiring potheads imagined when they saw “legal marijuana” on Indeed.com. Additionally, entrepreneurs who may start their own Dispensary or Grow Facility quickly become disillusioned from their “get-rich-quick” scheme when they actually have to do the work of running a compliant business, cannabis or otherwise. Whatever the reason, the ultimate nail in the coffin that leads to turnover is quite simply employee dissatisfaction. While a good SOP cannot save a disgruntled employee from an unfit manager, having poorly written, unmaintained, or inaccessible SOPs can quickly make an employee assume that the organization is lazy, inefficient, and doesn’t care about them as an employee. Turnover: The Snowball Rolling Down the Hill Turnover can cause logjams in the good-SOP-making process. When a new manager starts at your company, they may read some old SOPs and decide to draft a new set of step-by-step “rules” for their employees. If that same manager suddenly quits, you may find yourself with employees abiding by two completely different SOPs. A smaller problem caused by this turnover is that your employees will look at these contrasting rule-sets and decide that the business owners clearly don’t know what they are doing. The employees will not see the company nearly as favorably as they did in the job interview. A bigger (more expensive) problem caused by this turnover is when the nice people at the CRA decide to make a surprise visit while you’re not at the office and ask a budtender where they can find the SOPs. At that point, you are at the mercy of your budtender saying the deadly phrase, “which ones?” How to Avoid Repeat SOPs? Make a Method: have an established method of approving an SOP. The easiest way to have good SOP creation is to have more-than-one staff position that approves SOPs. Checks and Balances One person should be responsible for maintaining and regularly updating SOPs for content (checking CRA bulletin changes, communicating with managers throughout the company, working with the COO, etc.). A different person should be responsible for approving and authorizing the changes prior to them officially being added to the SOP library. A third person should be responsible for communicating/delivering these newly authorized SOPs to department managers and employees. This three-person-system of checks and balances can seriously increase your company’s accountability and precision. The DELETE Key An important tool for the SOP team is the delete key. Once your team finds SOPs that are either outdated from business operation changes, or outdated from CRA regulation changes, those SOPs need to be tossed. It is important that one person on the team is able to identify whether current SOPs are still legally compliant and which ones can be deleted or categorized as out-of-date to reduce any potential confusion. This will help you avoid serious fines, lawsuits, or both. Type A Personalities Make sure the SOP team has a person who is Detail-Oriented. The SOPs should be well-cataloged so that the naming and categorizing of your SOPs are fairly intuitive and not impossible to find inside the company’s records. The company team member who catalogs SOPs should be using practical and detail-oriented schemes that are not overly complicated and account for everyone’s position within the company. The SOP library should also have an accounting of changes, includes organizing the [OLD] and [CURRENT] files that will give you bonus points when the CRA does do a surprise audit. Even if you do experience turnover, a well-positioned SOP team will guarantee that there are still managing personnel who know where the records are kept, and know how they are properly updated, whether the update is from management or from the CRA. SOPs: Good for Business, Great for You When functioning properly, an SOP greatly increases the chances of: Investment and Growth Mergers & Acquisitions Substantially Less Employee Turnover Anyone involved in the cannabis industry ought to consult with experts frequently and have skilled attorneys able to handle any of the inevitable issues that arise within an industry as fast-paced and regulated as legal cannabis. If you are either looking to boost your current company SOPs, or seriously need to get SOPs ready for a surprise CRA audit, the capable attorneys of Scott Roberts Law Firm have been servicing the legal needs of business owners in the cannabis industry since 2014, making them a top choice to address any cannabis business problem. Our team can help you get your company moving in the right direction. https://www.oak-law.com/blog/bankruptcy-in-the-cannabis-industry-growing-pains-of-a-maturing-market monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/cdee2b4f-4bf8-422f-9cac-55b4405b1a53/unsplash-image-9j8k3l9afkc.jpg Blog - Bankruptcy in the Cannabis Industry: Growing Pains of a Maturing Market - Growing Pains of a Maturing Market It is well-established that cannabis is a federally illegal substance, no matter what the States think. Consequently, legal cannabis still has intense federal scrutiny, and federal restrictions. This scrutiny will become a substantial roadblock for legacy cannabis companies as they scale, increase their volume, and grow larger profits. The cannabis industry’s exponential growth is catching up to itself – recent market price values show that the vast number of cultivators have saturated the industry’s supply. This saturation forecasts an inevitable price dip that results from too many suppliers and too few commercial purchasers able to get the product to consumers. In Michigan, the average price of a recreational pound of cannabis has dropped from approximately $1,300-$1,500 down to $700-$900 (with lows as far as $500 in February alone). These sale values result in cultivators ultimately selling their cannabis for nothing more than the overhead required to produce it in the first place – making many companies unprofitable – and more importantly, unsure how they will repay their creditors. To complicate matters further, many cannabis businesses are funded by creditors/shareholders who happen to be friends and family. These relationships are easily soured when debts pile up and these creditors start knocking on your door for repayment. So why is this concerning? These circumstances spell a clear path to bankruptcy (the federal legal avenue to declare an entity immune from having to repay its creditors). Bankruptcy is often a death sentence for a company, but it can also be an effective tool and lifeline for business owners facing financial troubles. Unfortunately, cannabis is still listed as a Schedule I Drug under the Controlled Substances Act (CSA) – so this lifeline is unavailable to companies and individuals seeking protection from creditors if their debts or interests touch a state’s cannabis industry Bankruptcy courts are federal courts that find themselves stuck between a rock and a hard place. On the one hand, they would prefer to perform their literal function and assist business owners in need of good faith protection from creditors seeking to destroy these companies and recover their investments. There are bankruptcies that are a result of mismanagement and shady business methods, but there are a great many caused by market forces out of these companies’ control – this is who the bankruptcy courts were created to protect. On the other hand, these federal courts cannot in any way facilitate or assist in the sale of illegal substances. The result is that in extremely rare instances, a bankruptcy court will hear a case for cannabis related businesses – but a vast majority of the time, bankruptcy courts will reject cannabis company’s bankruptcy petitions. For cannabis business owners, this means turning to extremely less effective alternatives for relief when their debts become unmanageable. The few instances of cases making it to bankruptcy court have left cannabis business owners and lawyers in a state of uncertainty as to when a case will be decided by these courts. Looking at the Bright Side Leaning optimistically for cannabis businesses, experts turn to Burton v. Maney (9th Cir. BAP). In this action, the federal bankruptcy court ultimately decided to dismiss the case on behalf of the creditors, finding a variety of causes for why the case could not be heard. There were reportedly more debts than allowed under the Chapter 13 bankruptcy for which they applied for, as well as the debtor’s inability to confirm a financial plan for over a year. Notably, however, the opinion of the court did consider the blatant dissimilarity created by Arizona State Law and the federal bankruptcy code. The Bankruptcy Council left circumstances under which they could hear cannabis business cases open for consideration. The panel determined that “the mere presence of marijuana near a bankruptcy case does not automatically prohibit a debtor from bankruptcy relief.” (Maney 9th Cir. BAP). This sentiment carried over into another bankruptcy proceeding, In Re Player’s Network. In this action, the debtor simply held a controlling interest in a cannabis company, but the business itself had nothing to do with cannabis cultivation or commercial sales. Nevertheless, the Nevada court again chose to dismiss the case at the request of the creditors due to the debtor’s interest held in a cannabis company. Despite dismissing the case, the court again noted that the 9th Circuit of U.S. Federal Courts did not have a “per se rule precluding a Chapter 11 plan from being proposed in good faith based solely on the debtor’s relationship to commerce involving marijuana or cannabis products.” Unfortunately, this optimistic language has not had the desired effect on cannabis companies’ bankruptcy actions. In another bankruptcy proceeding, In Re Pharmagreen Biotech, Inc. (Bankr. D. Nev.), a Nevada court appears to have taken a step back from the Maney court’s ruling. This action questioned whether a U.S. company that strictly invested in Canadian cannabis production (refusing to operate or finance U.S. operations until federal laws changed) is eligible for protection under the federal bankruptcy code. Despite this degree of separation, the court dismissed the case because the debtor’s business plan focused on producing marijuana cultures, a business activity prohibited by U.S. federal law. The opinion states that despite this practice’s legality in Nevada, “you just can’t use federal courts to protect marijuana cultivation”. Speculators have interpreted this language as a firm denial of whether of cannabis companies can receive protection from the bankruptcy code. This supposedly shuts the door on bankruptcy code protection for a company that has any involvement with the cannabis industry. Without explicit bans on a bankruptcy court hearing a cannabis company case, the initial theory was that the more distance a company had from “touching” the cannabis products and operations, the more likely that company was to receive bankruptcy protection. This theory has mostly evaporated following the categorical dismissal of bankruptcy petitions if the debtor has even minor connections to the cannabis industry. Whereas bankruptcy is not necessarily a death sentence for a company, the reality of no bankruptcy protection for cannabis businesses means they must rely on inferior debt relief methods – generally resulting in complete liquidation. Alternative 1: ABC One alternative method is known as an Assignment for the Benefit of Creditors (ABC). This method allows the owner(s) of the failing cannabis business to assign their assets to a third party and slowly discontinue operations as the company is liquidated. General assignment avoids bankruptcy court completely and is governed by state law, which is why it is available to cannabis companies. The third party controls the dissolution and no input from the creditors is allowed, but the company is nevertheless liquidated to satisfy as much of its debts as it can. Alternative 2: Receivership Another alternative to the federal bankruptcy code protections is a State Law Receivership. There a few different varieties of receiverships differing on the reason it is needed and what entity will actually appoint the receiver. For cannabis companies the usual reason it is needed is insolvency, which requires a state court to appoint a receiver that will manage the business in a way that ensures creditors are paid what they are due. Business owner(s) usually opt for receivership as a last resort (as it strips all control from the owner(s) and allows the receiver to determine whether the company can sell some of its assets to avoid shutting down or if selling/liquidating the entire company is the best way to repay its debts). Alternative 3: The Negotiator The final alternative used by cannabis business owners is to just avoid any legal action such as assignment of assets or control of the company and enter into “Workout Negotiations” with their creditor(s). These workout negotiations are exactly what they appear to be – a process in which the debtor and creditor(s) sit down outside of any court order or direction and attempt to settle on a mutually acceptable plan on how to move forward. This can be the most beneficial method for cannabis business owners if it is successful, however, when dealing with vast amounts of debts, it can be difficult to reach a solution that both debtor and creditor can agree to. Obviously, cannabis business owners would like to avoid these alternatives and not have to contemplate bankruptcy by any means. Easier said than done. The most effective way to avoid these processes is to account for such a scenario at the beginning of the venture. For many cannabis business owners, investment comes from a select few players or entities known to the business owner. The offering memorandum is the default tool to circulate to these potential investors to garner the interest necessary to get the business off the ground, however, offering memorandums can be an angry creditor’s “best friend”. If an offering memorandum (essentially just a thorough business plan) makes certain promises/declarations, or outlines management/communication styles that the business strays from, creditors have a clear avenue for misrepresentation lawsuits. At the same time, these detailed offering memos often are what investors need or want to see before they provide any sort of capital commitment. This sharp contrast requires business owners to carefully balance A) creating documents that deliver informative-enough justifications for investment – without – B) overpromising realities that the business cannot deliver. Finding this balance or perhaps not creating an offering document (if investment can still be procured) is the best way to avoid actions based on misrepresentation in the document. Going Forward As the cannabis industry matures and unsustainable businesses are weeded out, the question of bankruptcy for these businesses will only become more prevalent in the court system. There is already pressure on bankruptcy courts to handle these proceedings as there is no per se rule barring these companies from accessing bankruptcy protection. Despite no rule, courts have decided that since they are part of the federal judiciary, they cannot provide protection for federally illegal businesses. This means that cannabis business owners are unlikely to be granted the protection that bankruptcy offers until federal law is changed, and cannabis is removed from the CSA Schedule I. Until then, anyone involved in the cannabis industry ought to consult with financial experts frequently and have skilled attorneys able to handle any of the inevitable issues that arise within an industry that has grown as quickly as cannabis. The capable attorneys of Scott Roberts Law Firm have been servicing the legal needs of business owners in the cannabis industry since 2014, making them a top choice to address any cannabis business problem. https://www.oak-law.com/blog/good-agricultural-collection-practices-gacp-worth-it monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/beeab0d3-a78e-48d4-9fb3-7d8c4591ad00/unsplash-image-gdVL8nvMbyc.jpg Blog - Good Agricultural Collection Practices – GACP: Worth It. - GACP: Worth It. In a recent rule publication, the Cannabis Regulatory Agency (CRA) has released a new regulation regarding the sale and transfer of immature plants. The market for the sale and transfer of immature plants is expanding because immature plant sales allow cultivators and dispensaries to cut harvesting timelines and get products in customer’s hands faster. The CRA’s new guidance aims to streamline the immature plant seed-to-sale process by giving greater sale and transfer leeway for cultivators in Michigan with a Good Agricultural Collection Practices (GACP) certification. The CRA defines an immature plant as a non-flowering plant produced from a cutting, clipping, tissue culture, or seedling that is not more than 8 inches wide and no taller than 8 inches from the soil it is planted in. Immature plants are essentially used to expedite the harvesting process and obtain viable product faster than starting from a plant seed. Put simply, immature plant sellers have already done the hard part for you. Because there are new ways to clone and transfer immature plants from the mature, tested “mother” plant, the CRA is relaxing some of its restrictions previously placed on the sale and transfer of these immature plants. So how can you become an immature plant retailer? To be eligible, cultivators MUST obtain a Good Agricultural Collection Practices (GACP) certification. This is a specific certification mandated by the state of Michigan, very similar to Good Manufacturing Practices (GMP), that serve as a state declaration that whatever practice a business is utilizing, it is considered to be an acceptable standard requiring less regulatory scrutiny. In response to this relaxed regulatory scrutiny, the CRA is removing some immature plant transfer/sale requirements that previously burdened cultivators looking to enter the market. The biggest change is that a GACP-certified cultivator does NOT need to use a licensed cannabis transporter to sell/transfer immature plants to cannabis retail locations (which was previously required). This change removes the largest fee and obstacle for cultivators hoping to enter the immature plant market. Additionally, the immature plants sold by GACP-certified cultivators do not require additional safety compliance testing upon arrival to the cannabis sales location – likely due to the nature of immature plants being genetically identical to the mature plant they were derived from (which is why some refer to them as “clones”). Another requirement loosened by the CRA was the necessity for cannabis retail centers purchasing immature plants to pre-order their immature plants from a selling cultivator. For a GACP-certified cultivator, this requirement is relaxed, allowing a dispensary to simply supply a 7-day plan to the GACP cultivator for the number of immature plants needed at the dispensary in that time frame. This will demand less prep work on the dispensary, and less concern for the cultivator when a dispensary is unable to purchase the entire pre-order. GACP-certified cultivators still must follow all outlined procedures, such as having the GACP certification to even qualify for these relaxed regulations, prior to selling immature plants. They must ensure the purchasing retail location has either entered a pre-order or entered an order identifying the number of plants needed under the new rules. Additionally, cultivators must also include a “sell-by date” for dispensaries to guarantee they sell the immature plant before it is able to grow into a mature plant, and thus no longer be considered “immature”. This “sell-by date” timeline is 7 days from the day the cultivator packaged the plant for sale. The cultivator must also include basic care instructions for the immature plant, informing a purchaser how to successfully grow the plant into a healthy and viable product. Lastly, an attestation from the cultivator is required, stating that only CRA approved ingredients were used in the growth of the provided immature plants. Further details include a requirement that cultivators’ standard operating procedures (SOPs) include how they ensure dispensary orders are compliant and – since no licensed transporter is required – how the cultivator will transport the immature plants safely without any chance of contamination during transport. The purchasing dispensary/retail location must also keep basic records to purchase immature plants from a GACP-certified cultivator, such as an SOP for how many plants they intend to pre-order or use in a 7-day period. The dispensary will have to ensure that the provided care instructions are relayed to a purchasing customer, as well as the attestation that only CRA approved ingredients were used in growing the immature plant (including notice that the plant has not been tested in its current form). The ostensible goal of these rule changes is to incentivize cultivators to obtain their GACP certification. Being GACP-certified not only guarantees a cultivator is in fact conducting their practice at the highest acceptable standard, but also allows the CRA to review the cultivator with less scrutiny. GACP standards were developed by the World Health Organization (WHO) in 2003 with the aim of improving the quality of medicinal plants being used in herbal medicines in the commercial market. The WHO released these guidelines in order to contribute to the quality assurance of medicinal plant materials used as the source for herbal medicines, aiming to improve the quality, safety, and efficacy of herbal products offered to consumers. If you are a cultivator looking to obtain your GACP certification, either to begin selling immature plants to retail centers or to simply guarantee your agricultural practices are never flagged as non-compliant with the CRA, it is usually beneficial to consult with experts to simplify the process. The experienced cannabis legal team at Scott Roberts Law Firm has recently recognized the value of the GACP certification and has familiarized itself with the certification process. As a result, cultivators looking to become GACP-certified should contact the firm here to find out how we will help you and your business. https://www.oak-law.com/blog/mra-new-rules-enacted monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/946e960f-ec0f-485e-bac3-ecc306ca8e09/unsplash-image-0LaBRkmH4fM.jpg Blog - MRA: New Rules Enacted&nbsp; - New Rules Enacted Following its new rule proposals from the summer session, the MRA has finalized new regulations that will make some significant changes to many processes under MRA control. These changes will affect the entire application procedure, from costs to the structure of the applications themselves. These rules are now finalized and are set to take effect this Monday, March 7th, 2022. Fees Current and potential licensees will be most focused on the fee changes that come with these new rules. The base prequalification application fee will be reduced by 50%, from $6,000 to $3,000, lessening the burden on potential licensees to enter the industry. Current licensees will be pleased to see reductions to initial licensing and renewal fees across the board. Notably, Class C Growers,’ Excess Growers,’ and Processors’ initial licensing and renewal fees are reduced from $40,000 to $24,000. In addition to these reductions, the tiered renewal system is being entirely removed from the fee structure, meaning that the initial licensing fee will also serve as the renewal fee. This will avoid the top third of any given license type being forced to pay over 20% more for their renewal. These reductions reflect the MRA’s recognition that the hurdles to enter the industry are simply too high currently and detrimental to all the players involved. Class A Marijuana Microbusiness License The highly anticipated adult-use Class A Microbusiness license will also become available on Monday, March 7th. This new license type is similar to the original cannabis microbusiness in that licensees are meant to produce and sell their products at the same location but differs in the scale of operations. The Class A cannabis Microbusiness license boasts higher plant caps, the power to purchase mature plants from other growers to maintain viable supply, and the ability to utilize outside processors to make more products from their cannabis. The license/renewal fee for this new type of license will be $18,600 – just as the rule’s proposal indicated. Marijuana Educational Research License Another new type of license that will be established on Monday is the adult-use marijuana educational research license. This license grants privileges one would expect, allowing a licensee to grow and conduct research on cannabis for educational purposes. Cannabis produced by an educational research licensee cannot be consumed and must be destroyed after research has concluded. To obtain this license, an applicant must receive accreditation from the Higher Learning Commission and register their research with the DEA. There are no application, license, or renewal fees associated with this license. Changes to Application The adult-use application is being modified to mirror the disclosure requirements for medical more closely. The threshold for disclosure is also lowered in the new rules to 2.5%, this means that any individual that holds over 2.5% interest in the applicant entity must follow proper disclosure requirements. Anyone with below 2.5% interest may avoid disclosure. The MRA has also added an ability for itself to administratively withdraw any application that is over one year old and has no determination made. Renewal applications may also be denied now for failure to submit the required annual financial statements prior to renewal process. Inspection Enforcement The MRA is also making updates to its inspection documents, adding new checklists for prelicensure inspections, 30-day inspections, semi-annual inspections, and SCF inspections that must be adhered to in order to avoid MRA disciplinary action. These checklists will be made available on the MRA website this Monday, March 7th. Sampling and Testing Greater freedom is being granted to licensees in the sampling and testing field. The biggest change is that final testing does not need to be performed every time cannabis product leaves a cannabis facility if it is not going to a retailer location. This means cannabis products purchased, sold, and transferred within the market, before reaching any consumers, do not need to pass final, full safety compliance. Operations New allowances have been made affecting day to day operations of cannabis facilities. Notably and likely in response to COVID-19 protocols, contactless and curbside retailer space is now permanently allowed under the MRA rules. A retailer need only gain municipal permission to add this operation to their business. Updates to the Standard Operating Procedures will also be enacted, including a new stipulation that any cannabis product ordered to be destroyed must actually be destroyed within 90 days to avoid disciplinary action. Given the volume of changes, the MRA warns its system may experience failure as licensees rush to absorb the updates. There will be additional instructional guidance on how to make a Request for Declaratory Ruling from the MRA, as well as extra requirements to packaging and labeling of edible cannabis products. The rule changes are vast and seem to affect almost every aspect of the cannabis industry in Michigan. Interested or concerned parties of these new rules may feel overwhelmed by everything the MRA is changing. For this reason, it is prudent to consult with knowledgeable individuals on these complicated matters. The skilled attorneys of Scott Roberts Law have the exact experience and knowledge required to navigate any uncertainties that these new rules may cause. https://www.oak-law.com/blog/conversion-oil-may-be-coming-to-michigan-the-beginning-of-the-end-of-licensed-outdoor-cultivation monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/daf2120d-8ba2-4696-b3c2-ae48d3e69bb9/unsplash-image-b2haCjfk_cM.jpg Blog - Conversion Oil May Be Coming To Michigan: The Beginning of the End of Licensed Outdoor Cultivation? - The Beginning of the End of Licensed Outdoor Cultivation? Some of the most popular cannabis products across the industry are cannabis-infused edibles and cartridges. Cannabis-infused edible products are produced by licensed processors, who use an intensive process that involves extraction equipment needed to extract concentrated oil from cannabis plant matter before adding that oil into normal baked goods or other confectionary goods. This distilled oil, also referred to as “distillate”, is also used for vaporized cartridges. Michigan’s Cannabis Regulatory Agency (CRA) recently proposed a new rule that would allow licensed processors to purchase industrial hemp for the purpose of producing conversion oil to be used for cannabis products for sale in Michigan’s licensed cannabis market. Conversion oil is very similar to the distillate oil described above, differing only in that it is derived from industrial hemp before it undergoes the process of converting certain cannabinoids into high potency THC. Industrial hemp is deemed an agricultural product that cannot contain more than 0.3% THC to pass compliance. This limit generally means that industrial hemp is not used for cannabis products marketed to consumers. If the proposed changes to R 420.1001 – R 420.1003b are passed, there will be an entirely new market to which industrial hemp growers may sell. This market will be composed of licensed cannabis processors looking to produce this conversion concentrate oil in order to create cannabis-infused products and edibles at a discounted price compared to purchasing cannabis from licensed Michigan cultivators. Who Would be Affected? For many Michigan licensees, this is a big deal. For processors without any outdoor cultivation, opening the door to conversion oil will likely save them from the costs of creating product. This would be due to the fact that the oil is no longer derived from products grown by MRTMA or MMFLA licensed growers, who must invest substantial capital into finding properly zoned property. Additional costs stem from compliance efforts related to the CRA’s stringent security rules, in addition to license assessment fees that currently stand at $40,000 per each MRTMA Class C license. Hemp growers do not have to incur such costs, and as a result, hemp is substantially cheaper to produce. This sounds great to licensed Michigan cannabis processors, as they will have access to much cheaper alternatives to create their concentrate oil. On the flip side, this may sound rather unappealing for licensed cannabis growers and especially for licensed outdoor growers. Outdoor growers currently dominate the processor market for cannabis biomass from which to make distillate. They have invested substantial money into their farms under the assumption that only cannabis grown under the MRTMA or MMFLA can make its way into Michigan’s licensed system. Many would stand to lose much of this investment if cheap, out-of-state hemp is allowed into the market. Indoor growers may not be as concerned with this issue as their cannabis is priced higher, making it less desirable for processors to purchase and convert into distillate / oil. However, this would also affect indoor growers, as it would reduce the market for their “trim,” which is often used to produce distillate as well. For licensed outdoor cultivators in Michigan, this could be the beginning of the end of their business. Most outdoor cultivators convert much, if not all, of their outdoor flower into distillate. If a cheaper source of distillate is available, then they will no longer have a market for their biomass. While this is unlikely to happen immediately, this rule change is still a “foot in the door” for converted oil. Once the door opens completely, and the THC restrictions are eventually lifted, many outdoor farms will inevitably go out of business. This would also have the effect of increasing the licensing assessment fees for all licensees. As noted above, the licensing assessment fee for one MRTMA Class C license is currently $40,000. Outdoor cultivators usually have more than one Class C license, which generates a substantial amount of money and is used to fund CRA’s operating activities. If many of the outdoor cultivators go out of business, as they cannot compete with cheaper, less regulated hemp producers who are not subject to such fees, then CRA will be forced to make up this shortfall through fees to other licensees. Not the End of Outdoor…Yet This may be bad news for outdoor growers, but these effects are unlikely to be seen right away given the language of R 420.1003(b). First, cannabis products containing conversion oil must be labeled as “synthetic,” which is likely to turn off some consumers. Second, this section of the proposed rules puts a strict limit on the THC levels of products produced from conversion oil derived from industrial hemp. After completing all of the required safety compliance testing, all THC infused products (tinctures, lotions, etc.) made from this industrial hemp conversion oil will be limited to 20 milligrams per container while edible cannabis products made from this conversion oil will be limited to 10 milligrams per container. These limits are likely to result in little consumer interest in these products compared to the typical 100 milligram edible commonly sold at Michigan cannabis dispensaries. However, many cannabis insiders are speculating that the language of these proposed rules is just the first step of slowly normalizing conversion oil in the Michigan market. If these rule changes are passed, additional rules could simply raise these THC concentration limits to competitive values and allow processors to fully transition to producing their products entirely from the much cheaper alternative, industrial hemp conversion oil. As a result, licensed Michigan processors will be the main advocates for these proposed rules, while licensed outdoor growers will strongly oppose the rules, as it could very well spell the beginning of the end of their business. They simply cannot compete on pricing given the substantial compliance and licensing costs imposed on licensed cannabis cultivators. Why Change the Rules? The State of Michigan believes the practice of creating this conversion oil from industrial hemp is already occurring, but without its regulatory purview, which the new rules will change. Under the proposed regulations, a processor/producer of industrial hemp conversion oil will be able to make the oil only after written approval from the CRA. To get this approval, producers will have to submit extensive plans that lay out the entire process from acquiring the industrial hemp, to identifying potential contaminants, to what amount of the product is used for conversion and what is excluded as waste. Without written approval from the CRA, industrial hemp cannot be used to create conversion oil. The idea here is to limit which cannabis products become available to consumers without proper safety testing. Additionally, the proposed rules will eliminate the requirement that the industrial hemp used for products in Michigan must be tested according to the Michigan Department of Agriculture and Rural Development. Instead, industrial hemp will be able to be tested according to the regulations of any department of agriculture. This indicates an intent by lawmakers to allow industrial hemp into Michigan from any other state that has been approved by that state’s department of agriculture and rural development or its functional equivalent. This will give Michigan cannabis processors greater freedom in choosing the most competitively priced industrial hemp, as their market will expand to other states that are perhaps better suited to produce industrial hemp at lower costs. Yet, it would mean less tax revenue for Michigan. Not a Done Deal Yet As of the writing of this article, the rules are still set for public comment and have not been finalized. There will be a public hearing held by the CRA on these proposed rules on Wednesday, February 16, 2022. This hearing will be located at 2407 North Grand River Avenue, Lansing, Michigan at 9:30 AM. This hearing offers an opportunity to parties interested in the Industrial Hemp Rules for Marijuana Businesses to have their opinions heard and questions answered. https://www.oak-law.com/blog/michigan-rolls-out-proposed-new-cannabis-regulations monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/cce3cc74-da2e-455a-b6df-9dd390274ee9/unsplash-image-9lTUAlNB87M.jpg Blog - Michigan Rolls Out Proposed New Cannabis Regulations - Proposed New Cannabis Regulations Michigan is now one of a few states around the country that has achieved legalization of both medical and recreational marijuana for a few years, thanks to a forward thinking legislature as well as voters. These years have been crucial for the Michigan Marijuana Regulatory Agency (MRA) in regard to recognizing the effectiveness and failures of its marijuana laws. This recognition allows the MRA to craft better policy for both the medical and recreational marijuana industries. In July of 2021, the MRA filed new proposed rules that reflect what the agency deemed missing in its current versions of Michigan marijuana laws. Many of the changes have to do with regulatory affairs and internal clarification for the MRA as far as definitions, but there are a number of changes that will have direct effects on recreational and medical marijuana businesses alike. New Lab Testing Requirements and Lab Quality Assurance Procedures Whether it’s processors producing the product, retailers selling the product, or consumers consuming the product, everyone wants the highest quality product possible. Originally, this meant less pesticides on the cannabis and high THC content in the cannabis. Now, increased scientific research from both the state and federal government levels has brought improved lab standards and quality assurances. The new proposed rules will treat testing centers in a more uniform manner between medical and recreational laboratory compliance centers. They’ll also create specified tracking regulations for cannabis products that are combined with other products, even in small amounts, to create a final product to ensure maintained quality throughout the creation of this final product. Requirements for All Expired Products to be Destroyed Prior to this rule change proposal, state law allowed many expired cannabis products to remain in a legal gray area as far as what must immediately happen to them upon expiration, where some processors or retailers of the industry would try to rework the product to sell it. Obviously after product has reached its expiration date, it should be destroyed, but retailers (or provisioning centers) are not always capable of the proper destruction process. Thus, the new law proposal would allow retailers to return an expired cannabis product back to the processor it was purchased from for the destruction and mixture with solid waste. Processors may have to destroy entire harvests of marijuana at times if the batch does not meet quality standards, so they are generally equipped to properly destroy any expired cannabis product, making one less problem for retailers when products expire. New Limitations on Employee Samples The proposed rule will also change the limits placed upon samples provided to employees of cannabis business. The largest modification now allows medical and recreational cannabis sales locations to provide sample to employees. Prior to this, only cultivators and processors could provided samples. This was odd as a large reason for providing employee samples is to increase the employee’s familiarity and understanding of the product. You’d think consumers would want the people selling them the products to have that increased understanding as well as the cultivators, now they can. Another shortcoming the new rule addresses is requiring quality assurance testing for any employee samples. Financial Record Regulations That Business Owners Must Maintain + Written Standard Operating Procedures New proposed regulations regarding the financial records of marijuana businesses in Michigan would require more extensive tracking of income and expenses than the MRA did previously. The new industry standard will be to keep track of: Cash logs. Sales records. Purchase of inventory. Invoices. Receipts. Deposit slips. Cancelled checks. Employee compensation records. Tax records. Requiring these types of records will not only help the MRA to keep track of the financial aspect of the Michigan cannabis industry, but will ultimately also benefit marijuana business owners by forcing them to maintain a better record keeping system and make important information easier to locate. In a similar fashion, there is a new requirement for any cannabis business in Michigan to have standard operating procedures written and on site at all times. This may appear like a burden to business owners, but having some written procedures in place on how to operate would also benefit cannabis businesses. Employees may have questions that arise during business operations and if the owner can’t be reached to answer written procedures would be a great help. Regardless, it will be a new requirement to maintain these written procedures if these proposed laws are finalized. Proposed Regulations for Drive-Thru or Curbside Pickup For obvious reasons, 2020 saw an explosion in the rate of curbside orders. For much of the year this was in fact the only way a cannabis provisioning center could operate in Michigan. Provisioning centers adapted quickly to this new method, and both the medical and the recreational market have readily embraced this feature of retailers. Despite the emergency health mandates being scaled back and dispensaries opening their doors again, the curbside pickup market, or as the MRA refers to it, contactless and limited contact transactions, have remained very prevalent. As such, the MRA decided to establish permanent regulations for these types of transactions in the new law proposal. Fortunately, the MRA proposal appears to follow the practices that most dispensaries arrived at naturally; the law will just require these practices to be written down, such as the location of the curbside pickup area being labeled on the business location plan. Company Equity Ownership of 2.5% Must Be Disclosed Another new small change to MRA policies is that any person with 2.5% or more equity ownership must be disclosed as opposed to 5% previously. The MRA wants more transparency as far as where the funding for Michigan marijuana businesses is coming from exactly. In addition to lowering the equity limits, the MRA now requires specific information from the entity that owns the 2.5% or more. The proposed law will require the personnel of any entity helping to fund a marijuana business to be disclosed in the licensing application in an effort to identify any potential illegal funding sources. Failing to provide all persons involved with an entity owning 2.5% or more will result in a stalled licensing process. Class A Marihuana Microbusiness License A long awaited addition to the MRA policies regarding the Marihuana Microbuisness license is also in the proposed rule changes. The law will establish a Class A Marihuana Mcirobusiness license for Michigan that imposes many necessary changes that will level the playing field for small business owners attempting to compete in the legalized marijuana industry. New Limitations on Percentage of Annual Profit Transferred Another change that emphasizes the MRA’s goal to achieve complete transparency in the cannabis industry financial sector is a new regulation on transfers of profit to outside entities that amounts to 10% of a marijuana business’s annual calendar or fiscal year’s profit. This law will place new stipulations on what a cannabis business may do with its profits as anyone receiving 10% or more of the business’s profits will be considered an extension of the license holder and must be included in the license application or license renewal for that year. Companies will now have to ensure financial agreements they have with any entity will comply with these new rules. Additional Disciplinary Rules Restricting Who Can Work at Cannabis Business The final aspect of rule changes proposed in July or 2021 affect who may work at a cannabis business in Michigan. These proposed changes will establish an exclusion list that will prevent anyone on the list from working at a cannabis business in the state. The exclusion criteria range from a conviction for selling controlled substance to a minor, to a pattern of convictions for theft or fraud, to being previously found ineligible for a license upon applying, to conduct that endangers public health; if an individual meets any of the criteria in the rule, the MRA then has full discretion to exclude them from working at any cannabis business. Exclusions can be temporary or permanent, and may be challenged by requesting a hearing on the exclusion. However, if no hearing is requested or the challenge is defeated, the person remains on the exclusion list until a different determination is reached by the MRA. Business owners in both the medical and recreational cannabis industries will have to pay close attention to these exclusion lists as failing to exclude someone on the list from your cannabis business could result in disciplinary proceedings. Conclusion With no real obstacles in their path, these proposed rules are likely to become law within the next few months and will be enforced promptly. If you are a marijuana business owner in Michigan, you will definitely want to determine if your business will remain compliant after the laws are finalized. Consulting with Michigan cannabis legal experts will help ensure your doors stay open when these new laws are put in place. https://www.oak-law.com/blog/detroit-legacy-program-update monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/231e7fc8-073d-416c-8e00-14ce96fc8881/unsplash-image-mwXHwx9LE1U.jpg Blog - Detroit Legacy Program Update - Program Update The Detroit Legacy Program is one of the more controversial municipal recreational marijuana ordinance to receive city council approval in this expanding new industry. Detroit legacy applicants will want to pay close attention to the outcome of a pending court case that challenges the restrictive nature of the program’s legacy residents language. This article will provide insight to anyone interested in establishing an adult use marijuana business in the city of Detroit. Crucial Case Against the City – Lowe In Lowe v. The City of Detroit, S.E. Dis. MI, Case no. 2:21-CV-10709, the plaintiff, Lowe, is one of many Detroit adult use recreational marijuana business applicants that was speculatively denied the privileges awarded to those that the ordnance deemed to have legacy status. Lowe is alleging that the adult use ordinance gives an unfair advantage to Detroit residents that receive the legacy status and is unconstitutional as a result. Legacy Ordinance The language of the ordnance provides marijuana licenses are to be limited and provided only an approved Detroit legacy application. Legacy Detroiters are considered to be Detroit residents that have lived in the city of 10 years or more out of the past 30 years. Those that have been in Detroit for 15 of the last 30 years are automatically qualified as legacy Detroiters. Those that have lived in the city 13-14 of the last 30 years are deemed approved legacy Detroiter applicants if they are low-income status and remain that way throughout the application process. Detroit legacy applicants that have lived in Detroit for 10-12 of the last 30 years must satisfy another social equity program component, to qualify an applicant must have a controlled substance or marijuana conviction record, or a parent with a marijuana conviction record they obtained when the applicant was a minor. The city program benefits those that it deems legacy applicants with an early license application window opening of 6 weeks, where certified legacy Detroiters get early access to the application process as well as 50% of the total licenses being reserved for legacy applicants. Additionally a marijuana conviction record, aside from selling to a minor, often receives a discount on licensing fees. Lowe’s Status Lowe has lived in Detroit for 11 of the last 30 years, allowing her Detroit legacy applicant status, but requiring an extra social equity component that she was unable to qualify for. Despite her mother having a cannabis conviction record, Lowe was over the age of 18 and therefore excluded from legacy Detroiter status. Neither does she have a controlled substance record or is of low-income status. Goal of the Case Due to her denial, Lowe is seeking a preliminary injunction against the city that restricts its ability to issue licenses until the constitutionality of the recreational marijuana ordinance. The ordinance also restricts adult use recreational marijuana licenses to 75 in Detroit, causing concerns that the over 400 Detroit legacy applicants with obtain all of the recreational marijuana licenses before non-legacy application review periods even begin. Plaintiff Lowe’s Challenges Equal Protection Claim Lowe is making an equal protection claim under the MI constitution, alleging that Detroit’s ordinance purpose of favoring local merchants to address social disparities relating to marijuana policing in the city and the country is illegitimate. The MI Supreme Court has required these claims to prove that an ordinance serves no legitimate purpose and is unrelated to any productive purpose sought by the law. Whether the social equity purpose of the ordinance is constitutional and if Detroit city council has gone about the restrictions in a logical way to achieve this purpose is exactly what must be answered by this case. Right to Travel Claim Separately, Lowe is bringing a claim of the protected right to travel under the MI constitution. Lowe alleges that the restrictions of Detroit’s adult use marijuana ordinance illegally restrict a Michigan resident’s right to travel within the the state. US Constitutional Challenge The federal challenge that brought the case to the federal district court of Southeast Michigan addresses something known as the dormant commerce clause of the constitution. By having a federal court hear the case, Lowe is hoping a higher priority is placed upon interstate commerce and free movement of capital within the country. Dormant Commerce Clause The third clause of the US Constitution establishes the power of congress to regulate the commerce or trade with other nations and within the states. What is not stated in this clause is that states also have the power to regulate trade between themselves, since it is not stated, it is held that states do not have the power to regulate interstate trade. This is known as the dormant commerce clause: the fact that states cannot control the trade between them means that they cannot create discriminatory policies against other states when it comes to commerce opportunity. Plaintiff Lowe alleges that Detroit’s Legacy Program does just that in how the program restricts the ability of a non-Michigander and therefore a non-Detroiter to enter into the commerce of the city that is the cannabis industry. City of Detroit Defense Legitimate Public Purpose The city council defends against the allegations under the contention there is a legitimate local public purpose served by the structure of the Legacy Program and it is therefore the right of the city to have it in place. It’s an assumption that laws are constitutional when they are passed, so the plaintiff Lowe must prove that there is either no legitimate public purpose served by the legacy program, or that if there is a purpose, the way the program is structured is unrelated to that purpose. The city claims the Legacy Program is directly related to the legitimate governmental purpose of the MRTMA, the same act that legalized recreational marijuana in Michigan: to reverse the disproportionately harmful impact of federal drug policies and enforcement actions. Policy Execution Despite that being an accepted purpose of adult use recreational cannabis programs, Detroit’s city council may have miscalculated in how it executed the policy. For instance, the policy reserves 50% of the total 75 adult use licenses for legacy applicants but provided no cap to them either. This fact combined with the over 400 legacy applicants with early window access, when only their applications are reviewed, could easily mean all of the adult use licenses being issues before non-legacy license applicants even have a chance to apply. Latest Court Decision The latest action in the case was a motion for preliminary injunction from plaintiff Lowe against the city to stop them from issuing any licenses for recreational marijuana businesses. The plaintiff urges the court to stop the city from issuing licenses to legacy Detroiters under a policy that is likely unconstitutional. The court was swayed by Lowe’s argument and has granted the motion to stop the comity from issuing anymore licenses. This has obviously stalled an already delayed process of issuing licenses for marijuana businesses in the city, but the court decided it is better to stop the process now and determine if the policy is even constitutional. If the policy is deemed unconstitutional and the city has to rescind the licenses its already granted to legacy Detroiters, it is probably a good idea to stop issuing them anyways. What’s Next This injunction was granted by the court on June 17th, 2021 and nothing further has been scheduled. The outcome of this case will decide the fate of the Detroit Legacy Program, at least in its current structure. If the policy is deemed to be unconstitutional, the Detroit city council will likely amend it to better serve the legitimate public purpose that it is meant to. Regardless, the priority of the court and litigants alike should be to resolve the manner as quickly as possible so that Detroit may start granting licenses again and begin reaping the municipal benefits of the cannabis industry. As soon as this happens, the Michigan cannabis attorneys of Scott Roberts Law Firm will be ready to assist anyone interested in pursuing cannabis business opportunities within the city. https://www.oak-law.com/blog/michigan-enacts-new-laws-on-the-production-of-delta-8-thc monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/4bd7129a-3e3e-457b-86cd-a7fb5b8efa1e/unsplash-image-3m9c72wkbIU.jpg Blog - Michigan Enacts New Laws on the Production of Delta-8 THC - New Delta-8 Laws Recently, the Michigan Legislature passed – and Governor Whitmer signed – farm bill legislation that categorizes all THC derivatives of the cannabis plant, including delta-8 tetrahydrocannabinol (THC), as marijuana, which are now regulated by the state’s Marijuana Regulatory Agency (MRA). This move from the state has been a long time coming as leaving delta-8 unregulated allowed unlicensed businesses, such as gas stations or tobacco shops, to carry and sell delta-8 THC products. With the passage of this new act, the legislature legally recognizes and restricts delta-8 THC as well as all THC products derived from this specific cannabinoid. This farm bill legislation is the first step towards making delta-8 THC a safe and viable product alternative for Michigan consumers. Delta-8 v. Delta-9 THC Up until now, and technically until October 11, 2021, when the law goes into effect, the state of Michigan only recognizes and regulates delta-9 THC under MRA guidelines. Delta-9 THC is the more traditional THC compound sought after in the cannabis market and in an extraction process to create products. Concentrations of delta-9 are what MRA inspectors measure and aim to regulate for compliant production, transport, and sale, as it is the traditional psycho-activating agent of cannabis. The differences between delta-8 and delta-9 THC do not go much further than their regulatory restrictions, as delta-8 THC is able to provide a similar psychoactive effect as delta-9. Lab technicians have determined that the slight difference in the chemical makeup of delta-8 and -9 (simply where the double bond exists on the cannabinoid compound), makes delta-8 marginally less psychoactive. This small distinction left delta-8 THC in a regulatory gray area despite being a psychoactive cannabinoid compound of the cannabis plant. On the one hand, it could have been argued that if delta-8 was derived from hemp, then it would be considered legal under the 2018 Farm Bill. On the other hand, delta-8 could be considered a controlled substance analogue under the Controlled Substances Act. The result of this gray area has been the ‘gas station weed’ that many consumers encounter in commercial shops in the United States without any sort of marijuana business license. While the effects of delta-8 THC are less than that of delta-9, Michigan has determined it should not remain available and unregulated. Need for Regulation The MRA has recognized the damage done to Michigan consumers by leaving delta-8 THC unregulated in a recent comment addressing the new legislation: “Due to public health concerns and the need for rigorous testing of intoxicating cannabis compounds, the Michigan Legislature recently passed – and Governor Whitmer signed – legislation that categorizes all THC isomers of the cannabis sativa plant, (including delta-8) as marijuana.” These products are naturally of a poor quality as the delta-8 THC extraction process is not regulated, product processing using delta-8 THC is not regulated, and storage and quality assurance standards of these delta-8 THC products do not exist. Lack of regulation of these exact types of legal gray area products is what led to the vitamin E vape cartridge “scandal” of 2019, where unregulated, unlicensed producers created products dangerous to their consumers. These dangerous and illegal products were damaging to the legitimate e-cigarette market and brought increased scrutiny over the entire vaping industry. Thoughts From the Michigan Cannabis Industry Delta-8 production has previously had no regulatory oversight. To ensure public health and safety, the MRA needs to both confirm that the product is safe for consumption and make sure that the production process is safe. Leaders in the cannabis community of Michigan applaud this new legislature from the state rather than creating a ban of delta-8 THC which fuels black market practices and potentially dangerous products. Leadership from both the Michigan Cannabis Industry Association and the Michigan Cannabis Manufacturers Association has publicly supported the recent bill passage. The bill is the ideal first step towards getting delta-8 THC and all other psychoactive agents of the marijuana plant under strict testing as well as complying with health and safety standards. By October 11th, 2021, any business that wants to produce, process, or sell delta-8 THC products will have to ensure that they are licensed, tracked, and tested similar to existing marijuana products. Delta-8 THC Limitations Michigan MMFLA and MRTMA licensed processors have not been permitted to manufacture or process delta-8. This new classification of delta-8 THC as marijuana simply applies the restrictions delta-9 THC products are under without giving processors the ability to produce compliant delta-8 THC products. Additionally, the MRA has not approved the use or addition of delta-8 in any currently approved delta-9 THC marijuana products. Furthermore, current licensees are not permitted to sell delta-8 THC product’s or use them in the production of marijuana products. Essentially, until the MRA can ensure the safety and quality of delta-8 THC products, they will not be legally available, as retailers will be stalled until processors are able to process delta-8 plant material. It is important to note that this is not a complete ban on Delta-8. Many legislators around the country in states with similar cannabis laws have opted to completely ban the delta-8 THC cannabinoid to stop its illicit flow through unlicensed commercial retailers. Such a ban would completely dismantle operations that are dedicated to delta-8 cannabinoid conversion, as opposed to the MRA reclassification as marijuana that will allow for legalization and regulatory steps to come next. Processors may be approved to perform research and development of delta-8 THC cannabis under MRA oversight; those interested in this process should email MRA-Compliance@michigan.gov. Products manufactured as a result of this research and development process must unfortunately be destroyed and are not permitted to enter the regulated market. This research process requires MRA approval and additional inspections. Conclusion Until the MRA establishes standards and regulations to apply to delta-8 THC, there is a de-facto ban on the sale of the compound. None of the “gas station retailers” selling the compound prior to this latest law will be able to continue as they are not licensed to sell marijuana products. The MRA will solidify its quality assurance standards for delta-8 THC and then move to allow current cannabis business license holders to work with the product in the same manner that they are licensed to work with delta-9 THC. Until that time, don’t expect to be able to buy delta-8 products here in Michigan anytime soon. https://www.oak-law.com/blog/how-to-manage-your-industrial-hemp-grower-recordkeeping-michigan monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/8eb8df33-a739-4ab7-b510-b519bc2d70dd/unsplash-image-8EzNkvLQosk.jpg Blog - How to Manage Your Industrial Hemp Grower Recordkeeping Michigan - How to Manage Your Recordkeeping The recent distinction of industrial hemp and products made from it as a separate agricultural crop from cannabis has spurred many Michiganders to get involved in growing industrial hemp. As a less expensive viable alternative to many fibers and plastics, industrial hemp is ready to launch into the commercial scene. The Michigan cannabis attorneys of Scott Roberts Law Firm are here to help you navigate the rapidly growing industrial hemp market of the state. In addition to commercial product use, certain industrial hemp products are generally recognized as safe by the FDA, allowing for human consumption without the extra inspections required for cannabis food products. If you want to get in on this ripe aspect of the legal cannabis industry, you’ll want to pay close attention to the Michigan Department of Agriculture and Rural Development (MDARD) record keeping process and provide any necessary employee training to ensure your hemp production stays compliant. It may seem like a lot to manage, but this article will show you that following MDARD’s rules is easy and will ultimately benefit your hemp grow operation. Registration MDARD has shut down many industrial hemp farm operations when they request a copy of a grower’s registration and the grower cannot produce it. This is essentially a matter of maintaining an adequate record keeping system that allows you to locate documents important to your operation. Keeping track of your grower registration can save you many headaches down the line as industrial hemp grower registrations are required to do anything with the crop in Michigan. From planting and harvesting viable products to selling to processing or safety compliance facilities, nothing happens if MDARD cannot verify your registration at any time. Farm Operation Acreage Reporting As an industrial hemp grower, your farm will receive less inspection than a cannabis grow farm overall, but not without initial regulations to comply to. After you get your Michigan registration you have to verify a variety of information with Farm Service Agency (FSA) of the United States Department of Agriculture. This process makes you an authorized industrial hemp farm the United States which is very helpful when a certain US tax entity (the IRS) comes around for an audit or an inspection. To comply with the FSA requirements, growers must report their farm address, total acreage of the crop field or square footage if using an indoor grow operation, as well the GPS coordinates of every location on the farm where hemp will be grown. Lastly, FSA regulations require your Michigan industrial hemp registration number and your intended use for the crop. Again, a proper record keeping system will make following these rules a simple task. The FSA suggests keeping records of when you submit this information as well as any confirmation that it was received by the agency. Grower Sales An industrial hemp farm can only sell its raw product to a safety compliance facility or a processing operation with a license from MDARD or the Marijuana Regulatory Agency (MRA). Each of these sales must be precisely recorded and those records must be maintained for five years to avoid violation. Sales Records Requirements Name and license number of the processor or safety compliance facility purchasing the industrial hemp. Total weight of industrial hemp sold. Total price for each sale of industrial hemp. Date of sale. Certified Test Report of THC content for each lot sold, identified by variety (commonly known as Certificate of Analysis). Most of this information makes sense for an industrial hemp grower to keep track of anyways, but these record keeping rules will ensure growers stay on top of their production and sales. Grown Hemp Variety A simple record of every name of the strains of hemp grown at your facility must be maintained. This type of record again makes sense for an industrial hemp grower to keep track of, so this law should be an easy one to follow. Purchases of Viable Hemp Products Similar to requirements for sale of raw industrial hemp and its products in Michigan, some purchases made by an industrial hemp grower must be kept track of in their records. Not every purchase related to your facility has to be recorded, such as production equipment, but record of every purchase of a hemp product and what variety of hemp it is must be kept for at least five years. Hemp growers often purchase seeds, transplants, or clone plants to assist in their grow production. If you are a hemp grower who has bought any viable hemp from another producer you have to record the name of the individual or facility as well as the active mailing address of the seller. These records must also be kept for five years in case of an MDARD or USDA inspection. Disposal and Remediation There are many different issues that could lead to an entire hemp harvest being disposed of, not every cause of disposal must be reported, but this process must also be done according to the rules. To properly dispose of a non-compliant hemp lot in Michigan, a grower like yourself has to go online to Grower’s Notice of Intent to Dispose to notify MDARD of the disposal. This permits a grower to rid themselves of non-compliant lots, either from improper THC levels after the biomass remediation and removal of cannabis flower material or a general order from MDARD to dispose of certain hemp crops. However, disposals that occur to compliant lots as a result of contamination, pest infestation, or inclement weather do not need to reported. Non-Compliant Lot Disposal Obviously it is preferable to only maintain compliant hemp lots, but when this is not possible, Michigan makes sure industrial hemp growers recognize their error through the multi-stepped disposal process. This process requires the grower to submit the intent to dispose form no more than two days before the disposal and then a separate notice of disposal no more than two days after the disposal. If a MDARD representative witnesses the disposal, you don’t have to submit the notice of disposal. However, if there is no witness, you must report the date of disposal, the method or equipment used for the disposal, the total acreage disposed of, the reason for disposal, as well as photographic evidence of the actual disposal. Just as all records for hemp growers, these must also be maintained for five years, a complete checklist for the Michigan disposal process can be found here Technical-bulletin. Non-Compliant Lot Remediation An alternative do disposal is an option to remediate the non-compliant hemp crop in order to salvage compliant biomass material that can be used and sold for commercial product use in Michigan. A grower must submit a remediation sampling request online when choosing to remediate a non-compliant hemp lot. Remediation can performed in two ways: either by shredding all plants into viable biomass or removing and disposing of all floral cannabis material while retaining leaves, stalks, and seeds for commercial use. The remediated material must be sampled by MDARD to check the THC level. Depending on the remediation option chosen, an inspector will either collect a biomass sample, or collect a non-floral material sample AND monitor disposal of the floral material. This inspection will serve as the notice of disposal for the floral material if that was chosen remediation method. Records of all remediations must kept for five years which will assist with the annual crop reporting required by Michigan law. MDARD Annual Reporting In addition to all the requirements thus far, the USDA requires an annual report of all hemp crop results from any state with an industrial hemp program. To ensure compliance with these rules, Michigan will send an inspection survey to grower’s to report their annual production to be completed by November 30th of each year. To complete this inspection survey, an industrial hemp business will have to track ad report its total acreage of viable material grown, harvested, remediated, and disposed of. MDARD Recommendations All of these requirements for records may seem overly difficult to follow, but as strict as MDARD is, it does want industrial hemp business in Michigan to succeed. As a result of this, it recommends certain record keeping methods to make your life as an industrial hemp grower as easy as possible. First it recommends keeping your original hemp registration application and specifically the maps submitted with the app. An audit of your operation will generally require the original maps of your crop fields, storage areas, drying rooms, etc., and having them on hand will only make the process easier. Compliant crop lots disposed of due to contamination of crops, pests, disease, or weather do not require an official notice of disposal, but it is highly recommended that records of all hemp disposals are maintained. Additionally any and all laboratory test results should be saved for MDARD to reference if necessary. Crop management information, including hemp varieties, planting dates, flowering start dates; light, fertilization, and pest control details; and any additional growing conditions that could assist with identifying the potential cause of any non-compliant lots from season to season. Conclusion Even if you believe you have a firm grasp on your record keeping requirements in Michigan, it may still be a good idea to consult with a Michigan cannabis attorney to help keep your industrial hemp operation compliant and to help you navigate this rapidly expanding industry. https://www.oak-law.com/blog/cannabis-administration-and-opportunity-act-a-rundown-for-business-owners monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/82863cce-eee6-4b1a-b6a4-213e002cf120/unsplash-image-M98NRBuzbpc.jpg Blog - Cannabis Administration and Opportunity Act – A Rundown for Business Owners - A Rundown for Business Owners On July 14, 2021, Senate Majority Leader Chuck Schumer introduced a discussion draft of the “Cannabis Administration and Opportunity Act”. The bill is authored and sponsored by Schumer, along with Senators Cory Booker and Ron Wyden. Though the bill is unlikely to become law in its current form, it is significant that the Senate Majority Leader and chairmen of the Finance Committee is sponsoring such a bill. The framework hints at what may eventually become law as some sort of federal decriminalization is inevitable. Below are the main bullet points as they would affect cannabis business owners, plus some editorializing: The bill would need 60 votes in the senate, or all democrat votes + 10 republican votes. The bill proposed will almost certainly not pass in its current form. Top line – the bill would remove cannabis from the Controlled Substance Act and transfer regulation from the DEA to ATF, FDA, and TTB. Basically, it puts it in the same category as cigarettes and alcohol from a governing standpoint. States may choose to retain cannabis prohibition laws. However, a state may NOT prohibit the interstate commerce of cannabis transported through its borders for lawful delivery into another state. Legal California weed could be shipped to Vermont. This will open up a lot of cans of worms. In legal states, illegal “cannabis diversion” is defined as unlawful possession, production, distribution, purchase of 10+ lbs. I believe this means the Michigan (and other loosely regulated) caregiver systems would be able to more or less stay intact. TAX: eventually excise tax would max out at 25% – however it would be half that for the first $20MM in sales. This would roll out over a 5-year period. See table 1 below. Though there will be a federal excise tax, once descheduled and removed from the Controlled Substance Act, prohibitions under 280E would no longer apply. 280E has acted as an “unofficial” tax on legal cannabis – I’m interested to see if the excise tax will offset 280E – I think most cannabis businesses (especially retail) will end up paying less in tax. The law caps the amount you can buy at a store to 10 oz. Minimum age to buy is 21+ Bill opens up the ability to do research involving cannabis – mainly where the cannabis being studied has to come from. This cuts a lot of red tape and will be a boon many understudied cannabis related topics. There are several social steps – The bill would expunge federal non-violent cannabis convictions. States could still keep cannabis criminals in jail under state laws. Removes ability of federal agencies to use cannabis as a basis for denying or rescinding security clearances, immigration stuff, some other benefits. Wholesalers must register with FDA and be permitted federally. Not much discussion on what that registration/permitting process would look like. FDA would be charged with making most of the nitty gritty rules – and establishing individual legal/tax treatment of the many ways THC can be produced, packaged, and sold. A federal track and trace program would be established. Some discussion on how a single fed system could replace the complex patchwork of state seed to sale systems. Replaces “marijuana” and “marihuana” with “cannabis” in codes and regs. (Though not that big of a deal, this has been a personal annoyance of mine for years.) Though not specifically addressed, normal banking and credit functions would open up. Excise Tax Rates Proposed in Discussion Draft Enactment - Top Rate = 10% | Rate on first $20 million in sales = 5% Year 1 - Top Rate = 10% | Rate on first $20 million in sales = 5% Year 2 - Top Rate = 15% | Rate on first $20 million in sales = 7.5% Year 3 - Top Rate = 20% | Rate on first $20 million in sales = 10% Year 4 - Top Rate = 25% | Rate on first $20 million in sales = 12.5% Year 5 - Top Rate = 25% | Rate on first $20 million in sales = 12.5% Conclusion I think overall it is a decent proposal for business owners. The biggest gains would be the elimination of 280E for cannabis businesses and the benefit of normal banking/lending. The ability to sell across state lines will cause the biggest shake ups and would be the next step for international commerce. The states with the cheapest electricity and the best tax incentives would likely become the main hubs of production. In any case, the bill will face strong headwinds on both sides of the Senate. Senator Charles Grassley of Iowa, the top Republican on the Judiciary Committee said “It’s important that we have robust research and fully understand the good and the bad of marijuana use, especially in young people and over the long term.” Senator Jenne Shaheen, Democrat of New Hampshire was quoted, “There is still not enough data on marijuana use and whether that is a gateway drug in my mind to be able to make a decision to legalize it,” and added that New Hampshire faces “a significant substance use disorder problem.” These are ridiculous arguments as cannabis research has been stymied for decades by the very bad faith laws this bill hopes to reverse and there is zero evidence that the nation’s opioid epidemic has be exacerbated by cannabis. The limited research available strongly suggests that cannabis can be a “gateway drug” to get off of opioids.1 President Biden has said he supports decriminalizing cannabis, but he is generally more conservative than most Democrats. The White House fired multiple staff members this spring over their use of cannabis. https://www.oak-law.com/blog/marijuana-regulatory-agency-compilation-frequently-asked-questions monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/300fc4b3-cde9-408e-b30a-a4987e9ef5eb/unsplash-image-tVkdGtEe2C4.jpg Blog - Marijuana Regulatory Agency Compilation: Frequently Asked Questions - Frequently Asked Questions As the cannabis industry continues to expand, the regulation of all things marijuana continues to be a growing task for the State of Michigan. As a result, Michigan’s Marijuana Regulatory Agency (MRA) is hard pressed to keep up with the demand for information on its expanding policies. MRA licensed cannabis business owners as well as Michigan cannabis attorneys rely on this information from the MRA to ensure they are continuing to abide by the MMFLA and MRTMA. To better relay this valued information to licensees that need it, the MRA has begun posting the most frequently asked questions by both Michigan cannabis attorneys and business owners in the field. This review reflects the MRA’s latest update to its common business operation questions as of June 1, 2021. Product Potency Issues As more cannabis products flood the market looking to get purchased by licensed dispensaries, it is important to know that the MRA requirements for potency in order to ensure these products are approved. The MRA requires that THC and CBD concentrations in those products must be labeled within 10% accuracy or the entire product may be restricted from sale. This means a product labeled at 50mg THC can vary 10%–i.e. 5mg THC—so either as low as 45mg or as high as 55mg is allowed before a cannabis business owner will have an issue. Product Labeling Issues Michigan sees an enormous variety of cannabis product labels, some of which may be considered false or misleading by the MRA. Admin rule 420.507(2) states that no cannabis product label may assert deceptive, false, or misleading statements. This is especially important for licensees who employ third-party suppliers for packaging purposes as those licensees become responsible for any labels provided by that third party, including products produced under an MRA approved licensing agreement. Michigan cannabis business attorneys need to make their clients aware that if a label or package supplier has contradictory information on their labels, it’s the licensed cannabis business owner that will suffer the consequences. METRC Program The Marijuana Enforcement Tracking Reporting & Compliance (METRC) program is a nationwide system meant to help the cannabis industry house its business information. Many cannabis business owners utilize all of the functions the system offers, however not all of these functions are approved under Michigan’s cannabis laws. Michigan cannabis attorneys must emphasize to licensees that it is their responsibility to ensure they are using METRC within the parameters set by Michigan’s MRA. METRC allows cannabis business owners to utilize options such as an ability to “return to sender” of unwanted products, to enter valid sales of products under administrative hold, and to use unauthorized license types for transferring product; none of these functions of METRC are allowed under Michigan cannabis law. Many licensed cannabis business owners choose to use third-party point-of-sale (POS) systems. These systems are meant to streamline business transactions such that the licensee does not have to keep track of every sale or transfer on their own. These third-party POS systems may not always result in accurate reporting, errors in such POS systems are detrimental to smooth business operations but are not directly an MRA issue. However, inaccurate information in METRC is a direct MRA issue, so if these third-party systems enter flawed reports, it will be the licensee that will face disciplinary action. To this point, it is important that MMFLA and MRTMA licensees utilize POS systems that smoothly integrate with METRC and remain supported by the software providers. As cannabis business attorneys, we’ve encountered situations where errors in the POS systems have caused errors in METRC, which have in turn led to citations from MRA. While MRA will consider this as a mitigating factor when negotiating a citation, it is still best to stick with proven POS systems that continue to be supported by the software providers. Temporary Marijuana Events and Designated Consumption Establishments As cannabis consumption becomes more commonplace, public events and establishments will increasingly seek to cater to such consumers. Temporary Marijuana Events (TME) and Designated Consumption Establishments (DCE) allow licensed cannabis companies to provide spaces for Michigan cannabis consumers to consume their products. Many licensees that apply for TMEs and DCEs are looking to also serve/sell food and alcohol at these locations. Any and all sales of alcohol are separately regulated by the Michigan Liquor Control Commission (MLCC) and thus only MLCC can approve the sale of alcohol at a TME or DCE. Food consumption, on the other hand, is allowed at a TME or DCE as long as the licensee receives the applicable local and state food regulator authorization, though this is often easier said than done. The only specific MRA requirement for food or beverage at a temporary marijuana event or designated consumption establishment is that these products must be stored separately from any marijuana to avoid cross-contamination. Failure to receive proper authorization for food and beverage consumption at a TME or DCE will result in the licensee being subject to MRA investigation. https://www.oak-law.com/blog/hemp-in-food-and-dairy-products monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/9012871e-f974-4f99-82f5-25a9f60685f7/unsplash-image-UuZEaHSyK2o.jpg Blog - Hemp in Food and Dairy Products - Hemp in Food Since the Marihuana Tax Act of 1937, which sought to stymie the entire hemp industry through excessive taxation in fear that industrial hemp would replace paper, industrial hemp has spent the past few decades as a restricted agricultural product. These tax restrictions were later superseded when the entire hemp plant was designated as a controlled substance under the Controlled Substance Act of 1970 (CSA). The CSA lumped industrial hemp together with consumable cannabis as a Schedule I drug with no medical use and a high potential for abuse, essentially killing the United State’s hemp industry for decades to come. Prior to these regulations, industrial hemp enjoyed a wide commercial use in many different products as a more sustainable paper substitute. Now that Michigan has authorized its own hemp program under the farm bill, and hemp is legal to grow and process once again, there are a myriad of potential applications and uses for Michigan hemp ranging from auto industry to plastic and paper substitutes. Industrial hemp is distinguished from recreational or medical grade cannabis when it has a delta-9 tetrahydrocannabinol (THC) concentration of 0.3% or less. This concentration level was determined to not have a reaction within the human body. However, the most recent and final USDA rule on industrial hemp serves as a positive sign for Michigan industrial hemp attorneys and the entire industry as a whole, as it allows a grace range of up to 1% THC for a cultivator to avoid negligent violation. The renewed treatment of industrial hemp as an agricultural product for commercial use has intrigued many industry stakeholders due to its viability as a food product. The general trend of loosening restrictions bodes equally well for industrial hemp cultivators seeking to compete with paper products as well as the industrial hemp cultivators seeking to produce the next “superfood”. Nevertheless, the Michigan Department of Agriculture and Rural Development (MDARD) wants to correct the misconceptions about the use of hemp in food and dairy products in the wake of the cannabidiol (CBD) product craze sweeping the US without approval of the Food and Drug Administration. Use of industrial hemp in food and dairy products falls under the regulations of the FDA, which are enforced in Michigan by the Food and Dairy Division (FDD) within MDARD. Recently the FDA chose to advance three hemp seed derived products to generally recognized as safe (GRAS) status, which allows the use of such a product in food items without extra premarket review be the FDA. Michigan hemp attorneys should recognize these products: hulled hemp seed, hemp seed protein powder, and hemp seed oil, as they are generally free of both THC and CBD and are therefore designated as GRAS and approved for use in food products. This designation means that these industrial hemp products are considered a food product subject to all FDA, Food Safety Modernization Act, and Michigan Food Law requirements, but otherwise free from previous CSA restrictions. Industrial hemp stakeholders seeking to enter the food and dairy product realm only need to acquire the correct specified licensing to produce hemp as any other agricultural product and use the approved seed derived substances as any other food additive with a GRAS designation from the FDA. The global industrial hemp seed market is set to rapidly increase in size following this designation for use in food and beverage products and an overall modern gravitation towards alternative ingredients and perceived “superfoods.” Through the sales of hemp seeds, hulled seeds, protein powder, and seed oil forms, the market grew to $710.7 million as of 2019, with projections of up to $1,634.6 million by 2027. Industrial hemp represents a viable substitute for many consumer-based products with economic and environmental advantages over its plastic and paper competitors. With the additional designation as a GRAS product and approved use in food products, the Michigan hemp industry is poised to experience booming growth in the coming years, and not just from high CBD hemp. Global Hemp Seed (Product) Market Stats MDARD – FDD Industrial Hemp Release USDA Final Rule on Industrial Hemp FDA Remarks at 2019 Industrial Hemp Summit https://www.oak-law.com/blog/michigan-microbusiness-update-february-2021-edition monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/adc8f345-437e-4eab-bc70-0ef0b13a11a9/unsplash-image-sEApBUS4fIk.jpg Blog - Michigan Microbusiness Update: February 2021 Edition - February 2021 Edition As Michigan cannabis lawyers we’ve seen a lot of changes in the Michigan cannabis market and the rules governing the recreational market. This update will discuss two major updates for Michigan microbusinesses, the first being the licensing of the state’s second microbusiness, and the second being the proposed “Class A Microbusiness” license type, both of which are discussed in detail below. Second Microbusiness Licensed in Michigan In fall 2020, the Marijuana Regulatory Agency licensed the first MRTMA Microbusiness in the State of Michigan. Our client, Sticky Bush Farms out of Onaway, Michigan, received the first microbusiness license on September 8th, 2020. We are excited to announce that another client, Purple Punch Station, just received the second microbusiness license in the State. Purple Punch Station is a mom-and-pop business located in Decatur, Michigan. With several more projects on the way, we are excited to see the microbusiness concept start to catch on. What do these two Michigan Microbusiness licensees have in common? One thing that Sticky Bush Farms and Purple Punch Station they have in common is that they were proactively working with their local communities. One of the key barriers to starting a microbusiness is getting a municipality on board. This means not just getting them to opt into the MRTMA, or even getting the municipality to allow microbusinesses licenses, but to allow them in areas where they actually make sense. We have seen at least one municipality allow microbusinesses, only to restrict the property in such a way that they were not viable for the typical mom-and-pop business owner. Both companies are also “mom and pop” businesses located in more rural areas outside of Southeastern Michigan. For many, this is the perfect situation for aspiring microbusinesses as they are able to start up and operate at lower costs and are not dependent on doing several million in revenue to be profitable, which is often the case for many Metro Detroit area dispensaries. That is not to say that Microbusinesses wouldn’t do well in more populated areas. We are working on a handful of microbusiness projects and hope to soon introduce the Microbusiness concept to the Metro Detroit area. While these projects will cost more to start up and operate compared to many of the more rural locations, they would be able to more than make up for that in terms of revenue. The key, as we have said in previous articles, is to find a way to differentiate your microbusiness from other local cannabis retailers. Whether that would be unique strains, higher quality product, lower prices, or some other differentiating factor, finding a way to set your microbusiness apart will help to ensure its long-term longevity as prices continue to drop in the MRTMA wholesale market. Microbusiness Class A License As some of you may already know, there has been legislation proposed to change the MMFLA and MRTMA in a number of ways. Originally, this was planned to be passed in the 2020 lame duck session, but that never happened. However, the proposed legislation lives on and continues to be refined by the MRA, lobbyists, and the Michigan legislature, working in tandem. More recent versions of the legislation have proposed some key changes with respect to microbusinesses. The current microbusiness license is governed by the MRTMA, and was intended to help those transition from the caregiver market to grow, process and sell their own products, however, relying solely on your own crop can be a risky venture. In the wake of this research, the MRA is proposing a potential new license type called the “Class A Marijuana Microbusiness”, which addresses some of the hurdles faced by microbusiness owners. The Class A Marijuana Microbusiness license differs from the existing microbusiness license in the following ways: Cultivation of up to 300 mature marijuana plants, increased from 150 plans; Purchasing/obtaining mature plants from other licensed growers; The ability to utilize an outside processor; These may not seem like huge sweeping changes to the microbusiness license, but they could add a lot of value if adopted. By increasing the plant count to 300 and allowing the ability to procure mature plants from other licensed growers insulates the risk of the business owner against crop failures and selling out of product. Additionally, allowing the use of outside licensed processors will help the business owner broaden their product line and potentially save initial costs on processing equipment, which can be incredibly expensive depending on the products the business plans to make. While this new license type has not been officially adopted, there is a lot of excitement that this could bolster the marijuana small business market. Conclusion These are exciting times to be in the Michigan cannabis industry. With the microbusiness license beginning to pick up steam, and offer opportunities to smaller groups, there are still plenty of opportunities to enter the Michigan cannabis market. As Michigan cannabis attorneys, we are excited to help the first couple of Michigan microbusinesses navigate their way to getting licensed and open. We hope to have several more such projects down the road and look forward to introducing the Michigan microbusiness license to the Metro Detroit cannabis market. https://www.oak-law.com/blog/will-the-u-s-house-of-representatives-end-marijuana-prohibition monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/32e3ea81-93b8-4d7c-9d64-923bc2d6e8de/unsplash-image-K6Vegac_Ic8.jpg Blog - Will The U.S. House of Representatives End Marijuana Prohibition? - End Marijuana Prohibition? The U.S. House of Representatives may very well vote to decriminalize marijuana, as well as provide a historical overhaul of the federal government’s treatment of the drug. HR 3884, otherwise known as the Marijuana Opportunity, Reinvestment, and Expungement Act, or MORE Act, is a comprehensive reform bill that attempts to begin repairing the damage done by the failed “War on Drugs.” The MORE Act would not legalize cannabis in all states. States would still be free to make marijuana possession and sale a criminal defense, but the MORE Act would reverse the current interplay between state and federal law. Currently, most state laws allow medical and / or recreational cannabis, while federal law does not. With the passage of the MORE Act, federal law would allow possession or sale of cannabis, but many states would still have more restrictive cannabis laws on their books. Most notably, if passed, the bill would remove marijuana from the list of scheduled substances under the Controlled Substances Act and would have a real impact on those suffering from marijuana-related criminal convictions. A significant expansion of expungement programs and a grant establishment for communities that have been negatively impacted by the justice system’s approach to drug crimes are also found within the proposed legislation, as well as a 5% federal tax on all marijuana sales. The bill also calls for greater testing and research, and even allows veterans to obtain medical marijuana recommendations from VA physicians. But wait, there’s more! Passage of the MORE Act is another important step to easing federal constraints on marijuana businesses operating legally under state law. Currently, marijuana businesses face limited access to banking and business loans, not to mention disproportionate tax treatment. Operators of cannabis businesses have good reason to keep a close eye on how the proposed legislation is received at the federal level. Although there will be little impact to the IRS Code Section 280E, the prominent federal tax provision known to flatten profit margins for industry operators, the MORE Act provides for a funding allowance by the Small Business Administration, improving access to financial assistance for cannabis entrepreneurs looking to enter or scale their business. As it stands, there are few commercial lenders that avail themselves of the industry; those that do provide funding have little competition and often time pose significant downside to operators who seek sustainable growth. At our cannabis business law firm, we often have only a handful of potential referrals for cannabis businesses seeking financing, and all potential lending options have interest rates almost twice that of a normal business loan. However, as more and more states recognize and implement laws to regulate the emerging commercial marijuana industry, the more potential there is for progress at the federal level. The MORE Act would certainly spearhead and accelerate efforts to impose major federal reform and could prove to be a catalyst to help level the playing field for those looking to flourish in the cannabis marketplace. https://www.oak-law.com/blog/how-to-start-a-legal-cannabis-business-in-michigan monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/9f3e6eb7-3947-4d07-8243-bd1cba127402/unsplash-image-r9T0LZv8xWQ.jpg Blog - How to Start a Legal Cannabis Business in Michigan - How to Start So you’ve decided you want to enter the Michigan cannabis industry. Maybe it’s because its one of the state’s fastest growing industries, or maybe you think it would be a fun and exciting industry to become a part of. Where do you start? Before getting started, it it’s important to talk about what laws actually govern legal cannabis businesses in Michigan. There are three main marijuana laws—the Michigan Medical Marihuana Act, or “MMMA”; the Medical Marihuana Facilities Licensing Act, or “MMFLA”; and the Michigan Regulation and Taxation of Marihuana Act, or “MRTMA.” The MMMA authorizes “caregivers” to grow up to 12 plants per registered patient, for a maximum of 72 plants, but does not authorize the sale of marijuana except to the caregiver’s registered patients. The MMFLA, on the other hand, allow for the licensing of medical marijuana businesses and allows dispensaries to sell to any registered patient, including out-of-state patients in some cases. Finally, the MRTMA, or “adult-use” licensing law, allows for the licensing of recreational marijuana businesses and the sale of marijuana to anyone 21 years and older. In this article, we will walk you through the steps you need to take in order to start a legal Michigan marijuana business. As a Michigan cannabis business attorney, we work with both licensed “plant touching” companies as well as cannabis companies that do not require an MMFLA or MRTMA license. Step 1: Choose Your Niche The very first decision you will have to make is what exactly you want to do in the industry. Do you want to start a commercial cultivation facility? Do you want to open a dispensary? Or do you want to simply take your existing business or skill set and pivot it to helping other cannabis companies? Here, we will divide up industry opportunities into three different tracks—branding and licensing, ancillary businesses, and plant-touching. Branding and Licensing Not many people know that you can sell your own branded marijuana and marijuana products without ever having an MMFLA or MRTMA license. Many of the brands that you see when walking into a Michigan dispensary are not actually licensed companies. Instead, they have licensing / white labeling agreements with a Michigan licensed cannabis processor to manufacture their products. You may be surprised to learn that most of the brands you see on a dispensary’s shelf are manufactured in one of a handful of processing facilities throughout Michigan. What that means is that you could launch your own cannabis brand, whether that be flower, cartridges, edibles, etc., without the immense start-up costs of obtaining a Michigan cannabis license under the MMFLA or MRTMA. What you will need is an lawyer with experience in negotiating cannabis licensing and white label deals, some start-up capital, and a very persuasive business plan or pitch deck. You don’t need to be a celebrity to start a cannabis brand—in fact, celebrity brands don’t have the best track record in this industry. What you do need is good branding concept, and most importantly, the work ethic and marketing budget to build that brand into a household name. I work with several such companies, and let me tell you, it’s much easier said than done, but that doesn’t mean it’s not possible. Ancillary Services While there is lots of opportunity in cultivation, processing, dispensaries and other “plant touching” businesses, there is also opportunity in the ancillary business sector. This was the path that I initially chose. I had worked in business, real estate and healthcare law prior to 2017, and saw the opportunity to pivot my law firm to servicing cannabis companies. In truth, it wasn’t all that much of a change, I just changed the type of clients I was going after but was still doing pretty much the same work. Similarly, you may have an existing skill, service or business that could be pivoted to the cannabis industry. Maybe you are an accountant, insurance agent, real estate broker, general contractor, or have some other professional skill that can be easily translated into the industry. If so, then your easiest path to having a legal marijuana business is to simply pivot your existing business to service the cannabis industry. Even if you don’t have a directly translatable professional skill, there are other ways to enter the cannabis ancillary services market. There are thousands of opportunities to break into the Michigan cannabis industry via ancillary services and products. You could develop an app such as WeedMaps, you could manufacture smoking accessories such as dab rigs, or provide some other product or service. Similar to the licensing and branding path, one of the big advantages of ancillary services is that you don’t need to go through the expensive and time-consuming task of obtaining a cannabis license. Plant-Touching “Plant-touching” is industry lingo that refers to a business that, you guessed it, actually touches the marijuana plant. In Michigan, that refers to cannabis cultivation, dispensaries, processors , safety testing labs, secure transporters, and microbusinesses. We will also include cannabis lounges and cannabis events in this category due to the fact that Michigan requires them to obtain an MRTMA license. While potentially the most lucrative, plant-touching cannabis businesses are expensive to start-up and require you to go through an extensive and time-consuming licensing process, as outlined below as well as here. Step 2: Put Together a Business Plan, Budget, and Pro Forma Before forming your business, you want to first put together a solid cannabis business plan with a start-up budget and pro forma numbers. Even if you are self-funding and don’t need investors or financing, it is still a good idea to put your business plan to paper and fully flesh out your business model. One of the most common mistakes in the Michigan cannabis industry is the failure of business owners to properly budget their projects. A dirty little secret of commercial real estate is that you can pretty expect your project to go over-budget. You need to account for this fact from the beginning, especially since cannabis projects, particularly cultivation facilities, are notorious for going well over budget. We commonly recommend adding a 15% contingency to any construction budget to account for expected cost overruns, though sometimes even this number isn’t enough. Another common mistake is to assume that your business will be profitable from day 1. This is almost never the case. Whether you are a dispensary, and need time to build a customer base, or a grower that needs time to get their first crop and work out the kinks in their cultivation system, do not count on being profitable from the outset. When building your budget, that means remembering to account for sufficient operating capital to allow you to survive until you reach the point of profitability. Step 3: Form Your Business and Choose Your Team Now that you’ve chosen your niche and have a plan, the next step is to form your company and choose your team. There are many considerations to take into account when selecting your business structure. While forming LLCs and corporations is incredibly easy in Michigan, selecting your team and properly structuring your company are not quite as easy. For plant-touching companies, you will at a minimum need a cannabis business attorney and accountant who specializes in cannabis. You will probably want to set up consultations with several professionals and companies providing these or other services before choosing the right attorney or accountant for your project. When selecting your cannabis business attorney, make sure you select a firm with both a cannabis and business law background. There are numerous “cannabis attorneys” with criminal law backgrounds instead of business law backgrounds. Instead, you will need an attorney with corporate formation, structuring, real estate and contracting experience who also has experience representing cannabis businesses. This will ensure your company is properly structured and protected from the beginning. Depending on your own skill set, knowledge and experience, you may also need to identify additional partners, employees, or cannabis business consultants. to help fill out your team. For cultivation projects, this usually means selecting the master grower; for safety testing, the right person to run the lab; and so on. This is also the time to decide how to structure your cannabis business. When drafting an operating agreement or setting up a corporation’s bylaws, you will need to decide how the business will actually be run. In deciding this, you will need to be prepared to answer a lot of questions. For example, will you need to bring on investors? Are you splitting up responsibilities within the company with your team? If you have partners, how are major decisions going to be made? What’s the best tax status for your business? The answers to these questions will decide what type of company you want to form, how it will be managed, and what tax selections you will want to make. It is important that you put sufficient time and energy into this step since incorrectly structuring your company can lead to headaches, lost profits, and potential litigation down the road. Now, if you are not a plant-touching company, you can skip right to Step 7. If you are a plant-touching company, however, you will also need to go through the next steps to properly license your company with the Michigan Marijuana Regulatory Agency, or “MRA.” Step 4: State Prequalification And now the fun begins! Unlike other states such as Illinois or Florida, Michigan doesn’t put limits on the number of state cannabis licenses that can be issued. That means that anyone who can pass the state’s background check and obtain a municipally licensed property can receive an MMFLA or MRTMA cannabis license. Luckily for cannabis business owners, the state has been loosening up on the qualifications for owning a Michigan cannabis business. The state no longer requires financial statements, real estate deeds, or three years of taxes. The state is also no longer hyper-focused on criminal matters as it once was. Instead, MRA’s main focus appears to be on taxes, business litigation, regulatory history, and bankruptcy. What this boils down to is whether you have a history of paying your taxes, whether you have any outstanding tax liens or deficiencies, whether you’ve had issues with other governmental licenses, and whether you’ve engaged in unethical business practices such as refusing to pay money you owe or engaging in fraudulent activities. At Scott Roberts Law, we’ve submitted well over a hundred prequalifications, and can help you identify and overcome potential licensing issues. With respect to multi-partner groups, sometimes this means leaving someone off of the license due to issues in their background, and instead having them control or finance the real estate or equipment. In other situations, it may simply mean getting ahead of certain issues and providing your side of the story in the form of a cover letter to your application. While each situation is different, we recommend you talk to a Michigan cannabis licensing attorney before submitting your MMFLA or MRTMA prequalification. Step 5: Identify and Municipally License Your Cannabis Property While your prequalification is in process, it’s usually a good idea to start looking for property to locate your cannabis facility. Under the MMFLA and MRTMA, whether and where you can locate your cannabis business is up to each individual municipality. Unfortunately, most Michigan municipalities do not allow licensed cannabis companies to operate within their borders. Nonetheless, there are a number of Michigan municipalities that will allow you to legally operate a licensed cannabis business, including Detroit, Warren, Lansing, Grand Rapids, Pontiac, Flint, Traverse City, and others. An unofficial list of municipalities that allow cannabis businesses can be found here. There are many different routes you can take to acquire a municipally licensed cannabis property. You can purchase the property or lease it. You can also purchase the property on a land contract, which is generally referred to in the industry as “terms.” Unlike other industries, land contracts are wildly popular in the cannabis industry, given the lack of banking and lending options for cannabis businesses. You can also purchase property with a municipal cannabis license or existing cannabis business, or obtain your own license. Generally, properties that already have licenses attached garner a premium compared to properties that are merely eligible for licensing, and both garner a substantial premium when compared to properties that are not eligible for cannabis licensure. For properties that do not already come with a license, you should be able to “tie up” the property with a purchase agreement or contingent lease while you obtain your municipal license. Otherwise, you could end up paying a premium for a property that you cannot use for your business. Many municipalities “cap” the number of licenses they allow for specific facility types, and there may be a limited window to apply for these limited number of municipal licenses. Most municipalities will cap the number of dispensary (also referred to “provisioning center” and “retailer”) licenses they allow, though some also cap the number of growers, processers, and other license types. Thus, even if you find a property in a municipality that allows cannabis and is properly zoned, you also need to make sure the municipality is actually accepting applications for your license type. Step 6: State Facility License Now that you are prequalified and have a municipal license, the next step is to build out your facility and apply for a state operating license. MRA recommends waiting until you are less than sixty days from being fully built out for operations before applying for the “Step 2” or “Part 2” cannabis facility licensing step with the state. Applying for a final state operating license requires you to put together a number of plans to submit to the MRA, from recordkeeping plans, security plans, staffing plans, advertising plants, and more. You will also need to submit to inspection by MRA as well as the Bureau of Fire Services, or “BFS.” Once your Step 2 packet is approved, and you have passed MRA and BFS inspection, the last step in the process is to pay the licensing assessment fee, which varies by license type. Once paid, MRA will issue you an MMFLA or MRTMA license and you can begin operations! Step 7: Execute! Now that you have gone through the process to legally start up a cannabis business in Michigan, you need to execute on your business plan. If you are properly funded and have a rock-star team of employees, consultants and / or partners, you are set up for success. However, as many business owners can attest (including myself), running a business is not as easy or as sexy as it looks. For plant touching companies, maintaining compliance with the ever-changing regulations and guidance applicable to the Michigan cannabis industry is tough. You will certainly face obstacles, some of which are outlined below, and you almost definitely won’t be an overnight success. I sometimes joke that it took my three years in the industry to be an “overnight success.” But with the right funding, team and lots of hard work, you can have a successful, and legal, cannabis business here in Michigan. Step 8: Overcoming Obstacles on Your Road to Success Let’s be honest, if it was easy to start a legal cannabis business in Michigan, everyone would do it. But the business opportunities the Michigan cannabis industry presents are especially attractive not because it’s an easy business to get into, but because it’s can be quite difficult. The stakes are high, and the competition can be fierce. There are likely hundreds of companies vying to be the next Weedmaps, and we’ve seen situations where there are dozens of cannabis companies going after only a handful of available municipal licenses. Don’t be afraid of this sort of competition, just be prepared. The market is big enough for there to be numerous profitable and successful companies in your niche, whether that’s cultivation, branded products, or professional services. The big winners are not always the ones who are first to market. Oftentimes, the most successful companies are defined by their ability to overcome the inevitable obstacles that operating in the cannabis space can present. We will go through several common obstacles faced by cannabis businesses below. Banking and Insurance It’s a common misconception that the cannabis industry is an all cash business. Every single cannabis company I represent, including both plant-touching and non-plant touching, has a bank account and access to most insurance products. There are now at least 5 Michigan banks and credit unions that will openly bank licensed, plant-touching cannabis businesses. Even more will bank ancillary cannabis companies, though ancillary businesses still have to be careful. Similar to banking, insurance is also widely available for cannabis businesses. As the registered agent on dozens of prequalified or licensed cannabis businesses, my mailbox is absolutely inundated with insurance agents offering insurance to cannabis businesses. Nonetheless, until the cannabis becomes legalized or Congress passes of the Safe Banking Act, banking in the cannabis space will be limited, and expensive. Michigan cannabis banks and credit unions will generally charge a hefty due diligence fee, thousands of dollars in monthly maintenance fees, and sometimes an additional fee based off the percentage of total deposits. It is therefore a good idea to shop around and find the bank or credit union that is best for your situation. If you have a high volume business, you may be better off with a bank that charges a higher monthly maintenance fee but no deposit fees, or vice versa. Funding One of the biggest obstacles in starting a licensed cannabis business is obtaining enough money to get off the ground. Because of the fact Cannabis remains federally illegal, almost no banks will lend to cannabis businesses, with the exception of a few that bank cannabis and lend only up to a few hundred thousand dollars in property-backed loans. For cannabis entrepreneurs, that usually means they either need to self-fund their business, bring on investors or obtain financing from a private, non-bank institutional lender. Raising capital from investors is not an easy task, even with the outsized returns some opportunities in the industry can offer. For this reason, many new cannabis businesses prefer to start small and then gradually scale up by reinvesting their profits back in the business. This also has the advantage of making it easier to raise capital, since growing companies with a good operational history are much more attractive to investors than pie-in-the-sky start-ups. Private lending is also available to cannabis businesses, just be prepared for incredibly high interest rates. Even real estate backed loans, which is the most common type of lending in Michigan’s cannabis industry, can easily have interest rates between 10-15%. Equipment loans for start-ups are particularly hard to come by, as are operating loans. Hopefully this will change, and loan programs like the SBA will start allowing loans to cannabis businesses, but until that time, obtaining financing for your business is no easy task. Taxes While non-plant touching businesses generally have it easy when it comes to taxes, plant-touching businesses need to familiarize themselves with what’s commonly referred to as “280E.” 280E is a section of the federal tax code that prevents plant-touching cannabis businesses from taking most of your standard business deductions. Taking into account the effects of 280E when structuring your business is highly recommended and can be the difference between turning a profit or suffering a loss. Real Estate and Construction For plant-touching companies, the biggest obstacle and biggest bottleneck in opening a licensed cannabis business in Michigan is finding cannabis real estate, getting it licensed, and getting it built out and properly equipped, especially when it comes to cultivation facilities and dispensaries. Most of your start-up budget will be dedicated to this process. Like any business, it is important to get this right the first time, because you may only get one shot at it. Selecting the wrong property can tank even the best of business plans. A retail dispensary with little to no foot or car traffic is likely to struggle, and a building not well-suited for cultivation can increase your build out and equipment costs and dampen your yields well into the future. I’ve seen clients have to replace their entire HVAC system because they miscalculated the expected loads, as well as clients that didn’t take into account the costs of bringing more power to their grow facility. The best advice I can give here is to simply be diligent, and take your time selecting your team and planning your facility. Going with the first architect you find, or first general contractor, is not always a good idea. For every quality contractor or architect in the industry, there is one that overcharges and underdelivers. The best advice I can give is to do your homework, choose carefully, and choose wisely. Conclusion With this article, hopefully you now understand the path you will need to go down to start a legal cannabis company in Michigan. On a personal note, entering the cannabis industry, and pivoting my existing business and real estate law firm to focus on working with Michigan cannabis companies, was probably the best career decision I’ve ever made. Starting your own Michigan cannabis business may very well be the best career decision you’ll ever make. Just don’t fall into the trap of thinking it will be a walk in the park. You will face obstacle after obstacle. I’ve had my bank accounts and credit cards shut down and had competitors pouch employees. I constantly deal with last minute client emergencies, not to mention a constant stream of late night and weekend calls, texts, and emails. It’s not been an easy path, nor is it an easy way to get rich quick. However, if you want to enter an incredible growth industry, and are not afraid to put in a lot of hard work, entering the Michigan cannabis industry might very well be the best decision you will ever make. https://www.oak-law.com/blog/what-to-know-about-recreational-marijuana-in-michigan monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/b9a94c2a-e228-4783-8f3b-eaa7f59c3e86/unsplash-image-82TpEld0_e4.jpg Blog - What to Know About Recreational Marijuana in Michigan - What to Know As Michigan cannabis attorneys, we get asked almost every single day about adult-use (or recreational) marijuana by both business owners and consumers. Recreational marijuana in Michigan has been a continuously growing industry with more and more business owners eager to open their own marijuana establishment and more consumers ready to get their hands on some great Michigan cannabis products. However, with caregiver product produced under the Michigan Medical Marihuana Act being shut out of the adult-use system, there is not enough marijuana flower and processed products to go around. This has caused prices for recreational marijuana in Michigan to remain high, with some cartridges retailing at over $100. December 1, 2019 was the first day of recreational sales in Michigan. Lines of consumers wrapped around buildings and filled sidewalks just at the chance of legally purchasing their favorite marijuana products. Even though it has been almost a year since recreational marijuana was welcomed to Michigan, sales are still not slowing down. During 2020 total recreational marijuana sales have exceeded $200 million, despite COVID-19. and product shortages causing high retail prices. With a majority of other businesses shut down, the Michigan recreational marijuana industry was considered an essential business and continued to provide patients and consumers alike with products throughout lockdown and stay at home orders. With that in mind, we will answer some of the most common “frequently asked questions” we get from Michigan cannabis consumers and business owners below. Who can purchase marijuana in Michigan? Anyone with a valid ID who is over the age of 21 years old can visit a recreational marijuana dispensary in Michigan. Most retailers primarily accept cash as the only form of payment, but more are beginning to accept electronic payments as well. Marijuana dispensaries have also been forced to adapt to the new normal with COVID. Many provide curbside pickup or delivery options. In order to use these options, consumers can complete online purchases and pick up from the dispensary without leaving their car or have the dispensary come right to them! While many dispensaries utilize Weedmaps for pre-orders and deliveries, many operate their own internal delivery and ordering services. Click here to find the closest dispensary to you! Can I own a recreational cannabis license without first owning a medical marijuana facility? Recreational marijuana in Michigan is about to see a big change, for the benefit of business owners and consumers alike. As the law currently stands, the only recreational licenses available to those without an already active medical marijuana facility are a Class A grow (100 plants) and a microbusiness (150 plants, processing and retail). As cannabis attorneys, we have heard and assisted with the overall frustration felt by many entrepreneurs and consumers who wish to see more recreational marijuana establishments throughout the state of Michigan. This has also prevented new businesses from applying for licenses in municipalities that opted into adult use but never opted in under the MMFLA. Recently, the MRA has announced that as of March 1, 2021 they will open up the recreational marijuana licensing process to all applicants regardless of whether they first held an MMFLA license. This means that anyone interested in applying for a Class C Grow (2,000 plants), a retailer license, or any other marijuana license can finally apply without limitation. This change will bring many more recreational marijuana dispensaries and microbusinesses to Michigan. That means more products, brands, and variety in these shops. Do I need to be a caregiver to grow marijuana in my home? Not anymore! The MRTMA allows Michigan residents to grow up to twelve plants for personal use at their residence. You can also legally give away some of your excess marijuana from your home grow as long as you don’t receive any sort of compensation in return. If you are interested in starting your own recreational marijuana business contact the cannabis attorneys at Scott Roberts Law today! How much marijuana can I legally possess in Michigan? Is it still only 2.5 ounces? No, you can possess more than 2.5 ounces of marijuana, but any amount over this 2.5 ounces must be stored in compliance with state law. The MRTMA allows you to possess up to 10 ounces of marihuana within your place of residence as long as the excess marihuana is stored in a container or area equipped with locks or other functioning security devices that restrict access to the contents of the container or area. What if my municipal government doesn’t want adult-use marijuana but the city residents do? The MRTMA allows you to initiate a voter petition to put an MRTMA opt-in on your municipalities next election. How many signatures you need depends on the number of voters who have voted in your municipality. However, there is some legal ambiguity as to what can actually be in a voter-initiated adult use ordinance, with some arguing that only the number and license types can be included, and others believing that a fully formed ordinance (without zoning) could be initiated. What is recreational marijuana? In Michigan, there are three Michigan cannabis laws that allow the cultivation of marijuana—the MRTMA, the MMMA , and the MMFLA. The MMMA and MMFLA regulate medical marijuana, while the MRTMA regulates adult-use or recreational marijuana. Cannabis that is grown at an MRTMA facility, or transferred from an MMFLA facility to an MRTMA facility pursuant to applicable MRA rules and policies, is considered “recreational marijuana” and can be purchased by any adult age 21 and up at a recreational marijuana dispensary in Michigan. Recreational marijuana is subject to less stringent testing requirements in Michigan compared to medical marijuana sold at a medical dispensary. How much does marijuana cost at dispensaries in Michigan? This depends first on whether the dispensary is “medical” or “recreational.” Marijuana is cheaper at medical dispensaries, also called “provisioning centers”, and is not subject to the 10% excise tax on marijuana sales. Marijuana is more expensive at recreational dispensaries, also called marijuana “retailers”, and is also subject to a 10% excise tax. The actual price of marijuana at each varies by location. How do you sell marijuana to dispensaries in Michigan? In order to sell marijuana to Michigan dispensaries, you need a grower or processor license under the MMFLA or MRTMA, which are Michigan’s two marijuana facility licensing laws. Click the link to find out more on how to get an MMFLA or MRTMA license. How can I invest in marijuana facilities in Michigan? There are many ways to invest in Michigan marijuana facilities. Due to cannabis companies being mostly unable to obtain traditional bank loans, and many angel investors being scared of investing in marijuana due to its current federal illegality, cannabis companies are constantly seeking debt and equity investment. You can be a cannabis real estate investor, you can invest directly in the licensed entity through an exempt offering, including a MILE Act crowdfund offering, or you can buy stock in a public company with facilities in Michigan. Investing directly in Michigan licensees will often be more lucrative than investing in the stock market, though such investments are generally riskier compared to investing in public companies. How does Michigan divide up the excise tax money from marijuana sales? Until 2022, Michigan will set aside $20 Million Dollars each year from the excise tax proceeds on adult-use cannabis sales to research the efficacy of marijuana in treating the medical conditions of veterans and preventing veteran suicide. Any additional money during these first two years, as well as excise tax proceeds generated after 2022, are divided up as follows: 15% to municipalities in which a marihuana retail store or a marihuana microbusiness is located, allocated in proportion to the number of marihuana retail stores and marihuana microbusinesses within the municipality; 15% to counties in which a marihuana retail store or a marihuana microbusiness is located, allocated in proportion to the number of marihuana retail stores and marihuana microbusinesses within the county; 35% to the school aid fund to be used for K-12 education; and 35% to the Michigan transportation fund to be used for the repair and maintenance of roads and bridges. Who can purchase marijuana from Michigan dispensaries? There are two types of dispensaries in Michigan—medical dispensaries and recreational / adult-use dispensaries. For Michigan recreational / adult-use dispensaries, anyone 21 years or older with a valid government ID can purchase up to 2.5 ounces of marijuana. Medical marijuana dispensaries, however, require a person to only be 18 years old but they must have a valid medical marijuana card. Michigan medical dispensaries are allowed to accept out-of-state medical marijuana cards, including medical marijuana cards from Ohio, though not all do. https://www.oak-law.com/blog/can-a-municipality-discriminate-against-non-residents-for-cannabis-licensing monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/25f6024b-e824-47a3-8ee4-c5e46135b811/unsplash-image-r3WAWU5Fi5Q.jpg Blog - Can a Municipality Discriminate Against Non-Residents for Cannabis Licensing? - Discriminate Against Non-Residents? In the Michigan legal cannabis market, as with other states, municipalities hold the keys to kingdom with respect to licensing specific cannabis properties. What that means is that it is up to the municipality to determine who can be licensed to operate a cannabis facility or establishment within their borders. While it remains common for municipalities to give preferences to local ownership within the context of a points-based or merit-based system, at least one municipality has taken this a step further and gave local residents the first shot at obtaining a license. This has had the effect of shutting out non-local companies from local marijuana licensing. But is this legal? Well, this is a question without an easy answer. But what is clear is that an applicant to a municipality with an ordinance that shuts out non-local companies can challenge the ordinance on constitutional grounds, and depending on the specific circumstances, may have a legitimate shot of striking down such a requirement. The first way a municipal application could strike down a local residency requirement would be under the commerce clause. In a 2019 decision, the U.S. Supreme Court struck down a Tennessee law that imposed durational residency requirements on operators of retail liquor stores, holding that such a requirement discriminated against out-of-state economic interests in violation of the constitution’s Commerce Clause. Under precedent set by this decision, an out-of-state company would have a strong legal case to strike down a municipal marijuana ordinance that gave municipal cannabis licenses only to local residents as such a restriction would prevent out-of-state interests from engaging in business activities. While a municipality could attempt to rebut this by establishing a legitimate local purpose, mere protectionism—or giving opportunities only to residents so they can benefit and others cannot—is never considered a legitimate purpose. Of course, a municipality will likely try to claim some other legitimate governmental purpose, such as public health and safety, or that it is easier to hold local residents accountable compared to out of state residents. But such attenuated reasoning is unlikely to be upheld in court. The question then becomes—what about Michigan companies that are not owned by local residents? In this situation, the commerce clause argument is not as strong, as the constitution only talks about inter-state commerce. Intra-state commerce challenges typically only come into play where a good or service could cross state lines, which marijuana cannot. That brings us to the next argument—due process and equal protection. The Michigan and U.S. constitutions prevent governmental entities from depriving persons from property by an arbitrary exercise of governmental power. Similarly, both the Michigan and U.S. constitutions’ equal protection clauses prevent discrimination against a person based on a characteristic that does not justify different treatment. Such a challenge would need to show that the policy is arbitrary and not related to a rational governmental purpose where, as here, there is no legally established suspect classification at issue. Thus, a non-local resident could argue that there is no rational connection between the residency or domicile of an applicant and the legitimate policy concerns of a municipality—e.g. promote local economic growth, equitable development, or otherwise. Similar to the commerce clause argument, naked protectionism is not considered a legitimate policy concern, and claiming otherwise when it’s clear that was the intent is unlikely to hold up to scrutiny. However, it is possible that a municipality could claim a legitimate policy concern such as providing preference to those disproportionately impacted by the war on drugs. But this in turn begs the question—aren’t there also non-residents that have been disproportionately impacted as well? Here in Michigan, Grand Rapids was able to avoid a commerce clause, due process and equal protection challenge even though its tiered lottery system made it nearly impossible for out of state residents to obtain a provisioning center license. As a cannabis business attorney who evaluated such a lawsuit in that city, it was my opinion that an out of state applicant could have struck down Grand Rapid’s local preference provisions. Detroit’s proposed ordinance, which gives “legacy Detroiters” first shot at licenses, with there being a real possibility that there will be no more recreational retailer licenses left for non-Detroit residents after that application window is closed, is almost certainly going to be challenged. And if the challenge is brought by an out-of-state applicant under the commerce clause, there is a strong change that it would prevail. https://www.oak-law.com/blog/mra-expands-the-marijuana-adult-use-market monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/e1f8830f-03eb-4a2c-b0bc-cffa5492dbec/unsplash-image-TfJYyDFktl4.jpg Blog - MRA Expands The Marijuana Adult-Use Market - Come one, come all, the Michigan adult-use market is growing! For months Andrew Brisbo, the director of the MRA, has strongly hinted that changes were coming to the adult-use licensing process. As Michigan cannabis attorneys, Scott Roberts Law, anticipated that the adult-use market would be expanding, but without any official word there was nothing to do but wait. On October 6, 2020, the MRA has finally made an official announcement that they would be expanding the eligibility for adult-use licenses. Starting March 1, 2021, the MRA will begin accepting adult-use applications from anyone interested in throwing their hat in the ring. Up until this point, a majority of the available adult-use licenses could only be obtained by those already licensed under MMFLA. That meant only limited types of licenses were available to those without an operating medical facility. This included the MRTMA Class A 100 plant grow license, event license, or marijuana microbusiness license. Per MRTMA, the MRA was given a year to determine if the other license types should be made available for any applicant. November 1, 2020 will mark one year since the MRA started accepting adult-use applications and the state has yet to see a slowdown. Cannabis businesses continue to pop up and consumers keep wanting more. This created the perfect opportunity for MRA to step in and open the door to the marijuana industry to more entrants in the marijuana industry here in Michigan. Changing up the licensing process will not only allow more Michigan cannabis businesses to enter the adult-use cannabis market but will also provide greater access to marijuana throughout the state, thus creating a win-win situation. In order for this to be the game-changing scenario it can be, municipalities will need to follow suit. There are several municipalities that have welcomed marijuana businesses with open arms while others have been more hesitant. This hesitation is no longer paying off. In their announcement, the MRA calls for greater municipal participation. This will require many municipalities to reevaluate their ordinances prior to March 2021. Whether that means removing a cap on the number of licenses available or allowing marijuana businesses for the first time, the State is urging municipalities to get on board with adult-use marijuana. With so much happening in the Michigan cannabis industry, now is the time to start getting involved. As Michigan cannabis attorneys, we are excited to continue helping marijuana businesses enter the Michigan market. From cannabis real estate needs to business structuring, we can handle it all. Start thinking about what license you would like to apply for today. https://www.oak-law.com/blog/getting-genetics-into-your-michigan-adult-use-cultivation-facility monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/b7222395-e4e4-4499-83a2-ba60938a5b2d/unsplash-image-eXoXJrOGqG4.jpg Blog - Getting Genetics into Your Michigan Adult-Use Cultivation Facility - Getting Genetics On April 8, 2020 the MRA released its latest bulletin regarding the phasing-out of caregiver product from the adult-use market. The bulletin specifically prohibited products “derived” from caregivers to enter the Adult-Use cannabis market. Throughout this year the MRA has been inching closer and closer to removing caregiver product from adult-use facilities all together. This bulletin, along with the new “phase” we have entered, places an immediate ban on caregiver produced or derived product from entering the adult-use market. As of June 1, 2020, we are in Phase 2 of this process. This means the MRA will not permit any MRTMA licensee with equivalent licenses to transfer caregiver produced or derived products from their medical facility to their adult-use facility. However, licensed medical growers may continue to receive seeds, seedlings, tissues, bud, shake, and trim from caregivers. There is one exception to this rule however, and that is transferring caregiver plants and genetics to a Michigan marijuana microbusiness. The MRTMA rules allow a caregiver on the microbusiness license to do a one-time transfer of caregiver plants to the microbusiness when it’s first opening up. Back to the issue at hand—how exactly are adult-use facilities going to receive genetics without caregivers? Well, if MRA were to take the position that even a clone from a plant derived from caregiver genetics would be included in this ban, they would effectively make illegal every single plant grown in an MRTMA grow facility in the State of Michigan. This would certainly be an absurd position to take. As a matter of fact, every single plant growing in a licensed facility in the State of Michigan was “derived”, at some point, from a caregiver. Which is likely why under MRTMA, a marihuana grower may acquire marihuana seeds or seedlings from a person who is 21 years of age or older. This means that if a caregiver is a Michigan resident, who over the age of 21, they may sell seeds/seedlings to a grower! As Michigan cannabis attorneys, we understand the need for licensees to get genetics and products over to the adult-use market. We are diligently communicating with the MRA to get a clear picture of what will and will not work when requesting transfers and may already have one by the time you read this article. While we suspect that the caregiver genetics example described above would be permissible, making those kinds of assumptions when it comes to dealing with the MRA can be dangerous. https://www.oak-law.com/blog/thinking-long-term-in-the-cannabis-industry-more-than-just-market-share-2 monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/fc45725b-4115-42c8-ade8-b503e6336a09/unsplash-image-6aapTQNjbP4.jpg Blog - (Part 2) Thinking Long-Term in the Cannabis Industry: More Than Just Market Share - (Part 2 of 2) In Part 1 of this article, I talk about how increasing market share for market share’s sake is one of the big mistakes made by “big cannabis.” Since many cannabis companies underlying operations were, for the most part, not profitable, all increasing market share accomplished was to exacerbate their losses. This lead to these companies diluting existing shareholders with more equity raises, or having to take on debt they couldn’t pay back since they were not actually profitable. This was probably the single biggest factor that caused the “big cannabis” stock bubble to pop. Investors found it hard to justify holding stock in companies that continually diluted their shares and weren’t producing profits. Why did it take cannabis investors so long to learn this lesson? Well, on its face, it’s easy to be seduced by a strategy with the potential to produce 10x returns in a short time frame. Who doesn’t want to grow their company by an order of magnitude? I certainly would, and you probably do to. The problem with trying to “10x your company”, however, is that pursuing aggressive, non-organic growth is an expensive, and often risky, endeavor. Of course, pursuing growth and new “blue sky” opportunities is not necessarily a bad strategy. In many cases, it could be the best move your business will make. But pursuing aggressive growth, especially when fueled by acquisitions alone, can sometimes backfire. The examples in the cannabis industry of companies that attempted to do this, then fell flat on their face, are almost too numerous to count. I could point to MedMen as an example, but that would simply be too easy as they are the posterchild of unsustainable growth, too much debt, and constant shareholder dilution. Instead, let’s look at another “big cannabis” company’s attempt to 10x their market. Initially, their growth strategy made sense, and they were able to become one of the largest cannabis companies in North America. Eventually, however, their pursuit of growth went too far and has lead to issues the company is currently struggling with to this day. Canopy Growth: The Heady Days If you purchased shares in Canopy Growth in 2016, you probably patted yourself on the back quite frequently. The share price of Canopy at the time was around $2.00, and by 2018 reached an all-time high of over $51 per share. The share price has since fallen to around $16 per share at the time this article was written. At first, Canopy’s growth strategy was the envy of the industry. As an early player in the market, they were able to capture new markets while other cannabis industry players were playing catch-up. But eventually this strategy, fueled by hungry capital markets willing to throw money at any cannabis growth opportunity, started to backfire. Let’s start this story at the beginning. Canopy Growth, originally “Tweed Marijuana Inc”, was founded in 2013 in Ontario, Canada. The company started operations by repurposing a former Hershey’s chocolate factory for cannabis cultivation. It received one of the first medical cultivation licenses in Canada in 2014, and with hundreds of thousands of square feet of cultivation space to work with, was well positioned to carve out a dominant share in Canada’s burgeoning medical marijuana industry. At the beginning, margins were high as there were a limited amount of competitive cannabis cultivation licenses, meaning the company was able to obtain a high wholesale price for the marijuana it grew. The company soon merged with a competitor, changing its name to the one we know today–Canopy Growth. At this point, pursuing growth opportunities made a lot of sense. It was sitting on a highly valuable, cash producing asset, and therefore had the capital to invest back into its operations. It reinvested its capital by significantly expanding its operations at the old Hershey plant, eventually acquiring the property in 2017, and it signed rapper Snoop Dogg to a sponsorship deal, helping to elevate its brand. At this point, the company seemed to have made all of the right moves, and its stock price began to explode. It traded at an obscene valuation, to the point that it seemed like the stock market had already priced in another “10x” growth cycle. The company felt the need to keep this momentum going, which it did with a series of acquisitions and market expansions. This is also the point where the company’s strategy went awry. Canopy Growth: “Let’s Acquire Everything!” When a stock increases in value by 10X, it can sometimes be a smart decision for a company to sell additional shares to raise money. Legacy investors, who bought the stock at a fraction of the new offering price, were likely happy to be diluted as long as the new capital was being used for accretive growth. Moreover, since the company was focused on cultivation, it made sense to expand its footprint in order to protect its long-term margin. It also made sense to expand beyond the Canadian market, which was a fraction of the size of the U.S. market. In short, the Company had significantly grown its market share and stock price, and the company and its shareholders seemed to think that they could continue to grow their market share and stock price through an aggressive growth strategy funded not by the company’s operations, but by bringing in new investors, including Alcohol giant Constellation Brands. Facing an increasingly competitive cultivation market in Canada, the company sought to expand its cultivation capacity in Canada to protect its market share, and expand it did. The company hoped that its new cultivation facilities would protect its Canadian cultivation operations in an increasingly competitive market, but the problem was that the new cultivation facilities weren’t really that profitable given the increasingly competitive Canadian market. By late 2017, many commentators and industry insiders were suggesting that Canada already had enough cultivation capacity to serve the entire Canadian marijuana market. Yet, Canopy continued to build more facilities, hoping to squeeze out its competitors with massive production. In 2018, the company opened two new “mega” greenhouses in Canada with a combined total of 3 Million square feet of new production space in anticipation of Canada legalizing recreational marijuana. Unsurprisingly, in just two short years, these two “mega” greenhouses were closed down due to the Canadian cannabis market being overwhelmed with supply. As we have observed in this blog, in the beginning, growers are generally the most profitable part of the industry. Since it’s the beginning, there isn’t as much competition, meaning the wholesale price, and margins, remain high. However, as the market matures, and more and more growers come online, the wholesale prices drop and margins start to squeeze. Canopy could have used the money it was generating from cultivation and new investors to invest more in vertical integration, or in cultivation facilities in the new markets that were popping up in the U.S. Instead, it invested more in the already saturated Canadian market because it was worried about protecting its market share. Cultivation facilities of the size Canopy Growth was building can cost hundreds of millions of dollars, but Canopy, sitting on a pile of investor cash, didn’t seem to care. Raising money from capital markets seemed like a consistent source of growth capital, and the company probably assumed it wasn’t going to go away anytime soon. If the company had taken a more disciplined strategy and not invested in more grow facilities in an increasingly saturated Canadian market, it would be sitting on a lot more cash today, which could be used in other new North American markets, where they could have gotten a better return on investment. Instead, it sought market share in the Canadian market seemingly for market shares sake, instead of focusing on maximizing the value of its existing operations. In the process, it burned through cash at a startling rate. The over-expansion in the Canadian cultivation market wasn’t the only mistake the company made in its aggressive growth strategy. The company sought to take its newly raised cash to dominate, quite literally, the entire world of cannabis, while ignoring more grounded organic growth opportunities in its own backyard. It’s hard to put all of the blame on Canopy’s management, they were just doing what their investors wanted them to do—growth at all costs. The idea at the time was that this was a land grab situation, and it would be stupid to not invest every dollar available to the company to plant as many flags as possible. Thinking the window was closing on this opportunity, it decided to grow as quickly as possible, meaning growth by acquisition rather than slower-moving, but sustainable organic growth. Focusing on expanding by acquisition, Canopy began to overpay for other company’s brands and facilities, rather than develop and strengthen their own branding. For example, in 2018, Canopy acquired Hiku and its Tokyo Smoke brand for a whopping $600 Million in stock. Hiku only operated 6 branded Tokyo Smoke retail facilities and small number of other branded facilities. Think about that for a second. Canopy had one of the most prominent cannabis brands at the time in “Tweed”. Rather than invest in further developing its own brand, or creating a new complimentary brand to Tweed, it decided instead to spend $600 Million acquiring the Tokyo Smoke brand and a handful of other lesser-known brands. Why seek strategic investment with one of the biggest alcohol brands in the world if you are going to simply overpay for the brands of lesser well-known cannabis competitors? This land grab mentality also led the company to engage in a number of poorly executed international expansions and acquisitions. Rather than develop its North American presence organically, the company yet again sought to expand into the North American market by acquisition. In 2019, it sought to acquire Acreage Holdings, a deal that is expected to close when the U.S. officially legalizes marijuana. At the time of writing, shares in Acreage Holdings traded at approximately half of the price Canopy agreed to pay. This same mentality carried over into acquisitions outside of North America, from South Africa to Colombia. In South Africa, Canopy practically gave away its operations, while in Colombia Canopy recently announced that it was shutting down its cultivation operations. To be fair, the company did make a couple smart moves in this time, and it did try to vertically integrate its Canadian operations organically though it ran into regulatory roadblocks. But the fact remains that by 2020, Canopy had spent a whopping $2.7 Billion in acquisitions. Canopy’s massive war chest has since dwindled, and it continues to lose significant money each quarter as its operations are not profitable by a long shot. Had the company taken a more disciplined approach, it would now be in a position to strategically buy assets at low valuations. It could have spent a fraction of that money organically obtaining licenses in the lucrative U.S. market, where a handful of big cannabis players have managed to achieve profitable operations, rather than focus on pie-in-the-sky international markets. If it did so, it would have more cash on hand, high margins, and may have even been profitable like some of its U.S. focused competitors. What’s Next for Canopy? Canopy remains the biggest cannabis company in the world by market capitalization, but it is hard to think the company didn’t squander its opportunity to become a true global giant generating billions in revenue and hundreds of millions in free cash flow. The mistake it made, and the mistake I’ve seen many other smaller cannabis companies make, is they tried to grow too fast. They focused too much on acquisitions over organic growth, and in the Canadian market, aggressively tried to grow its market share without taking into account margins and profitability. At the same time, it ignored organic growth opportunities in its own back yard—the U.S. In short, Canopy suffered from the mistaken belief that it had a limited time to claim as much market share as it could, because the industry would soon solidify much the way the alcohol market has. The problem with this logic is that it took DECADES for the alcohol industry to solidify, and the cannabis industry is still in its nascent stage. Canopy’s management didn’t realize they had plenty of time to grow organically rather than through acquisition. If the company had taken a more disciplined approach, rather than trying to take over the entire world of cannabis, it may very well be profitable today. It also may very well have been sitting on a pile of cash that could be used as part of a disciplined acquisition strategy. Instead, it spent money on acquisitions like a drunken sailor, and we will never know what its true potential would have been. Canopy is currently trying to turn itself around, and has seemed to recognize its previous mistakes. It brought on a new CEO who has focused on streamlining operations. Canopy is shedding itself of unproductive assets and cutting the proverbial fat, including stopping construction or halting operations on its expensive new Canadian cultivation facilities and ridding itself of many of its unproductive international assets. Only time will tell whether Canopy can turn itself around into a profitable, sustainable operation. Lessons for Small Cannabis While many of the big cannabis companies made this same mistake, some smaller and micro cannabis companies have been able to grow through a disciplined acquisition and licensing strategy. The key to this strategy is simple, have patience, and don’t force opportunities. When advising cannabis business clients, I like to use the analogy of acting like an alligator. Now before you think I’m crazy, hear me out. An alligator is an incredibly patient hunter, and also an opportunist. They may patiently observe their prey for hours before waiting for the perfect time to attack. That’s exactly the type of mentality you need to have in the cannabis industry when it comes to acquisitions. The problem with being patient is that it is much easier said than done. In the Michigan market, it took two years for reasonably priced dispensary opportunities to present themselves. During this time, many thought that it may never happen, that overpaying for dispensaries was simply what you had to do in this market. Some dispensaries were sold for north of $10 Million, many of which artificially increased their revenue through low margin sales in an attempt to justify a lofty valuation. Like the Canopy example above, many companies fell into the trap of overpaying for dispensaries in an attempt to grab market share. They were afraid of missing out. A few, however, were a bit more patient. These companies developed their own opportunities organically while the mad rush to acquire operating dispensaries was happening, only to switch over to an acquisition strategy when the market for dispensaries tanked and good opportunities presented themselves. They were willing to lie in wait for years for the right acquisitions to line up, and when they did, like an alligator, they quickly pounced on them. I’m sure there are hundreds of more examples of smaller cannabis companies waiting for the right opportunity to come along before making an acquisition. Discipline is a trait that is not common in this industry at the moment, despite it being incredibly valuable. Eventually, it will be more prevalent as the disciplined companies continue to not just survive, but thrive, and eventually overtake their larger, less disciplined competitors. However, it will take time to do so, as markets start to mature and capital discipline is gradually instilled in the industry and the undisciplined companies get shaken out. In the meantime, don’t be afraid to pass on an acquisition opportunity. Oftentimes the best business decision you can make is to simply do nothing, and like an alligator, lay in wait for the right opportunity to present itself. https://www.oak-law.com/blog/thinking-long-term-in-the-cannabis-industry-more-than-just-market-share monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/fc45725b-4115-42c8-ade8-b503e6336a09/unsplash-image-6aapTQNjbP4.jpg Blog - (Part 1) Thinking Long-Term in the Cannabis Industry: More Than Just Market Share - (Part 1 of 2) Like any new industry, the cannabis industry saw a flood of new entrants looking to make a quick buck off the next hot market. While a number of Michigan cannabis investors did make quite a bit of money in the short term, mostly through buying and selling cannabis real estate, most operators did not see the immediate financial windfall they had expected. A couple years ago when the industry was first really starting to get off the ground, it was common for my law firm’s cannabis business clients to tell me their plan was to sell out to Phillip Morris or some other company for $50M in a couple years. Out of all of my clients, the clients with this sort of short-term thinking were least likely to be successful, and also the least likely to be able to sell their business for millions of dollars as they hoped. It’s not that this was not an admirable goal, it’s that it merely reflected short-term, get rich quick thinking. While I did witness a couple clients “get rich quick” based off shrewd opportunistic investments, none of these client entered the industry with that mentality. If you are serious about the Michigan cannabis industry, you need to think long-term. The cannabis industry is not for the faint of heart. No matter what type of cannabis business you are in, it can be a grind. It can take years for your hard work to finally come to fruition. We have clients that are just opening their facilities after over two years of work. Those with a short-term mentality rarely last long enough to see the fruits of their labor. Long Term Opportunities: A Piece of a Growing Market Currently, black market sales dominate the U.S. marketplace, and grey market sales remain prevalent here in Michigan. In nearly all legal jurisdictions in North America, illicit sales make up a majority of the cannabis marketplace. This will not last forever. Over the coming decade, as state after state legalize cannabis, and as states like Michigan that have legalized cannabis improve their legislation, regulation, and tax structures, the legal market will come to dominate. That means in the next decade, tens of billions of dollars will be made as one of the biggest blue sky market opportunities in recent memory matures into a solidified, mature market. There will be winners, and there will be losers, but there will be enough money to be made to mint countless marijuana millionaires throughout the country. There are many ways a business owner or investor can make money off of this market. You can start a consulting company, operate a licensed facility, invest in a facility operation, or reorient your existing company to service the cannabis market, much as I did with my law firm. You can also invest in “big cannabis” stocks on various stock exchanges, but this is likely not the best way to make money from this once in a lifetime business opportunity. Maybe as the market matures, and solid operators start to rise to the top will stocks be a good way to invest in this market, but for now, you might be just as well off buying a lottery ticket. The Problem with Cannabis Stocks Why are cannabis stocks not a good investment? Well, it’s because “big cannabis” have not been a great place to be putting your money in this industry. Of the biggest cannabis stocks by market capitalization, most do not currently make money. How many industries can you say the same for? How on earth are these companies hemorrhaging money in one the of the greatest investment opportunities some of us will ever see in their lifetime? Answering this question would be a book in and on to itself. But I will highlight some of the main reasons many big cannabis companies are not anywhere close to profitable. The big problem with big cannabis companies is that they have historically not seemed to care whether they are making money, as long as they are increasing market share. The problem with this is that market share can be fickle. Brands rise and fall in every industry, and grabbing market share now does not mean they will be able to keep it down the road. But big cannabis companies have seemed more focused on expanding as rapidly as they can in the hopes they can hold down their newly acquired market share and then eventually be profitable when the dust clears. And that’s assuming they haven’t gone bankrupt or been taken over by their creditors by this time—I’m looking at you, MedMen. It’s bewildering how these companies seem to ignore the single biggest thing that matters in business—profits. The problem with focusing on market share over profitable operations is that this strategy really only seems to work in one situation, where a jurisdiction hands out a very small number of licenses to a select few businesses, who are essentially handed a government enforced pseudo-monopoly. Some states have done this, such as Florida, and other states like Illinois have created a somewhat more expansive, yet nonetheless rigid, limited license market that practically ensures profitability for most licensees. But in open markets, grabbing market share for market share’s sake is not a good idea if the underlying operations are not profitable in the first place. If anything, all that does is exacerbate a cannabis company’s losses. Instead, cannabis companies in open markets such as Michigan need to focus on their operational efficiency and customer experience if they are going to make money in the long-term. Slowly, cannabis companies big and small are beginning to recognize the importance of operational efficiency, as well as the fact that market share alone does not guarantee profitability. Evolution of Cannabis Investors: The Canopy Example It’s taken the cannabis industry several years for this lesson to begin to sink in. At first, cannabis investors were more than happy for the companies they own to expand as rapidly as possible. The thinking was that they needed to grab as much market share as they could while it was still available. But as operating losses continued to accrue, and the capital market grew weary of companies posting losses quarter after quarter, investors started to wisen up. Cannabis investors started to wonder: where are all the companies in the cannabis industry focusing on establishing profitable operations and growing their company organically? Do they even exist in the cannabis industry? The answer is, they do, they just tend to be smaller companies who are expanding organically, and it takes time to grow organically. These smaller companies are for the most part not publicly traded, and some of them aren’t even involved in growing or selling marijuana. To examine how cannabis investors have evolved, we don’t have to look any farther than the biggest cannabis company by market share today, Canopy Growth. In Part 2 of this article, we will explore the evolution of Canopy Growth’s business and how it reflects the change in focus away from market share and topline revenue as ends in and of themselves. https://www.oak-law.com/blog/whats-the-difference-between-smoking-and-vaping monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/580b0cd8-af03-4a75-8e44-74532644ab5a/unsplash-image-suUs21vrCXc.jpg Blog - What’s The Difference Between Smoking And Vaping? - Smoking And Vaping Despite striking differences between the two concepts, most people still believe that vaping and smoking are the same thing. Smoking is derived from the root word “smoke” while vaping comes from the root word “vapor.” The fundamental difference between smoke and vapor lies in how the two substances are produced. For smoke to be produced, a substance must undergo combustion (usually incomplete combustion). On the other hand, a vapor is produced when a substance undergoes vaporization, which simply implies heating up a liquid until it turns into vapor. So, smoking can be defined as the process of inhaling a puff from a cigarette and exhaling. The puff is usually inhaled through the mouth and exhaled through the mouth or nose, with a significant amount of it going through the smoker’s windpipe and into the lungs. With vaping, the vapor puffs on a vaping device, also known as an e-cigarette, and exhales the vapor. In both cases, smoke and vapor go to the user’s lungs and that may beg the question, are there any real differences between vaping and smoking? Let’s find out. Common Differences Between Vaping and Smoking Health and Safety Smoking is believed to be more harmful than vaping, which is why most experts recommend vaping for chronic smokers who’re struggling to give up the habit. In itself, tobacco isn’t a very harmful compound. However, harmful effects occur when it’s heated. The burning process that takes place when you smoke tobacco is known as incomplete combustion. During incomplete combustion, a substance burns in a limited supply of oxygen, giving off hazardous by-products. You can tell when incomplete combustion is taking place when you observe smoke coming out of a fire. The smoke contains thousands of compounds and most are considered to be highly toxic. Researchers believe that cigarette smoke contains more than 7,000 chemicals. Only a few of those have been studied and so far, scientists have cited 250 of them as highly toxic, with 70 of them containing carcinogenic properties. Some of the chemical by-products in tobacco smoke include; Ammonia Hydrogen cyanide Nitrosamines Lead Benzene Formaldehyde Carbon monoxide Unlike smoking, vaping doesn’t involve combustion. Instead, an in-built coil heats the elements in an e-liquid, causing the liquid to vaporize. So, provided that there are no harmful compounds in the e-juice, it’s unlikely to become toxic upon being vaporized. It’s also worth mentioning that some of the common ingredients used in vaping, such as polyethylene glycol, are FDA-approved. But does that make vaping completely safe? Absolutely not. Vaping may be 85 percent safer than cigarette smoking, but it still carries some worrying side effects. According to the Centers for Disease Control and Prevention (CDC), there were 68 vaping-related deaths reported as of February 18, 2020. However, the CDC was quick to observe that most of the deaths were related to people who modified their vape devices or used modified e-liquids. There was also a strong link to vaping significant amounts of 9-delta tetrahydrocannabinol (THC). This is not a toxic compound per se. However, it comes with psychoactive and intoxicating effects, which means it should be consumed in moderation. In terms of health and safety, the verdict is vaping is far the healthier option. However, you’re better off not smoking or vaping in the first place. Delivery Smoking is also different from vaping in terms of the delivery method. Smoking generally utilizes concentrates or dried plant parts. The dried parts are processed and smoked through cigarette rolls, pipes, or bongs. On the other hand, vaping mostly uses vape juices, also known as vape oils or e-liquids. These liquids are purchased separately from the vaping device. That means you have more control in terms of the ingredients you’d like to vape as well as their individual concentrations. After purchasing the e-juice, you administer it into a tank that’s built into the vaporizer. Vaporizers are powered using batteries. When you light the device, the batteries heat up a coil that responds by warming the liquid in the tank. As the liquid heats up, it vaporizes and travels through the cartridge to the vapor’s mouth. Always use trusted mighty vaporizers only for vaping. However, both vaping and smoking are fast-acting, which means that users can get instant relief from CBD vape pens. Effects can be felt within as short as 10 – 15 minutes. Nicotine Use Another commonly misunderstood fact concerning smoking and vaping is that smoking involves nicotine whereas vaping does not. This isn’t true. Both vaping and smoking deliver nicotine. In fact, it’s the nicotine that makes smokers and vapers hooked to the habit. The difference is that smoking delivers nicotine via combustion, whereas vaping delivers the compound through vaporization. Another common difference as far as nicotine is concerned, is that in smoking, the strength of nicotine is fixed. So, the amount of nicotine the smoker gets depends on how much they smoke, which can be another hazard, especially where a cigarette roll comes with low nicotine strength. A smoker would have to do many rolls to satisfy their nicotine craving while taking in a lot of toxic compounds. Vaping allows the vaper to control the amount of nicotine they take as it largely depends on the e-liquid that is chosen. It’s also worth noting that while nicotine is an addictive substance, it isn’t toxic. There are endless exciting products like vape cartridge that are coming along to make smoking a pleasant experience. Cost The cost of cigarettes is considerably cheaper compared to a vaping device. So, cigarette smoking may appear more affordable than vaping. However, apart from buying the vaping starter kit (which is mostly a one-off purchase) and e-liquid oil, you can vape for weeks on end without shelling out more money. Provided you have a proper cleaning and maintenance plan for your vaporizer, you’ll avoid any associated repair and replacement costs. This means, the only cost is the vape juice, which is a once-in-a-while expenditure. Conclusion Remember, smoking comes with more health implications. That means a smoker is likely to spend more on healthcare than a vapor will. These are the main differences between smoking and vaping. Remember, neither practice is 100 percent safe. However, if you must choose one, go for vaping any day. https://www.oak-law.com/blog/the-power-of-borders-in-the-cannabis-industry monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/d24a6965-2d57-43f3-8b4d-d1c97f78ad6c/unsplash-image-FbhuN53_330.jpg Blog - The Power of Borders in the Cannabis Industry - The Power of Borders One of the big questions looming over the cannabis industry is what happens after federal legalization. As a cannabis business attorney, I am asked this constantly by concerned clients. Currently, each state has its own cannabis laws and rules which govern activity in the state. Similarly, each country has its own cannabis laws and rules, and importing and exporting cannabis from one country to another is virtually unheard of. The fact that each jurisdiction acts as its own silo, with no product coming in or coming out, and each subject to different regulations and testing requirements, creates barriers to entry that make it difficult for big cannabis companies to simply take over the industry. It is hard to underestimate the power of these borders, and how they and small cannabis companies, especially growers and processors. These borders make it impossible for all cannabis cultivation to be centralized in one state or country, then exported to another to another jurisdiction. If this was allowed to happened, most local and regional growers would quickly be out of business as production centralizes in places such as California or Colombia. Put another way, it’s tough for a greenhouse in Michigan, with our perpetually grey winters, to compete against a greenhouse in sunny Southern California. Growing cannabis is still farming, and without borders, it will migrate to the locations with the most favorable climate, or in the case of indoor grows, with the lowest utility costs. Michigan’s climate isn’t particularly suited for cannabis cultivation, unfortunately, while Southern California is tailor made for it. That means if cannabis can legally move across borders, then much of the cannabis being grown in Michigan for the Michigan consumer will be grown elsewhere and imported into the state. There are many companies that placed bets big and small on the breaking down of borders in the cannabis sector. Canopy made a big bet on Colombia, which has the perfect climate for growing cannabis, and a few U.S. companies are betting on Mexican production. However, there are many more companies who have placed their bets on the borders not going away anytime soon and each jurisdiction acting as a silo. This in turn begs the question—what will happen to these borders once cannabis is federally legalized in the U.S.? The Future of Borders While I cannot predict the future, I would place my money on most of these borders staying in place for awhile for one simple reason—jobs. It’s the same reason why states require car dealerships to act as an intermediary for car sales, even though this raises the costs of cars for consumers. Keeping the borders in place does create “economic inefficiencies”, as economists would say, but these inefficiencies are what leads to more jobs in a jurisdiction. If the U.S. legalizes marijuana and cannabis can cross state borders, then production will centralize in several, hyper-efficient mega facilities that minimize labor costs and mechanize much of the process. Most jobs from small to medium scales grow facilities will simply disappear if the borders break down, and while they may be good for the consumer (though this is up for debate), it is bad for local cannabis companies and the states in which they reside. Many states and municipalities decided to allow medical and recreational marijuana solely because they want to bring “cannabis jobs” to their localities. As mentioned above, this debate is similar to the debate over direct-to-consumer car sales. Many car companies, Tesla being the latest example, have argued that they should be able to sell direct to the consumer, bypassing state laws requiring cars to be sold through car dealerships. Now economists will say that car dealerships are inefficient and cause consumers to pay more for cars, and they would be right. The owners of car dealerships, on the other hand, would counter that they are small businesses that employ thousands of people in the state, and if direct sales were allowed, all of those jobs would disappear. For the most part, legislators have agreed with the dealership owners, and these restrictions have stayed in place. Legalities and Politics Just because the U.S. legalizes or de-schedules cannabis doesn’t mean that these borders will automatically breakdown. The U.S. Constitution grants the U.S. government with the ability to regulate interstate commerce. That means if the U.S. were to legalize cannabis on the federal level, they could also tear down these borders when they do so. While states could still impose local regulations on testing requirements in this scenario, they would not be able to ban the sale of marijuana products imported from another state. Of course, they could also decide to leave the borders in place and let each state decide whether they want to be a cannabis “silo” or allow out-of-state imports. Politically, one would think they stay in place, since there are many more states who would see the partial collapse of their cannabis growing and processing industries then there are states that would realize an economic boom. However, it is hard to discount the ability of a few well-funded companies to successfully lobby politicians to act against the best interests of their state’s residents and business community. It’s important to note that once legalized, individual states could also allow the movement of cannabis through inter-state commerce even if the federal government doesn’t impose it. However, this is unlikely to happen in my opinion because it would cost these states well-paying cannabis jobs. It’s also hard to see many legislatures caring to much about customers having to pay slightly more for marijuana if it’s that cost difference that keeps those jobs in-state. Politicians don’t seem to care much about how car dealerships cause consumers to pay thousands of dollars more for cars, so its hard to see them being overly concerned about cannabis consumers paying a few dollars more for marijuana products. Should My Company Be Worried? Despite arguments by economists about the inefficiency of these borders, most consumers don’t really seem to mind, nor do politicians. Anecdotally, many cannabis consumers outside the industry I’ve talked to would rather pay slightly more and have a thriving local industry than pay a bit less and see the local industry disappear. This is not entirely irrational either. Many cannabis consumers fear the industry being dominated by huge producers who can offer great prices but not necessarily great products. In essence, they fear the Bud Light-ification of the cannabis industry, and the resulting loss of the craft products and local strains they have come to love. Moreover, cannabis business owners are starting to become a force to be reckoned with politically, and not just the big cannabis companies that can afford to hire lobbyists such as the former Speaker of the House. Many local cannabis company owners were already politically active or in some cases started becoming politically active once they got into the business. Similar to car dealerships owners, cannabis business owners can flex their newfound political muscle to ensure that the borders stay in place and their businesses are protected. While I don’t believe these borders will break down anytime soon, I’m also not here to put your mind at ease. The breaking down of borders is a very real possibility, and may even be an inevitability on a long enough time frame. However, if you are a local cannabis grower or processor, I wouldn’t start panic selling your company just yet. https://www.oak-law.com/blog/ancillary-cannabis-companies-banking-issues monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/3e026c1b-7076-4520-9568-deb33943a4fb/unsplash-image-Y5bvRlcCx8k.jpg Blog - Ancillary Cannabis Companies Banking Issues - Ancillary Cannabis Companies Banking There has been a lot written about the issues cannabis companies have with banking in the U.S. Most of these articles talk about cannabis growers and dispensaries having their bank accounts shut down one day without warning. I even wrote one a year or two ago, though a lot has happened in that time. Multiple Michigan banks now openly accept cannabis companies, though they are generally charged a hefty upfront fee as well as monthly maintenance and transaction fees. But that’s not what this article is about. This article looks at banking from the perspective of ancillary cannabis businesses. You Are Now High Risk I had been using a certain banking institution for about 4 years. I had 7 total account accounts spanning two businesses as well as personal checking and savings account. Today, I was informed they were all being shut down, right in the middle of the COVID-19 pandemic. The only information I could get from their representatives was that I was “high risk.” Of course, I knew exactly what this meant. They found out my law firm represented quite a bit of cannabis businesses. The funny thing was, all the branch managers at the locations I would frequent already knew this. I had been talking in depth about the cannabis industry and what I do with several bankers and assistant managers for years. I had cashed checks made out to Marijuana Microbusinesses , a DBA I’ve used for my law firm. They never batted an eye…until today. I probably should not have been too surprised, I’ve had numerous cannabis clients get their bank accounts shut down. I also have friends in ancillary industries who had their accounts shutdown awhile back. But I never thought my business would be flagged: I had a lot of money with them, good relationships with their bankers, and I was a long-time client. I was obviously mistaken. While many banks are happy to look the other way on this, many are not. My financial institution had seemed like they were totally OK with my business…and then they were not. What to Do? The first thing I did was to ask other ancillary businesses where they bank, and I received a flood of responses from my fellow cannabis business owners. After doing some of my own research and talking and emailing with some trusted fellow professionals, as well as getting more than a few helpful suggestions from the Michigan Cannabiz Professionals group, I started to narrow down my choices. What I found was that there are a number of cannabis friendly banks that would be happy to take my money. Nearly all, however, would only do it for an upfront fee, and many also wanted to charge me anywhere from $50 to $250 a month to have an account with them. After some research, I narrowed it down to two institutions. Both needed to charge me an upfront fee, but neither charged a monthly maintenance fee. At this point, I was happy to pay a small upfront fee as long as it meant I didn’t have to worry about hiding my business from them or live in fear of having my account shut down on a whim. For Michigan ancillary companies, I am more than happy to share my results with you privately—just shoot us a message on our website. For non-Michigan companies, you will have to do your own digging. Lesson Learned: Your Personal and Business Bank Should Be With Different Institutions In a way, I was lucky. I had just run my payroll a couple days prior, as well as just paid my rent, so I didn’t have any bills immediately due. However, the timing still wasn’t great—I can’t exactly waltz down to another bank at the moment with the state’s stay at home order still in place and nearly all bank branches being by appointment only. You would think my bank wouldn’t shut people down in the middle of a pandemic, but you would be wrong. I think the biggest lesson I learned from this is that I really should have kept my personal accounts with different institution. I had them all together, and in the blink of an eye, they were all shut down together. Now if I had my personal accounts with one bank, and the business with another, at least I would have some accounts open I could backstop my business with. But by putting all of my accounts with one institution, I put all of my eggs in one basket. Putting it All Together Ancillary cannabis businesses are not immune to the banking issues facing the cannabis industry in general. While we all hope for passage of the Safe Banking Act, until that time comes, all of us in the industry need to be careful with banking, even law firms or accountants that merely dabble in the industry. No one is immune. The key takeaway for me—and hopefully for those reading this as well—is to spread out your risk. I will likely be opening two business accounts with two different banking institutions. Even though the financial institutions I plan on opening an account with both have said they are OK with my business, I want to exercise an abundance of caution. I will also be opening personal accounts with an entirely separate institution. This way, even if one of my accounts is shut down again, I have a back-up, and a back up to my back-up. Finally, f#%$ Huntington Bank. Had to get that off my chest. https://www.oak-law.com/blog/no-your-dispensary-is-not-greedy monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/73e0df78-7d8f-43aa-90aa-160d359ba9e8/unsplash-image-wNnGHhZ9QHA.jpg Blog - No, Your Dispensary is Not “Greedy” - Not “Greedy” As someone with strong connections to both dispensary owners as well as cannabis consumers, I often hear complaints about cannabis pricing in the current market. Consumers mistakenly believe that their MRTMA marijuana retailer, or in some causes their MMFLA provisioning center, is “ripping them off with these prices.” I can’t tell you how many times I’ve heard consumers complain that dispensaries are “greedy” because they are charging $60 for an eight of adult-use product, or selling ounces of premium medical flower for $300. As a cannabis business attorney that represents more than a dozen state licensed provisioning centers and retailers, I also hear complaints about the high wholesale costs and how all of their supposed profits went to the IRS. I’ve also heard a few other dispensary owners complain about how their profits all went to their attorneys, though not with respect to my legal bill (hooray value-based billing!). And to be fair, I think some of this has to do with overstaffing and less than efficient operations. I was once in a well-known brand name dispensary and counted 11 total staff members onsite, compared to two total customers. It’s hard to be profitable with that many staff unless you are doing some serious volume. Nonetheless, the truth is, Michigan dispensaries are not very profitable at the moment. In fact, many dispensaries that consumers claim are being greedy are actually losing money, meaning they are essentially subsidizing the consumer with lower pricing than they should otherwise be charging. This begs the question, why are dispensaries losing money with prices that many consumers believe are simply “too high”? Putting aside the points mentioned above about operational efficiency and overpriced law firms, there are two main reasons for this—high wholesale costs and 280E. Let’s unpack why each of these factors forces provisioning centers and retailers to retail products for higher than what many consumers believe is “fair”. High Wholesale Costs As a dispensary, you buy wholesale products from MMFLA and / or MRTMA licensed growers and processors, mark up the price, and then sell to the consumer. That’s the business model. Now what do you do if you are forced to pay up to $5,000 for a pound of adult-use wholesale flower? Well, you have to mark up the price to at least cover your operating costs, then sell to the Michigan adult-use market. That means they are paying approximately $40 an eighth wholesale. Ideally, as a retailer, you want to have at least 50% margins, which if you were to apply it to this example, would be $80 an eight. Yikes. The reason for the high wholesale price on the adult-use side is lack of supply. Many Michigan marijuana retailers brought tons (literally…) of caregiver product in through their grows hoping to take advantage of MRA’s policy that allows certain transfers of medical marijuana products over to the adult-use market. MRA, or the Marijuana Regulatory Agency, recently announced that caregiver products cannot cross over into the adult-use system. With a very limited amount of MRTMA licensed growers, and the need to sit on inventory from MMFLA licensed growers for 30 days before you can transfer part of that product over, it means there is simply not a lot of adult-use marijuana to go around. That’s why many adult-use dispensaries don’t offer price breaks above an eighth, or in some cases a gram. Those price breaks would eat away at their entire margin, not to mention they don’t have that much product to sell. This is also why the prices for medical flower has dropped quite a bit recently. All that cheap caregiver product that flooded the system has to be sold. I’ve seen deals for $20 eighths, or quality flower priced below $200 an ounce. Not so coincidentally, I have also seen medical marijuana wholesale for $2,000 a pound. When the product is cheaper to buy wholesale, then a lot of those savings are passed on to the consumer. What this means it that dispensaries are not being greedy. They are simply passing on the cost of their purchases to the consumer, and many of them subsidizing the consumer with margins low enough to ensure they don’t make a profit when all is said and done. The only solution for many dispensaries, other than waiting for the prices to eventually fall, is to vertically integrate. 280E It’s safe to say most cannabis consumers don’t know what 280E is. It’s also safe to say that not only does every dispensary owner know about 280E, but that it’s also the bane of their existence. I’m not going to get into a thorough discussion of 280E in this post—you can read this article that goes into detail on how this affects dispensaries. But to make a long story short, dispensaries cannot take business deductions on the cost of their employees, rent, security, insurance, or pretty much anything else other than the wholesale costs to purchase and package marijuana. Let’s use an example to illustrate. Let’s say John owns a dispensary. That dispensary does $1 Million in revenue, of which $500,000 goes to wholesale and packaging costs, $200,000 to staffing, and $200,000 to rent, insurance, attorneys, and other costs. You would think John just made $100,000. In fact, he didn’t—he actually lost money because he is paying taxes as if he made $500,000, not $100,000. Since his tax bill on the $500,000 exceeds the $100,000 he made on paper, he just made money on paper but in actuality lost money after paying taxes. Sucks to be John. Putting It All Together If you are a consumer and you read this article, hopefully you understand now that your local dispensary was not being “greedy” when they were charging $60 an eighth for adult-use product. These same dispensaries that you were saying are greedy are now selling $20 eighths on the medical side. So if you don’t like adult-use pricing, just get a medical card, it’s easy. I’m sure you’ve had back pain or something. If you are a dispensary owner, you probably now know why I push nearly all of you guys to vertically integrate. The whole business model changes when you also own the grow facility that is charging the dispensary $5,000 a pound for adult-use flower. While your dispensary business would still not make much money, that’s OK, your grow is printing money at those wholesale prices. And if the wholesale prices start to drop, or rise, you are insulated in both scenarios. A higher wholesale means you make more profits on the grow, but a lower wholesale means you make more profits through the dispensary. Either way, your cannabis businesses should be making money. Unless, of course, you have 11 staff members at your retail facility and no customers. Or the “big firm” you use, that doesn’t really understand the market and how to properly advise your business of these sorts of things, is billing all of your profits away by the hour. But hey, at least you can brag to your friends that you pay your lawyer $500 an hour so he must be the best! https://www.oak-law.com/blog/municipalities-can-now-control-caregiver-zoning monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/f9b91ba5-62cf-4494-99c4-143de9a7e981/unsplash-image-Bu6BSErSL_M.jpg Blog - Municipalities Can Now Control Caregiver Zoning - Caregiver Zoning The long awaited Deruiter decision was just announced by the Michigan Supreme Court, and the decision was yet another blow to Michigan caregivers operating under the MMMA. It had long been an open question of law whether municipalities had the ability to zone or otherwise utilize land use restrictions to prevent caregivers from operating in certain zoning. This question has now been answered. The Michigan Supreme Court in Deruiter held in an unanimous opinion that municipalities the MMMA does not nullify a municipality’s inherent authority to regulate land use as long as: the municipality does not prohibit or penalize the cultivation of medical marijuana, and the municipality does not impose regulations that are unreasonable and inconsistent with regulations established by state law. What this means for caregivers is that municipalities are now able to exercise their zoning and land use powers to determine where a caregiver is able to locate in that municipality. Previously, a line of Court of Appeals cases indicated that municipalities may not be able to restrict where a caregiver is able to operate. In its opinion, the Deruiter court went on to state: Because an enclosed, locked facility may be found in various locations on various types of property, the township’s ordinance limiting where medical marijuana must be cultivated within the locality did not directly conflict with the MMMA’s requirement that marijuana plants be kept in an enclosed, locked facility. The township’s ordinance requiring primary caregivers to obtain a permit and pay a fee before using a building or structure within the township to cultivate medical marijuana also did not directly conflict with the MMMA because the ordinance did not effectively prohibit the medical use of marijuana. With MRA banning caregiver product from entering into the licensing system starting in September, and with municipalities being granted the newfound authority to restrict caregiver facilities, it seems that caregiving in Michigan, at least as a legal business, is on its way out. https://www.oak-law.com/blog/5-reasons-why-tourists-love-cbd-oil monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/d8cf32c3-4582-4e75-acb9-f4fe90c2ce27/unsplash-image-CaamBvp7180.jpg Blog - 5 Reasons Why Tourists Love CBD Oil - Why Tourists Love CBD Oil If you look back at the past decade, one topic that has come about increasingly in conversation is CBD oil. With the legalization of CBD and increasing evidence about its safety coming to light, more and more people are making CBD a part of their lifestyle. Today, the efficacy of CBD oil is not just limited to the locals, but it is also getting attention from the tourists who come looking for it. If you are a CBD seller, you would be wise not to ignore this little talked about market. Are you wondering why tourists love CBD oil? You will get your answer right here, read on to find out. What is CBD oil? While the world is abuzz with CBD, do you know what it actually is? If not, let us enlighten you. The cannabis plant has more than a hundred different chemical compounds called cannabinoids. Among them, CBD or Cannabidiol is the most prominent one. CBD is a therapeutic and non-psychoactive compound that is responsible for many of the medicinal effects of cannabis. Consuming pure CBD will not induce a mind-altering high, making it safe for use in the work place and other activities. The leaves of the plant go through a rigorous Co2 extraction process that gets you high-grade CBD oil in the end. Why do tourists love CBD oil? Here are a few reasons why tourists love CBD oil: 1. Easy to use and carry: The one thing tourists want the most is convenience, and they get just that with CBD oil. The oil comes in tiny, compact bottles that you can easily carry in your travel bags. The methods of consuming CBD oil are also straightforward. You can ingest it orally, apply it on your skin, or get topicals and edibles infused with the cannabinoid. If you are looking for edibles, you can get pretty much the best gummies ever from online stores and consume it discreetly or add CBD oil to your salads, coffee, smoothies, etc. Travelers can enjoy the benefits of CBD effortlessly. 2. May help alleviate pain: Traveling and exploring for hours on end can often lead to muscle and joint pain. It can also aggravate situations like arthritis, which can dull the travel experience. While there are plenty of painkillers that people take for excruciating pain, CBD might help with it naturally. When the cannabinoids enter your body, they bind with the cannabinoid receptors present in the body. CBD communicates with the endocannabinoid system and may help bring down pain and inflammation without any side-effects. After traveling for long hours, CBD oil can be a go-to pain reliever for tourists. Alternatively, one can you can buy CBD gummies from CBD industry titans CBDfx and reap similar benefits. 3. May combat anxiety: With the increasing work pressure and never-ending deadlines, stress and anxiety have become a part of modern life. People who have anxiety face symptoms like palpitations, excessive sweating, increased heart rate. Stepping out of your comfort zone, visiting new places, and having different experiences can also give rise to social anxiety. Some tourists might even feel anxious while boarding a flight. CBD oil may help relax their nerves and help them enjoy their vacation more. The cannabinoids communicate with the endocannabinoid system and may regulate mood and emotions. Using CBD may help get control over the symptoms of anxiety. 4. Protects the skin and hair: The frequently changing weather conditions, temperature, and pollution can take a toll on skin and hair. They can lose moisture and become lifeless while you are on the go. Here, CBD oil may help your delicate skin and hair. The cannabinoid adds a layer of protection over your skin. It keeps the skin nourished and away from dirt and harmful UV rays. The anti-inflammatory properties may also help reduce the chances of acne breakout and skin infections. Similarly, CBD oil can also enrich the scalp and hair, making them shiny and strong. The tourists that plan to look good throughout their holidays can use CBD oil to maintain the health of their skin and hair. 5. May help get better sleep: It is quite common for tourists to face difficulty in sleeping when they are in an unfamiliar place or new bed, especially budget tourists taking advantage of cheaper group accommodations like hostels. If you are also one of them, you might get some relief by using CBD oil. High-quality CBD tincture from CBD Tinctures – Flavored CBD Tincture Oil – 100% Vegan can work as a sedative, and it may help you sleep faster. CBD might also alter the sleeping schedule. It reduces the time you spend in the initial two stages of sleep, and prolong the time you get in the third stage of deep sleep. Final Thoughts While the travel bug has always made people travel far and wide, the trend is only increasing. More and more people are taking out time to travel and experience new things. While some go in search of peace, others might seek an adrenaline rush. But the only thing familiar you may find in them, other than the knack of traveling, is CBD oil. Owing to the plenty of benefits it offers, CBD oil has become a travel essential for most people. It can make any vacation much more comfortable and fun. And if you are a CBD distributors or retailer in a touristy area, you would be wise to market and sell your CBD products to tourists. https://www.oak-law.com/blog/michigan-cannabis-supply-and-demand-where-we-are-how-we-got-here-and-where-were-going monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/3bd98979-553a-4880-913b-b01a90ebe1ff/unsplash-image-ZYyRc6OHNR4.jpg Blog - Michigan Cannabis Supply and Demand: Where We Are, How We Got Here, and Where We’re Going - Where We Are, How We Got Here, and Where We’re Going Supply and Demand in Michigan Recreational and medicinal cannabis are still in high demand in Michigan, and dispensaries remain an essential business while many non-cannabis businesses have closed down. According to recent reports, medical marijuana sales remain strong through the COVID-19 pandemic, while recreational or “adult-use” sales have dipped a couple weeks into the state’s shutdown order. Despite consumer demand remaining strong, Michigan started to see its wholesale cannabis price drop this March. This article will explore the different cannabis wholesale markets in Michigan, from the caregiver market, to the MMFLA licensed market, to the MRTMA market. We will also explore a few reasons why the markets are priced differently and how these different markets will be relatively priced in the future. We will also explore why we’ve experienced a short-term drop in the licensed market, and speculate on whether this dip in the wholesale price of cannabis is a temporary blip or here to stay. The Split of Michigan’s Wholesale Cannabis Market: Caregiver v. Licensed Product Prior to the proliferation of provisioning centers under the MMFLA, the wholesale cost of caregiver flower per pound was approximately $2,000 to $2,500. At the time, caregiver cannabis was the only legal or quasi-legal market for marijuana, so the when you talked about the wholesale price of cannabis in Michigan, you were talking about the price of caregiver product. In 2018 , the Michigan’s wholesale market for marijuana started to split. On the one hand, the caregiver market remained strong, but a new market emerged—the MMFLA licensed product market. In this new market, MMFLA licensed product was at a premium since, due to guidance issued by the MRA, it was the only product that could be directly sold to a licensed provisioning center. There was still some crossover between these two markets –caregivers were allowed to sell to un-licensed temporary operating facilities, as well as MMFLA growers and processors, who could then sell to MMFLA provisioning centers if the product passed testing. Nonetheless, the market was still splitting, with licensed product garnering a premium to caregiver product. With the increase in the number of Michigan dispensaries, MRA stopping provisioning centers from purchasing from caregivers, and caregiver product having to pass MMFLA safety testing, the price of licensed product shot up to around $4,000 a pound, with premium product fetching prices as high as $5,000 a pound. But what really split the market, and determined whether cannabis would be subject to caregiver pricing or licensed product pricing, was whether it could pass Michigan’s stringent safety testing guidelines. At the time, it was estimated that 70% or more of caregiver product was failing safety testing. If caregiver product could pass testing, then it could garner a premium and sell to licensed growers and processors for resale to dispensaries. If not, then caregiver product couldn’t enter the licensed system, but could still enter through unlicensed temporary operating dispensaries. As more and more temporary operators became licensed and couldn’t purchase untested product, the wholesale caregiver market was pushed to the side. With new guidelines further restricting caregiver product going into effect beginning March 1st of 2020, with caregiver product set to be fully phased out by the end of September, and with recreational dispensaries openings starting to pick up their pace, it was expected that prices for licensed product would shoot up again. In the beginning of the month, this seemed to be the case, but then prices starting precipitously dropping. As of the time this article was written, licensed product prices had dropped down to around $2,500 / lbs wholesale. This begs the question, why would the prices drop in a period that was expected to see prices rise even further? Recent Changes to the Market: Caregivers Phasing Out Back in November of 2018, only 2.4% of the flower sold in medical dispensaries was provided by licensed businesses, the remainder coming from caregivers. With restrictions on caregiver sales put in place last year, there has been a shift in the licensed market. In January of this year, 38.2% of the 2,968 pounds of marijuana flower sold was provided by licensed growers; according to the Michigan Marijuana Regulatory Agency. The Marijuana Regulatory Agency, or MRA, has now decided to phase out direct sales between caregivers and the licensed marketplace. With the new restrictions in place, caregivers are only allowed to sell marijuana flower to licensees, and will be completely prohibited from selling into the licensed market at the end of September, 2020. That being said, as of the beginning of March, approximately 60% of flower provided to the licensed market was provided by caregivers. This will most likely cause a medium-term increase in the licensed retail price for not only flower, approximately 60% of which is caregiver product, but for infused products such as vaping cartridges, oils, and edibles as well. Michigan’s Shelter in Place Order With Gov. Whitmer’s “Stay at Home” or “shelter in place” order taking effect, Marijuana facilities were considered “essential businesses”, and most remain open. According to the MRA guidance, licensed facilities will still be allowed to sell to qualifying individuals, even with an expired form of identification. Curbside and delivery services are the only options, with no customers allowed in stores, and the minimal number of employees allowed on premise for the store to remain open. Even with actual visitations suspended, sales remain steady. In fact, sales in Michigan increased by approximately 1 million dollars the week before the governor’s order, but then plummeted around 1.2 million the week following. This drastic rise and fall of sales can be attributed to cannabis consumers stocking up before the impending “Stay at Home” order. Sales were front loaded as consumers prepared to hunker down during the stay at home order, fearing stores would close. If ordered to stay at home, it would make sense that Michigan residents would stock up on the necessities, and for many residents, marijuana is a necessity. During this time, sales in California, Colorado, and Washington have declined compared to Michigan. This may be a result of the fact that these states are more dependent on tourists than Michigan for much of their recreational sales. Michigan, being much less of a tourist state, has not seen quite the same effect. Buy the Dip? As mentioned above, Michigan has seen a precipitous drop in the wholesale price of licensed cannabis over the last month. The most obvious reason for the drop in prices is COVID-19. Through my work as a cannabis business attorney, I’ve heard from both growers and dispensaries that the wholesale market was slowing. Growers were finding it harder to unload product as dispensaries owners slowed down new purchases due to expected decreasing retail traffic. But this decreased retail traffic didn’t decrease all that much, so if this were the reason for the dip in pricing, then the wholesale market should quickly recover. I’d like to propose a second reason for this dip though, one that hasn’t really been talked about much except among certain cannabis industry insiders. When caregiver flower restrictions were about to take effect, one licensed grower dropped 5,000 pounds of “caregiver” product in a single day into METRC, while others also dropped significant amounts of caregiver flower as well. To put this in perspective, one grower entered approximately $15,000,000.00 to $20,000,000.00 worth of product in a single day. This amount is well beyond what a single caregiver or collection of several caregivers could possibly produce in an entire year, so where did this new supply come from? The answer—probably not Michigan. While I’m not going to name any names, it became clear that a certain licensed Michigan marijuana facility was loading up on out of state product. They were purchasing the product from a caregiver, but what essentially was happening was that out of state product was being laundered through caregivers. If this were the reason for the dip, then it will likely be temporary as the state ratchets up the restrictions on licensees purchasing from caregivers, with sales limits taking effect in June and all caregiver sales to licensees stopping at the end of September. Since we believe these were the two primary reasons for the drop in whole pricing, and both are likely temporary, we expect the wholesale price to recover from this most recent price dip. The Coming Split of the Cannabis Wholesale Market…Again: MMFLA v. MRTMA What we saw in the split between the caregiver market and licensed market is happening again, this time in the split between medical, or MMFLA marijuana products, and adult use, or MRTMA marijuana products. One reason for this split is the lag between MMFLA licensees being able to convert to MRTMA licensees. Municipal opt ins under the MRTMA have been a slow go so far. Dozens of municipalities have opted in to the MMFLA but still have yet to opt in under the MRTMA. In contrast, I am hard pressed to think of a single municipality that has opted in to MRTMA cultivation facilities but not MMFLA. In addition, large growers will be required to continue to service the medical market in order to add additional plants to their adult use cultivation. This is due to the “excess marijuana grower” license, which was a devilish work around created by the MRA to get around vague language in the MRTMA statute forbidding the holding of more than five MRTMA Class C licenses. This work around required MRTMA growers to hold at least two MMFLA Class C licenses in order to be eligible to grow more than 10,000 plants for adult-use. This prevents large growers from switching entirely to the adult-use market. Second, the market for MMFLA product will decline, while the market for MRTMA product is set to explode. Many medical card holders have let their patient status expire because they don’t need one in order to go to certain dispensaries. This trend will continue as more and more adult use dispensaries come online. Taking these factors together, the supply under the MMFLA is not going anywhere, yet the demand will fall as more and more cardholders let their MMMA certifications expire. In contrast, MRTMA demand is rising, yet there are not many MRTMA licensed grow facilities. Moreover, MRA recently prohibited MRTMA licensees from transferring caregiver product brought in through the MMFLA, further limiting MRTMA supply. With very little supply, and explosive demand, MRTMA marijuana products are likely to sell at a significant premium compared to MMFLA products. This is causing a second split in Michigan’s cannabis wholesale market. Even if none the factors above are true (hint: they are), the MMFLA market will never be at a premium to the MRTMA market for the simple reason that if it was, MMFLA cardholders would simply buy from the adult use market. The fact that the MMFLA market is a subset of the MRTMA market means that MMFLA product will always be priced as a discount compared to the MRTMA market. What Does the Future Hold? Michigan retail sales have been relatively steady; however, wholesale sales have dropped to $2,500 a pound. We believe that wholesale prices and sales will recover due to dispensaries’ need to replenish supplies, and will be in higher demand due to both delay in production of new facilities and the phasing out of caregivers from the system. But this won’t happen overnight. We still need to work through the massive amount of “caregiver” product that recently entered the marketplace. In the short term, once the out of state product has been filtered out, prices will rise again. This is mostly because people have either consumed their COVID-19 stockpile, or the illegally sourced out of state product will no longer be available. However, once things start going back to somewhat normal, with social distancing bans being eased, and people being allowed back into public spaces, the construction of new facilities will continue. In fact, many of my cannabis business law clients’ facilities are continuing constructing their MMFLA and MRTMA facilities during the shelter in place order. Eventually, when these new facilities open, more product will be available, causing an inevitable long-term decline in the price of wholesale cannabis in Michigan. I am often asked to predict the future price of cannabis in the wholesale licensed market. My cannabis business law clients constantly ask me what I think the price will be in one year, or what the price will be in five years and beyond. While I don’t have a crystal ball, I do have the benefit of looking to other states to see how the price has evolved under similar regulatory schemes and timelines. For the Michigan cannabis market, the best analogue by far is the Colorado cannabis market. Colorado legalized adult-use marijuana well before Michigan and saw their first dispensary sale in January of 2014. The State then saw the prices decline over several years to eventually bottom out at about $800 per pound in 2019, before rising to about $1,000, where it is has mostly held steady. The same scenario is likely in store for Michigan. Keep in mind, however, that there are now three different cannabis wholesale markets in Michigan—caregiver, MMFLA and MRTMA. That means there will be three different wholesale prices, with MRTMA being the most expensive, then MMFLA followed by caregiver product. As a grower, this means you will want to get into the MRTMA market as soon as possible. That could either mean adding an MRTMA license to your MMFLA facility, or if you are a caregiver, transitioning your grow to a Class A or MRTMA microbusiness license. In short, Michigan cannabis growers will need to stay ahead of this curve in order to get the best price for their products. https://www.oak-law.com/blog/where-cannabis-dispensaries-are-headed-in-the-next-5-years monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/45b120b9-c1dd-4c0b-943d-dc6acd8c891c/unsplash-image-24C4MlZRqeI.jpg Blog - Where Cannabis Dispensaries Are Headed In The Next 5 Years - Where Cannabis Dispensaries Are Headed Do you see cannabis dispensaries opening up around you? Are you wondering what will be the future of these dispensaries? Cannabis has been in a grey area for far too long now. With legalization, the opening of cannabis dispensaries made both medical and “adult-use” marijuana easily accessible. These brick and mortar stores range from being regular retailers similar to your typical “head shop” to high-end establishments that resemble apple stores. Here is what you should know about the future of cannabis dispensaries. What are cannabis dispensaries? A cannabis dispensary is a local shop or store that can sell this medicinal herb to people. In Michigan, medical marijuana dispensaries are sometimes referred to by their legal name, “provisioning centers”; and adult-use dispensaries are sometimes referred to simply as a “retailer.” If you are planning to buy cannabis, either for recreational or medicinal purposes, you can head to one of these stores. The local and state governments regulates these dispensaries by issuing licenses to the owners that authorize the sale of cannabis under state law. These stores allow everyone to get access to the plant in a legal as well as safe manner. A majority of cannabis dispensaries have trained professionals present at all times, with the service staff often referred to as “budtenders.” With their expertise in the plant, they can help customers choose the marijuana product right for them. For example, you can take their recommendation regarding the suitable method of consumption, optimum dosage, the effects of cannabis on your body, or the strain or brand of marijuana products you would like to purchase. The dispensary offers a wide variety of cannabis seeds, strains, and many other cannabis-infused products. Where will the cannabis dispensaries be in the next 5 years? 1. The numbers will expand: With the legalization of cannabis all around the globe, authorized dispensaries are increasing becoming the safest and most convenient avenue access to this medicinal herb. In 2019, there were close to 7500 dispensaries in the US alone, with this number set to expand as more and more states authorize cannabis sales. Moreover, in states such as Michigan that delegate authority to the municipalities, more dispensaries will pop up as more municipalities authorize marijuana sales within their borders. 2. Most Dispensaries Will Carry a Variety of Products: A majority of cannabis dispensaries get their products directly from the marijuana growers or marijuana processors, which are companies that make marijuana products such as edibles, concentrates, and more. While traditionally marijuana flower has dominated the cannabis sales market, both in terms of black market and legal dispensaries, non-flower marijuana products are increasingly taking over the marketplace. As products such as edibles and oils increasingly saturate the market, the cannabis consumers of today are demanding more variety in terms of products and consumption methods. The dispensaries of the future will be more like a typical retail store. Similar to a liquor store, they will be home to a wide array of products from different cannabis brands to offer customers a better and broader range of choices. It will make them a one-stop-shop for all your cannabis needs, including non-THC products such as CBD oils and creams. That means you can head to a cannabis dispensary not just to purchase your favorite strains of flower but also the best CBD in marketplace, industrialhempfarms.com 3. Educational Experiences Are on the Rise: With more and more research and evidence surrounding cannabis, people are becoming increasingly aware of the power of the cannabis plant. They are getting to know about the benefits of cannabis not just in terms of a euphoric high but also for treating ailments like pain and anxiety. While the attitude of people towards cannabis is changing, there is still plenty of room for more education and awareness. Some cannabis strains can be helpful for insomnia, with others helping with muscle pain and yet others used for glaucoma. In many cases consumers suffering from these ailments do not know that marijuana can be used to treat them. In order to reach these potential customers, cannabis dispensaries are taking the lead on educating people on the medicinal uses of marijuana. For example, some of my clients from my cannabis business law firm hold seminars and workshops open to the public to education residents on marijuana. Budtenders can also be used to familiarize customers with the products, their uses, and benefits. 4. Legal Cannabis Sales Are Climbing: Marijuana is becoming a household product today in places such as Canada and Colorado. Whether it is for recreational reasons or medicinal, cannabis is a go-to product for many, with it taking the place of alcohol in certain social circles. With the increasing popularity, the sales of legal cannabis are also increasing. The sales of the legalized cannabis market recorded an all-time ‘high’ of $9.8 billion in the year 2018. By the year 2024, the growth rate of the industry can go beyond $30 billion though much of that depends on the ability of states to drive out black market sales. Certain states like Michigan, with a lower overall tax on cannabis sales, will likely have more success than other states with higher taxes and more complex regulatory regimes such as California. 5. Tech is Taking Over: The innovation in the technology space and the cannabis industry are going hand-in-hand. Cannabis growers and dispensaries are making use of modern technology to enhance the customer experience and increase the efficiency of their operations. Many dispensaries rely on modern gadgets like smartphones and tablets to help buyers while they are in the stores, allowing them to easily access information about a particular cannabis strain, its contents, and its effects. Just like technology has revolutionized other industries with online purchasing, online purchasing and delivery is slowly permeating the cannabis market. Many dispensaries currently use their own website or weedmaps to facilitate delivery, but there are innovative technology companies trying to take over this space. Those who stay up to date on cannabis news likely have read about the many “Uber of cannabis” companies that are trying to take over the cannabis delivery market. Final Thoughts The cannabis market is changing by the day. With more benefits of cannabis coming to light and legalization by various states, an increasing number of people are resorting to this therapeutic plant. To fulfil the rising demand, the need for cannabis dispensaries is only going to rise. They will be able to give access to legalized cannabis products to consumers, along with essential information about its use and benefits. https://www.oak-law.com/blog/5-simple-ways-to-finance-a-marijuana-dispensary monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/c80d0f76-3ea0-440b-96bb-e3c08366d4df/unsplash-image-8lnbXtxFGZw.jpg Blog - 5 Simple Ways to Finance a Marijuana Dispensary - Finance a Marijuana Dispensary Financing any business isn’t a walk in the park. And it’s even harder for a business that’s considered high-risk, such as a marijuana dispensary. The primary reason behind the difficulty in securing funds for marijuana-based businesses is the complex legal status around the cultivation, sale, and use of marijuana. Even if you reside in a state or country where marijuana is approved for medical and recreational use, your potential financiers might still have a million reasons to not fund your venture. The nagging fear remains that authorities in your state might wake up one day and criminalize weed, or that the federal government may change course and take action against the state-legal cannabis industry. And that could deal a heavy blow to your business. However, with a growing list of research pointing to the potential medicinal properties of cannabis, we can expect the trend towards decriminalizing weed to continue. But still, very few financiers will loan you funds to jumpstart your marijuana dispensary. As an astute entrepreneur, you must know where to look, and that will be the focus of this post. What Is The Current Legal Status of Marijuana? Marijuana is illegal under federal law, and that fact alone makes most lenders shy away from offering their services to cannabis-based businesses. Federally chartered banks risk losing their federal banking charter by lending to the cannabis industry. Some banks are even apprehensive about opening checking or savings accounts for marijuana dispensaries, though more than a few banks here in Michigan openly accept cannabis business bank accounts. With that said, we will look at five non-traditional ways that you can finance a marijuana dispensary project. Top 5 Ways to Finance Marijuana Dispensaries Using Your Credit Cards One of the easiest ways to secure funding for your marijuana dispensary is by using your business credit cards. You can use your credit cards to perform various functions, including paying for startup expenses like buying auto-flowering seeds, and meeting the recurring expenditures in your business. Credit card borrowing is ideal where you frequently use your credit cards to complete most of your business transactions. The lender will only need to check your credit score. And even if you have a poor credit score, you may still be considered for secured or unsecured credit cards, albeit for a lower credit limit and higher interest rates. Crowdfunding Crowdfunding involves raising funds for your marijuana dispensary by seeking small donations from a large number of people. One of the best things about crowdfunding is that it works well online. Therefore, there are fewer logistical hassles involved. All you need to do is ensure that the company that you choose allows cannabis-based businesses to crowdfund on their platform. This alone can be a tall order but there are cannabis crowdfunding sites in the works and a couple already in operating—CannaFundr and Fundanna. Also, be sure to check that there are no hidden fees involved. Angel Investment The growing popularity of cannabis-based products has piqued the interest of angel investors. An angel investor is simply a wealthy individual who is able and willing to fund a project with the hope that the venture will one day grow into a leading global brand. It’s a give and take arrangement where the investor injects a substantial amount of capital investment into your project in return for equity. In this case, a stake in your marijuana dispensary. There are numerous sites where you can look for an angel investor, including the ArcView Group as well as AngelList, though business owners tend to have the best luck within their own personal network. While Arcview is dedicated to the cannabis industry, AngelList has a section that’s dedicated to marijuana startups looking for angel investors. Venture Capital Venture capital is classified along with crowdfunding and angel investment among the top ways to get equity funding. In venture capital, an investor (known as a venture capitalist) finances a budding enterprise, with the hope that the business will grow swiftly. And just like angel investment and crowdfunding, you should target venture capitalists that focus on cannabis startups. Examples of such firms include the Casa Verde Capital by Snoop Dogg. And as you shall find out, most of these venture capitalists are owned or run by celebrities that have publicly endorsed marijuana use, and in many cases, are long time cannabis users. Online Lenders One of the best things about online lenders is that unlike traditional financing institutions, these lenders don’t shy away from working with cannabis-based companies. That’s because they aren’t heavily affected by federal government regulations and oftentimes will structure the loans as personal loans to individuals, as opposed to loans directly to cannabis businesses. For instance, unlike banks, online lenders don’t need to report to the Treasury Department’s Financial Crimes Enforcement Network. That makes their lending services more accessible to cannabis businesses. There’s only one little drawback – most of these lenders offer short-term loan options with a quick turnaround and high interest rates. Examples of online lenders include United Capital Source, Kabbage, and Fast Capital. So there’s our rundown of 5 ways to finance your marijuana dispensary. If you’ve always desired to start a marijuana business but couldn’t locate a viable lender, why not jumpstart your business by trying out one of these options? https://www.oak-law.com/blog/cannabis-industry-under-michigans-shelter-in-place-order monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/b636cffb-0318-4340-b39f-470204603b1b/unsplash-image-iA2f8YAOeOk.jpg Blog - Cannabis Industry Under Michigan’s Shelter in Place Order - Shelter in Place Order Today, the State of Michigan officially declared a “shelter in place” order in order to contain the spread of COVID-19, also known as the “coronavirus.” The order asks residents to avoid all nonessential travel and requires all individuals to stay home or at their place of residence, with certain exceptions. This order will have a substantial effect on business activity in the State of Michigan, including Michigan’s cannabis industry. The order lasts until April 13, 2020, but it could remain in place longer than that date. Despite rumors that Michigan’s order would mirror Ohio’s shelter in place order, which specifically exempted the cannabis industry, Michigan’s order has no specific exemption for cannabis businesses. As a matter of fact, the order is silent on the marijuana industry specifically. However, the order does exempt “agriculture” as well as workers in “health care and public health.” From this language, it appears that the State of Michigan only recognizes medical marijuana as essential for residents, though it does contain an important exception for cannabis businesses that would allow “workers who are necessary to conduct minimum basic operations…and whose in person presence is strictly necessary to allow the business or operation to maintain the value of inventory…” That means that if adult-use establishments have to shut down, they may be able to continue with skeleton operations with “workers who are necessary to conduct minimum basic operations” to protect critical inventory and equipment. Companies will need to make the determination of which workers are necessary “in writing…by electronic message, public website, or other appropriate means.” Such designations may be made orally until March 31, 2020. This exception would likely protect MRTMA cultivation facilities by allowing a skeleton crew of workers to maintain the plants and protect the business’s “inventory.” It is also not entirely clear what this means for caregivers with cultivation facilities outside of their residences. It would appear that they fall into the “health care” exception to the shelter in place order, but further clarification will be needed by the State of Michigan to confirm this interpretation. Similarly, they could also claim that they need at least one person to visit the caregiver area in order to maintain the value of inventory under the “minimum basic operations” exception. In addition, under previously released guidance, MMFLA provisioning centers are encouraged to implement curbside pickup, meaning customers do not need to actually enter the store but can instead have an employee come out to the customers car. They are also strongly encouraged to focus on delivery in place of retail sales. In recognition of the need to close down most retail outlets, the state’s Marijuana Regulatory Agency is fast-tracking delivery plan approvals for companies. As an example, one of our provisioning center clients at our cannabis business law firm received approval of their delivery plan within 24 hours, whereas it usually takes a week for such approval. Compared to other industries such as hospitality and most retail sectors, who are struggling with the effects of the coronavirus on their businesses, Michigan’s cannabis industry will not be as hard hit. But that does not mean that Michigan’s cannabis industry won’t feel any effects from the coronavirus. MRTMA licensees will need to put their operations on hold with the possible exception of cultivation, and start up projects that have yet to receive a state MMFLA or MRTMA license will likely see their timetables pushed back due to delays in construction as well as municipal approvals. We have already seen municipal deadlines for cannabis applications get pushed back, as well as city council and planning commission meetings be postponed. This will likely increase as the shelter in place order takes effect. Additionally, for those cannabis companies unlucky enough to be involved in litigation, most court deadlines will also be pushed back and motion hearings postponed. Funding for projects and working capital to maintain operations during the shutdown may also become harder to come by as investment capital dries up. While the federal government is working on relief for small businesses, including extending more SBA loans to them, Michigan marijuana companies are ineligible for SBA loans. As a matter of fact, according to one SBA lender I was working with in 2019, SBA won’t even lend to a business where the business owner also owns a cannabis business. In sum, COVID-19 will have a drastic impact of Michigan’s economy, and the state’s shelter in place order will further grind the state’s economy to a halt. Recreational cannabis businesses outside of cultivation will need to shut down, though MMFLA licensees will not be as effected by the order as other businesses. Certain cannabis projects will also be delayed, in some cases indefinitely due to the owners need to concentrate on their other business, the inability to raise investment capital, or simply because the owner’s lost so much money in the stock market they no longer have the funds for the project. Nonetheless, Michigan’s cannabis industry will survive this order, though there may be tough times ahead. A copy of the order is available here: We will be publishing updates as it becomes clear how the State of Michigan and MRA is interpreting this order with respect to the cannabis industry. https://www.oak-law.com/blog/cannabis-insurance-industry monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7809aa0e-e56d-4130-840d-28d02c1c79b1/unsplash-image-mCqi3MljC4E.jpg Blog - Cannabis Insurance Industry - Cannabis Insurance Industry Needing insurance is like needing a parachute. If it isn’t there the first time, chances are you won’t be needing it again. Too often is the case of wrong coverage, or inadequate policy limits running businesses out of business. With exponential growth in industry comes growing pains. The Cannabis market is growing faster than the legislature can produce rules and laws to govern the industry. Likewise, the insurance industry is trying to understand cannabis and how they can offer affordable coverage that is valuable to Growers, Processors and Dispensaries. Many insurance companies are taking a stop and watch position. Meaning, they do not have enough of a comfort level to provide coverage yet. What is left for business owners, is trying to sift through new policy language and determine what is covered. No two Cannabis Insurance Markets are the same. Insurance policy language is significantly different from one insurance company to the next. Crop Insurance is the single most difficult part of the Cannabis package to understand. Is there a sub-limit? Is that sub-limit per plant? Does the policy pay on a replacement cost, actual cash value or stated amount? Is the crop insurance separate from the finished product? How do I cover my seed? The variations of Crop Coverage, along with other business property, can leave a business owner not really understanding how the loss payment would be calculated. If you are or are becoming a tenant in a commercial building, it is imperative the landlord completely understands your business. The building owner could have a Cannabis exclusion on his current policy. Large sums of money are put into the additions and alterations of your building. The lease will answer how much in additions and alterations to you need to insure. Working with your landlord will avoid confusion when it matters the most. The attestation filing is not liability coverage. There is a lot of confusion that exists between liability insurance and financial responsibility filings. The simple answer is you need to file your attestation paperwork and purchase product liability insurance. There are only two insurance companies that will sign the attestation filing. The attestation filings are approved by the insurance companies and signed by a representative of the insurance company. Insurance agents cannot legally sign on behalf of the insurance company. Workers Compensation has the least amount of insurance carriers willing to offer coverage. There are options outside of the State of Michigan Insurance Pool, but you must do your research. Rates can vary as much as 100%. Insurance companies will start to gain a better understanding of Cannabis, which will result in additional markets and lower pricing on the Workers Compensation. More insurance companies will enter Cannabis, which will drive down pricing and increase coverage. Policies will continue to vary widely in their coverage and should be assessed individually. https://www.oak-law.com/blog/transitioning-from-medical-to-recreational-marijuana-licenses-in-michigan monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/bc071a49-8c28-410f-a1cc-bc07069763c2/unsplash-image-ImcUkZ72oUs.jpg Blog - Transitioning from Medical to Recreational Marijuana Licenses in Michigan - Transitioning from Medical to Recreational In the past two years, Michigan’s Marijuana Regulatory Agency and its predecessor has licensed numerous marijuana facilities under the Medical Marihuana Facilities Licensing Act, or MMFLA. Under the MMFLA, a licensed dispensary—often referred to as a “provisioning center”—can only sell to Michigan medical marijuana card holders. Similarly, a licensed grower or processor can only sell to an MMFLA licensed entity. However, with Michigan voters passing the Michigan Regulation and Taxation of Marihuana Act, or MRTMA, in November 2018, Michigan now allows the sale of marijuana to any adult aged 21 and up and is currently licensing marijuana facilities under the MRTMA. The passage and rollout of the MRTMA has many Michigan MMFLA licensees wondering how they can transition to the recreational marijuana market. First off, it should be noted that for most MRTMA licenses, the owners first have to have a MMFLA license. There are exceptions to this requirement, however, the most important ones being the MRTMA microbusiness license, which allows for small scale vertical integration, and the Class A Grower license, which allows for the growing of 100 plants under the MRTMA. This rule also doesn’t apply to Designated Consumption Area licenses and event licenses. Making the Transition Putting these exceptions aside, let’s assume that you have an operating MMFLA Class A, B or C growers license, processor license, provisioning center license, safety testing license or secure transport license. How and when does your MMFLA licensee transition to an equivalent MRTMA license? Until December 6th, 2021, only those who first obtain an MMFLA license are eligible for an MRTMA license, except as noted above. In this way, the MMFLA acts as a sort of “gatekeeper” to most of Michigan’s recreational cannabis licenses. Now, assuming you are an operating MMFLA licensee, and your municipality has opted in under the MRTMA, or in some cases failed to opt out (more on this later), your company would be eligible to apply for an MRTMA license. The MRTMA application process is somewhat similar to the MMFLA, and MRTMA license applications for MMFLA licensees are expeditated and can pass the prequalification step in as little as a week. However, only step one of the application process is expediated, and step 2 remains the same whether the entity already has a medical license or not. Thus, an applicant with an operational medical facility would still need to complete the recreational attestations A through F and submit a social equity plan, though this is a lot easier than some would lead you to believe. Updated information regarding any change in the entity’s ownership interests, contact information or tax liability must be updated with the MMFLA licensing section prior to applying for a recreational application. This includes bank accounts being opened in the name of the entity and property owned or leased by the entity, even though the MRTMA does not require an entity or its supplemental applicants provide 12 months of financial statements as required under the MMFLA. Contrary to many of the rumors I’ve heard in the industry, there is no requirement for how long the entity must hold a medical license. For whatever reason, many licensees, and even a few cannabis business attorneys, seem to be under the mistaken belief that you must have held your MMFLA license for at least two years. This is likely an incorrect reading of the MRTMA statutory provision that after two years of the MRTMA program’s implementation, you are no longer required to first obtain a medical marijuana license before obtaining an MRTMA license. MRTMA Opt-Ins: “If a municipality hasn’t opted out, they still haven’t opted in” There is one more misconception that may be helpful to address. You may have heard this one before, possibly even from MRA Director Andrew Brisbo himself, and that is the misconception that if a municipality hasn’t “opted out under the MRTMA, they have in effect opted in.” This was a source of confusion among many attorneys, including myself, who read the statute differently than the MRA’s previous interpretation. However, my firm along with a couple other firms decided to put this statement to the test, and the outcome was what I had long suspected, and even told many guest at my previous speaking engagements. That is, if a municipality hasn’t opted out, that doesn’t necessarily mean you would be able to receive an MRTMA license. As an example, let’s take the City of Detroit, which failed to opt out by the November 1st, 2019 deadline. The City did eventually opt out about two weeks past this deadline, though in the interim, our firm along with a few others submitted MRTMA licenses to MRA since we were told by MRA on several occasions that would mean our clients were eligible for a state MRTMA license. In turns out, this was not the case, and there are a couple of reasons why the “if they didn’t opt out, they’ve opted in” argument failed. First, the MRTMA license application requires a municipal certificate of occupancy in order to issue a MRTMA license, and you would be unlikely to get a certificate of occupancy if a municipality hasn’t passed an MRTMA opt in ordinance. However, let’s assume you are a medical marijuana facility that already has a certificate of occupancy. In fact, our clients in Detroit all had certificates of occupancy and were operating as MMFLA licensed provisioning centers. This leads to the second hurdle, which is that the state will ask the municipality to confirm that the marijuana facility complies with its zoning ordinance. Here, if a city or township hasn’t passed zoning for recreational marijuana, and has only enacted zoning for medical marijuana or has no marijuana zoning at all, then the municipality will almost certainly tell the MRA that the property does not conform with municipal zoning, and the MRTMA application would be denied. While this certainly begs the question of how a facility could not confirm with zoning if there is no applicable zoning, MRA’s current position is to simply take whatever the municipality says at face value. While this second reason may be challenged in court or through administrative hearings, it is MRA’s current interpretation of the MRTMA (at the time of this article), and it effectively shuts down the “if you haven’t opted out, you’ve opted in” theory of state licensing. That leaves MMFLA licensees waiting for their municipality to opt in to the MRTMA three options: (1) lobby municipal officials to opt in, (2) petition the municipality to bypass the city council or township board (but these petitions cannot enact zoning provisions), or (3) simply wait and see. If you have questions on how to transition your MMFLA licensed facility to the MRTMA, contact us today to discuss your options. https://www.oak-law.com/blog/when-is-a-marijuana-plant-a-plant-under-michigan-law monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1a634238-1732-4338-add5-4eaa606e3845/unsplash-image-7NpU3EdryP0.jpg Blog - When is a Marijuana Plant a “Plant” under Michigan Law? - When is a Marijuana Plant a “Plant”? Michigan’s two marijuana licensing statutes—the Medical Marihuana Facilities Licensing Act (“MMFLA”) and Michigan Regulation and Taxation of Marihuana Act (“MRTMA”) place limits on the number of plants a licensed grower can cultivate. This is in contrast to most other states that limit cannabis cultivators by total canopy size rather than number of plants and is the reason why Michigan grower’s tend to cultivate plants differently than in other states. Generally speaking, MMFLA licensed cannabis cultivators grow bigger plants than licensed growers outside of Michigan since Michigan growers are focused on maximizing their yield per plant, as opposed to out of state growers that focus on yield per square foot or yield per watt of energy. Since all legal Michigan cannabis growers are limited by their “plant count”, it’s important to know exactly what constitutes a “plant” for purposes of the MMFLA and MRTMA. Here, it is important to note that Michigan law differentiates between a “mature” and “immature” plant. An immature plant is defined by the MMFLA Rules as a nonflowering marijuana plant produced from a cutting or seedling that is no taller than 8 inches, no wider than 8 inches, and that is in a growing medium or growing container. Conversely, a mature marijuana plant is a plant that has taken root and is taller or wider than 8 inches. Both mature and immature plants count against a Michigan cannabis grower’s plant count, though immature plants do not yet need to be individually METRC tagged, unlike mature plants. Turning back to our original question, the MMFLA defines a “plant” as any living organism that produces its own food through photosynthesis and has observable root formation, though this begs the question—at what point does a marijuana seedling or clone meet this definition? Seedlings A marijuana plant has 4 main points during its growth cycle: seed germination, seed growth, vegetation and flowering. During the seed germination and growth periods the seed is exposed to heat, light and moisture and the seed slowly starts to open and reveal seed leaves. Once sprouted, the seedling is considered an immature plant under Michigan law. As noted above, while immature plants do not need individual METRC tags, they still count against a Michigan licensed grower’s plant count and must be accounted for in the statewide monitoring system in batches of no more than one hundred plants. Moreover, once the plant has grown to be greater than 8 inches tall or 8 inches wide it must be marked as an individual plant in METRC and entered into the statewide monitoring as such. Clones Clones or “cuttings” are typically cut from plants during their vegetative stage. This means the plant the cutting is coming from has its own root system and is considered a plant, but at what point does the cutting become a plant for plant count purposes? According to the Marijuana Regulatory Agency, or MRA, a cutting is not counted against a Michigan licensed cannabis grower’s plant count until the clone or cutting is put into a growing medium and the cutting starts to take root. Prior to this time, a cutting is not considered a plant for purposes of a grower’s plant count. Conclusion When purchasing genetics or creating new clones from a mother plant, it is important to know at what stage your plant is considered a “plant” under the MMFLA and MRTMA since going over your plant count could lead to regulatory action against your cannabis company. This question is especially important for small plant count growers like the MRTMA Class A grower’s license, which only allows 100 plants, or the MRTMA microbusiness license , which allows 150 plants. https://www.oak-law.com/blog/how-cbd-companies-are-preparing-for-the-future-of-compliance monthly 0.5 2025-02-26 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/4010b4a2-7a36-4eb0-bfcb-ef0d8a3452bb/unsplash-image-rLR4smahG2Q.jpg Blog - How CBD Companies are Preparing for the Future of Compliance - Preparing for the Future The legalization of hemp-based CBD oil through the Farm bill in 2018 marked the beginning of an influx in CBD products and cultivation. The industry continues to grow in size and companies continue to establish their hold in the market. However, the regulations are prone to change, and compliance needs differ from state to state. As the future of CBD knock, companies need to ensure that they comply with any regulations that might become cannabis laws. Therefore, predicting and being proactive is the first step towards being compliant today and in the future. Here is how organizations and CBD based companies are preparing for the future, especially in regards to compliance. Available Regulations Before complying with the future, complying with the available rules today takes precedence. As of now, minimal laws are available in regards to the manufacturing, processing or even marketing and sale of cannabis-derived products or extracts. As a result, each company is producing its products, and the only compliance is ensuring that they are of a quality nature. However, the situation will most likely have a considerable change in the near future. Such change in regulations can put your business at risk of closure or even bankruptcy if not ready to tackle the challenges new rules may present. Therefore, it is crucial to identify, recognize and develop practices that may save your business and ensure neat, quality and highly compliant CBD products. Companies should develop and effect clarity levels in regards to different CBD specifications available in each state where CBD derived products are legal. Make them the basis of producing the most exceptional CBD production, manufacturing and processing practices. As a result, you will find that you keep up with the dynamic changes that occur, and you will provide a measure of assuredness in potential company executives and prospective investors. Predicting Compliance Needs for the Future It is impossible for companies to come up with their regulations on different sections in the cannabis industry. It makes being proactive quite a challenge. However, since cannabis-derived products are decidedly manufactured and processed for consumption. Companies such as online dispensary Canada may want to consider some of the rules that govern food quality and safety. Look for regulations governing food supplements, food production and processing companies, cultivation qualities and standards of different plants, among others. These are the most likely rules that CBD companies will have to comply with in the future. Treating marijuana-derived products as a whole meal and complying with regulations that govern the purchase and sale of different meals in places like restaurants may come in handy. Incorporate ISO standards and look for FSMA compliance methods toolbox. Don’t wait for the FDA to put these rules and make them into regulations before you start complying with them. Also, you can work with strict rules that govern medicinal compounds with the perception that CBD derived from hemp applications are in the medical industry. FSMA indicates where the plant is making that product grow, whose farm, growing conditions and the quality of the final product. It will ensure that your CBD manufacturing processes and product lines contain a clean and thorough trace. As a result, it will comply with almost all of the FDA, ISO and FSMA requirements. Customers will also have trust in your products as they come with valid origins and credible processing and manufacturing processes. To top it all, it will provide consistency, security and value in your company’s products today and in the future. Companies Preparation for the Future Technology Aim to keep up to date with changing technological inventions that enable farming, production and extraction of CBD products. With each passing moment, an innovation enters the market that makes manufacturing, extraction of CBD much easier, faster and better. Besides, with new technological innovations, more stringent regulations also become part of the industry. New Marijuana seeds online are also in production depicting the continuous change that occurs with technology. New innovations not only improve product quality but also enhance the quantity of production over time. They decrease the time you need for production or manufacturing and other extraction processes. As a result, the company earns more, has less expensive production costs and is in compliance with all rules and regulations. Enter new markets with market rules Since CBD studies indicate the importance of using CBD for different conditions that pet goes through, it is essential to seek regulations pertaining to that specific industry. Coming up with any particular product, developing a production line and entering the market, ensure compliance with already available laws and potential laws to mark the future. Remember, this is a different market entry with varying requirements concerning licensing, business operations, among others. Regulations Some companies are already tracing their product lines as a way to comply with future regulations. They are looking at their sources of CBD oil and have restrictions concerning their CBD sources. They are only accepting hemp-derived CBD for manufacturing processes. In addition, they are researching cultivation solutions that a farmer uses in the cultivation of the hemp plants. Ensure you comply with the ISO-9001 which dictates the lifespan of different plants. It gives strict rules in regards to plant lifespan from cultivation of hemp plants to extraction of CBD. Besides, such compliance is also international, which makes your product an international mark as well. Do not forget being compliant with the ISO SIX, which dictates the cleanliness compliance protocols. Not only do they keep airborne pollutants away from your cannabis solutions, but it also guarantees the quality and strength of cannabis products you manufacture. Conclusion Companies need to consider different laws governing different food and medical products such as supplements. Ensure your companies comply with these rules as they are most likely to form the basis of future cannabis-based regulations. They will ensure that your company is sustainable all through even with the introduction of different laws or regulations. Besides, you will already have an established hold over the market. It will ensure your business operations will hold through the compliance audits that will ensue with changes in laws and regulations. https://www.oak-law.com/blog/investing-in-cannabis-businesses-more-than-just-the-stock-market monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/0038d171-767c-4945-86bd-7a4050228860/unsplash-image-qwtCeJ5cLYs.jpg Blog - Investing in Cannabis Businesses: More than Just the Stock Market - More than Just the Stock Market Many cannabis investors interested in getting into the industry have used the stock market as a way to invest in North America’s growing marijuana industry. After experiencing years of nearly unfettered growth, cannabis stocks seem to have hit the proverbial wall. Popular stocks such as Tilray, Canopy, Medmen, and Aurora are no longer on a seemingly never ending upward trajectory. Tilray, for example, was trading around $27 / share at the time this article was written, compared to last year’s high of over $214 / share. Similarly, Medmen’s stock is trading at around $2 / share, compared to last years high of close to $7 / share; Canopy is trading around $24 / share compared to last years high of close to $57 / share; and Aurora is trading around $6 / share compared to last year’s high of close to $12 / share. Even at these lower current valuations, these businesses trade at a multiple well-above what an average investor would receive if he or she were investing in a closely held marijuana company. Those lucky enough to have access to these closely held company investment opportunities are able to invest in cannabis companies at far better prices and valuations compared to stock market investors. Here in Michigan, there are plenty of cannabis companies looking for investors to complete their project or expand beyond their current footprint. We currently represent several cannabis companies currently seeking outside investment. However, many Michigan cannabis companies have struggled to find investors even though they offer far better valuations compared to the big cannabis stocks, many of which are consistently losing money quarter after quarter. So what opportunities are out there for cannabis investors looking for investment opportunities outside the stock market? This article will explore two potential cannabis investment opportunities in Michigan—investing in “small cannabis” and investing in “micro cannabis.” Big Cannabis v Small and Micro Cannabis With the marijuana stock bubble seemingly “popped”, investors looking to invest in the growing cannabis industry may want to consider investing in small cannabis companies due to their potential for outsized returns as well as investors ability to favorably structure their investment. Investing in small and micro cannabis businesses is certainly not without risk, though as the last year has proven, there is significant downside risk even in investing in Big Cannabis stocks like Medmen, Tilray and others. Given this landscape, investors may be better off investing in small and microbusiness cannabis companies, that offer a much greater upside compared to public companies. These investments are not for everyone, as even the smallest cannabis companies would not accept investments of $5,000 or $10,000 dollars. However, for those investors with significant capital to invest and who are looking for longer term investments, small and micro cannabis companies may present the best investment opportunities. Investing in “Small Cannabis” Small cannabis companies offer incredible opportunities for those who are able to understand Michigan cannabis investments and sort through the many companies looking for investment. Many of these companies purport to offer returns of capital in the high double digits or even greater, though not all projections are to be believed. Investments can also be secured by property and other assets and can also offer secured returns or first money out options. These are terms that only larger institutional investors would be able to secure with respect to “big cannabis” stocks. So what makes a good cannabis investment? The best cannabis investment plays in our opinion are vertically integrated cannabis companies. These are companies that cultivate, “process” (i.e. make cannabis products such as edibles, oils, and wax) and operate dispensaries. Controlling the process from “seed to sale” protects these cannabis companies from fluctuations in the wholesale prices of marijuana as well as allows them to take advantage of advanced 280E tax planning. In short, vertically integrated companies have a “bigger moat”, as Warren Bufffet would say, compared to companies that focus only on dispensaries or only on cultivation or processing. Many Michigan cannabis companies recognize this and are actively raising money so that they can “go vertical”. In other words, dispensary focused companies are starting to open up cultivation and processing facilities, and cultivation and processing companies are starting to open up their own dispensaries. To do so, many have to raise money to expand, which presents investors with opportunities to invest in companies on favorable terms and conditions. While it is certainly important to evaluate the assets of a cannabis company prior to investment with small cannabis companies, investors are investing in people as much as they investing in the assets of a cannabis company. Put another way, a strong management team is arguably just as important as the real estate and licenses that a company holds. As several public companies have demonstrated, even having the best assets do not guarantee strong returns. In sum, “small cannabis” provides incredible opportunities for those who are able to properly evaluate a cannabis companies potential. The key of course is to identify the companies with promising growth potential while discarding the companies that are poorly run or poorly structured. Of course, this is easier said than done, but for savvy investors, small cannabis offers far better opportunities than investing in cannabis stocks. Investing in “Micro Cannabis” Michigan and several other states are rolling out a new license type that can be particularly attractive to smaller investors looking to get a piece of the ever-growing legal cannabis market. That license is the “microbusiness” license. While the specifics of this license vary from state-to-state, in Michigan, a microbusiness license allows companies to achieve vertical integration at a fraction of the cost it would take with other cannabis license types, albeit at a much smaller scale. Our law firm currently has several Michigan cannabis “microbusinesses” seeking investment in the range of $50,000 to $500,000. These companies offer potential sky high returns, though they are not without risk. With micro cannabis opportunities more so than cannabis stocks and smaller multi-license players, an investor is really investing in people. A strong operator can obtain seven figure returns from a single microbusiness facility, while a weak operator can easily fall flat on their face even before they even open their doors for business. So this begs the question, how do you determine who is a strong operator versus someone who is likely to run the business into the ground? The first thing we usually look at is the background and experience of a company’s operating team. The best teams in our opinion are ones that combine practical experience in the cannabis industry with experience successfully operating other businesses. Highly skilled growers, as well as processors, often make horrible business people. Some of the best craft cannabis growers and processors that I’ve met tend to be “mad scientist” types—i.e. not the type of person you want running a business. Conversely, many business people who have been successful in other industries fail to understand the intricacies and nuances of the cannabis market and cannabis consumers in particular, causing them to make ill-fated business decisions. Separately, these two types of operators each possess half the experience needed to be successful, but together, they possess all of the knowledge and experience you would want in a cannabis operating team. While it is possible that a single individual possesses both skill sets, these individuals are few and far between. Now let’s assume you’ve identified a strong operating team to invest in. What other factor’s should you look at when looking to invest in a micro marijuana business? The second most important factor, behind the management team, is the facility’s location. In the Michigan marijuana industry, location is incredibly important. Some areas of Michigan—e.g. the Bay City / Banghor area—have authorized so many cannabis retail licenses that all but the most highly skilled operators will struggle to survive. Other areas—e.g. metro Detroit—have authorized far less licenses on a per capita basis, which in turn offers far better investing opportunities. Put simply, would you rather hold one of 15 retail licenses in an area with over 100,000 people, or one of 60 retail licenses in an area with a similar population? Other Items to Consider When Investing in Closely Held Cannabis Businesses In a previous article, we discussed some tips for Michigan cannabis companies seeking investors. Many of the key takeaways from that article would also apply to cannabis investors evaluating Michigan cannabis companies. Investors should look for companies with strong business plan and financial projects. Cannabis investors should also look for companies that present unique value propositions, especially in the microbusiness sector. Another item that is of great importance when evaluating investing in small and micro cannabis businesses is how the investment is structured. As with any small or start-up company, investments can be risky, and there is the potential to lose your entire investment if not properly structured. However, investors in small and micro cannabis businesses have the ability to negotiate favorable investment structures that can provide significant downside protection to ensure they at least get some money back even if the business fails. Investors can take security in a company’s assets—e.g. having UCC liens on Company equipment, or mortgages on the Company’s operating facility. Investors can also simply just invest in the real estate instead of the licensing company, which would provide significant downside protection, though at the expense of upside potential. As Cannabis business lawyers, we have worked with both cannabis investors and companies seeking investment and have creatively structured many cannabis investments that both protect investors but are fair to the cannabis businesses seeking investment. We have many tools in our proverbial toolbox—convertible notes providing first money out, equipment and real estate liens, preferred returns, and more. These tools allow investors to structure their investment in a way that mitigates the riskiness of investing in small and micro cannabis businesses. https://www.oak-law.com/blog/growing-industrial-hemp-plotting-to-minimize-risk-of-loss monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7817ad77-05ba-449f-b44a-f9df6cbfdb3f/unsplash-image-F-ZXqLioXxg.jpg Blog - GROWING INDUSTRIAL HEMP: PLOTTING TO MINIMIZE RISK OF LOSS - PLOTTING TO MINIMIZE RISK OF LOSS Earlier this year, the Michigan Department of Agriculture and Rural Development (MDARD) launched an industrial hemp pilot program. MDARD recently released the emergency rules related to the testing procedures of industrial hemp. Plants must contain less than 0.3% THC concentration by weight to comply with the statute and all non-compliant strains must be destroyed. According to the emergency rules, Michigan hemp growers must collect samples in a sawtooth pattern, which will give testers a representative sample of the entire strain contained within a plot. Each sample should be separately bagged, but samples from the same strain and same plot will be tested together. Because even one plant that contains over 0.3% of THC can cause a plot to fail, growers must consider the risk of loss and take steps to mitigate that risk. Even if an industrial hemp strain has previously passed inspection with the THC testing below 0.3%, THC levels can fluctuate in each crop cycle. There are many reasons a previously successful strain can become “hot,” which means the strain tests over the federal legal THC limit. Besides purposeful experimentation with cross breeding, plant stresses such as drought, flooding, excessive nutrients, not enough nutrients, heat, cold, etc. can also result in unforeseen THC spikes. Environmental factors are often beyond the scope of control of outdoor hemp growers, but the line between hemp and marijuana is non-negotiable according to the State. In another state that is testing a pilot program, Hawaii, the 2019 planting season has resulted in more than half of the hemp crops testing above the legal limit due to environmental factors. Nearly all of the Hawaiian hot crops had to be destroyed, but State officials granted waivers to some crops that tested just slightly above the limit. At this time, the State of Michigan does not allow such waivers. Here in Michigan, industrial hemp growers must always take into account typical crop risks such as hailstorms and bug infestations, but how can growers fight against the risk of loss from a “hot” hemp crop? First, growers should create small testing areas. The smaller the plots, the lower the risk of mandated destruction. Although growers will pay for more testing over time, smaller plot sizes may be the only crop insurance a grower is able to obtain, especially if growing for CBD. Strains that are grown for CBD tend to have higher THC levels, which means a much higher risk of loss. Michigan industrial hemp cultivators may also choose to grow many different strains on one plot of land instead of having smaller plots. This tactic has potential to create the best return on a harvest because the more strains a grower has, the less likely it is that a grower could lose plants to destruction. Growers utilizing this tactic should keep different strains separate and identifiable. Although only one plant that tests over the limit can result in destruction, MDARD will only order that particular strain within a tested plot to be destroyed, saving the rest of the plotted harvest. If a grower has many strains on a plot, destruction becomes less likely. This strategy can be used to mitigate risk of loss as growers wouldn’t have all of their eggs in one basket. Second, growers must carefully select when to send in samples for testing. Industrial hemp harvest is time sensitive because THC levels rise as the plants remain in the ground. Plants must be harvested soon after receiving test results so growers must be careful not to test too early, but waiting too long to test can result in destruction of the entire plot, costing the farmer thousands of dollars. Finally, if growers wish to reduce the amount of testing, but also want to mitigate the risk of loss from a hemp crop testing “hot”, growers should start small. Costs of growing industrial hemp can be high and industrial hemp is a particularly labor intensive crop, at least compared to traditional row crops that most Michigan farmers are used to. This is in part caused by the fact that much of the hemp cultivation process is not yet “industrialized”, meaning work that could be done by a machine for other crops need to be done by hand for industrial hemp. In order to succeed in the long term without taking on too much risk, Michigan industrial hemp growers could perfect the growing of industrial hemp on smaller plots before scaling up to larger plots and bigger crop yields. Growers should be aware that the industry has other built in costs that will affect even a successful harvest. For example, some processors will not take harvests unless they have verified the seeds first, banks may refuse to provide lending or even banking, and crop insurance is difficult (but not impossible) to obtain. However, if a grower of industrial hemp is successful at mitigating the risk of loss, he or she should expect a high return on their yield compared to traditional Michigan row crops such as corn or soybeans. https://www.oak-law.com/blog/michigan-releases-emergency-rules-for-testing-of-industrial-hemp monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/17b3d72f-1e39-4643-a7bf-e008d261ecf5/unsplash-image-EKy2OTRPXdw.jpg Blog - Michigan Releases Emergency Rules for Testing of Industrial Hemp - Emergency Rules for Testing Hemp Earlier this year, the Michigan Department of Agriculture and Rural Development (MDARD) launched an industrial hemp pilot program. Last week, MDARD released the emergency rules related to the testing procedures for industrial hemp in Michigan. These rules outline the process for testing Michigan Industrial Hemp produced under the State’s Industrial Hemp-Ag Pilot Program. First, before a grower of industrial hemp may either harvest or destroy a crop under the pilot program, the grower must first schedule a sample test by a testing facility within 15 days before the intended action. The sample sent for testing must include leaves and female flowers. All samples sent for testing will not be returned to the grower. Once received, testing facilities will test the samples after removing the extra carboxyl ring from the THCA, converting it to THC. Plants must contain less than 0.3% THC concentration by weight to comply with the statute. If testing indicates that the hemp exceeds 0.3% THC—in other words, it’s “hot”—the farmer will need to destroy the hot product. Further testing standards will be set by ASTM International, which are currently being developed. ASTM International standards currently being developed that could be used for testing in the future include: defining minimum food safety and quality for hemp seed grain, sampling of bulk industrial hemp, measuring the moisture content, whole nutritional value for human or animal consumption, assessing spoilage, and separation or quarantine standards for nonconforming substances of hemp plants during processing. Both growers and testing facilities may also test for acid levels, foreign matter, microbial and mycotoxins, pesticides, chemical residue, fungicides, insecticides, metals, residual solvents, terpene, and water content, though at the moment there are no threshold levels that would require a crop be destroyed. All results gathered by the testing facility will be provided to both the grower and the MDARD. Compliant plots must be harvested in 15 days, while non-compliant plots must be destroyed. If non-compliant crop is discovered, a destruction order may be served on the grower from MDARD. The order may require a method of destruction or even required department oversight of the destruction. All licensees are subject to these inspection rules and sampling procedures at reasonable times and the grower must be present at these inspections and must allow the department to enter all buildings and structures with unrestricted access to hemp areas. Additionally, all testing costs will be the responsibility of the grower and anyone who refuses to pay the fee will have their license renewal denied by MDARD. These are emergency rules, meaning that they only in place for six months while final rules are being developed. The emergency rules allow growers to move forward while federal standards are still being developed. The U.S. Department of Agriculture is expected to release further requirements before the end of the year, which will be reflected in updated rules put forth by MDARD. https://www.oak-law.com/blog/how-can-michigan-licensed-growers-obtain-genetics monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/330e9203-8a83-4373-8619-a16f45fa4a76/unsplash-image-tV-RX0beDp8.jpg Blog - HOW CAN MICHIGAN LICENSED GROWERS OBTAIN GENETICS? - HOW TO OBTAIN GENETICS? Congratulations, you’ve successfully become an MRA approved State of Michigan licensed Marijuana Grower! Now what? The first obstacle many state licensed Growers face is where to obtain plants, seeds, seedlings, or tissue cultures. If you are a caregiver or you hire a full-time employee that’s a caregiver, you can transfer the caregiver product to the facility when the caregiver license is surrendered. This can give your facility a “running start” such that not all of your plants have to be started from scratch. However, if you are a 1500 plant facility, and only have two caregivers with 144 total plants, you are still going to need to access more genetics for your grow. There are a couple of avenues for a commercial grower to obtain seeds in Michigan. One way is from someone already legally growing marijuana, including other licensed Growers and Caregivers. Although licensed Growers may currently accept any product directly from a registered Caregiver or another Grower without use of a Secure Transporter. Another way, pursuant to the MTRMA, is acquiring seeds or seedlings from any adult over the age of 21. Pursuant to the Medical Marijuana Facilities Licensing Act (“MMFLA”), the only permanently approved source for plants and seeds is from other licensed Growers, and the sale must be completed through a licensed Secure Transporter. MMFLA licensed growers may be tempted to purchase from larger online retailers, but marijuana seeds are considered cannabis products just like flower, edibles, and concentrates. Cannabis product may not legally cross state lines so long as marijuana remains illegal at the federal level, meaning a licensed grower cannot legally purchase seeds online for their MMFLA facility. Growers licensed and operating in Michigan are limited in product selection and may only purchase, produce, and sell seeds within the state. If a Grower holds a valid medical marijuana card, he or she may purchase seeds from a licensed dispensary, but widespread commercially available seeds is a distant reality until overseas and US based seed banks can ship nationwide, which won’t happen any time soon. Now you may be asking—if that’s the case, how does Michigan get access to top quality genetics from other states? Well, there is a backdoor way to do it, at least for now. Unlike MMFLA and MRTMA licensees, caregivers and adults over the age of 21 are not subject to the same intense regulatory requirements and inspections that MRA licensed businesses are. Essentially, caregivers and adults over the age of 21 still operate in the wild west and can get away with things that MMFLA licensees simply cannot. They can therefore serve as the conduit for out of state genetics. To illustrate, a caregiver/adult over 21 may purchase out of state genetics (which is still illegal by the way), and then sell those genetics to a MMFLA licensed grower. While this solution isn’t great—it is at best a legal grey area, and at worst simply illegal—it is the only workable solution for out of state genetics to come into Michigan’s regulated cannabis market. Unfortunately for Michigan cannabis cultivators, MRA seems to be one (or perhaps several) steps behind in identifying and addressing problems in Michigan’s regulatory scheme. Now let’s assume you are able to get a hold of good genetics for your MMFLA cultivation facility from a caregiver or another MMFLA licensee. How do you ensure you still have access to genetics without having to continue to purchase them from other Michigan licensees? You will need to carefully cultivate and breed the plants to ensure a constant supply of new seeds or utilize cuttings from your existing plans. Otherwise, as a professional cultivator, you will need to continue to purchase seeds from another Michigan licensed grower or caregiver. Once a Grower obtains a stable strain that expresses consistent traits, that licensed Grower may start selling those seeds to other licensed Growers that are beginning a commercial grow. A start-up Grower may spend years crossing and breeding plants, but the best of these strains will be highly sought out by other commercial growers. This means a licensed grower could experiment with genetics, cross-breeding, and produce his or her own unique strains and results for resale to other growers, as opposed to producing merely for flower production. This is a business model we have yet to see get much traction among licensed MMFLA or MRTMA businesses, but we expect this to change soon, especially if the “caregiver backdoor” is shut down. Until then, licensed growers will be forced to purchase from other licensed facilities as well as caregivers who were able to obtain desired genetics, even if the source of those genetics was not entirely legal. https://www.oak-law.com/blog/michigans-new-cannabis-license-marihuana-event-organizers monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/b85f83ec-d07e-4cbf-929b-7504a8a62453/unsplash-image-a6y8tj2K1HQ.jpg Blog - Michigan’s New Cannabis License: Marihuana Event Organizers - Marihuana Event Organizers The Marijuana Regulatory Agency recently put out new rules that will initially govern Michigan’s “adult use” cannabis market. Included in these rules was several new license types not contemplated by the MRTMA statute, one of which is the marihuana event organizer license, as well as its companion license, the temporary marihuana event license. The purpose of these new licenses was to create a regulatory scheme where adults over the age of 21 could buy and consume marijuana at a public event much in the same way they already buy and drink alcohol. As someone who represents large event spaces and tons of Michigan cannabis companies, I immediately recognized the importance of this license for event organizers and event spaces. Why an Event Space Should Apply for an Event Organizers License I was talking with my client that owns several large event spaces about the marihuana event organizer license. They are usually happy when most of their concert goers are getting high, though they obviously prefer them to do it outside the theatre and indoor event areas. The reason? High people are a lot less destructive than drunk people when it comes to post-event cleanup and repairs, and also a lot less violent. You don’t really ever see two really high people get into a fight at a concert, but with drunk people it’s an all too common occurrence. And let’s be frank—people smoke marijuana at concerts, regardless of whether the facility actually allows it and regardless of whether the event is held indoors or outside. This is a simple fact of life. If concerts were to ban alcohol, you could pretty much guarantee that people would be smuggling in their own drinks or at least likely getting pretty liquored up before coming into the venue. Rather than fight this, most concerts and festivals have chosen to embrace alcohol. The rationale goes that it’s going to happen anyway, so it’s better to control it and make a little money off of it as well. For some venues, alcohol sales is the primary source of income, bigger than even ticket sales. The rationale for allowing marijuana at public events is similar. It’s going to happen anyway, and you’d probably be better off having a bunch of stoned concert goers than drunk ones anyways. If you allow attendees to buy cannabis onsite and set aside a designated space for its consumption, you can at least control the use of cannabis at your facility. Looking at it from this perspective, it seems like common sense. The other main rationale for allowing cannabis sales and consumption is that it makes money! Many concert and event spaces’ profits are derived from alcohol and beverage sales, and as noted above, this can be a double-edged sword due to the problems excessively drunk event goers can cause. Having a marihuana event license allows venues to make money by charging vendors —i.e. marijuana retailers and microbusinesses. who sell at their venue—for using the space. Thus, a marihuana event license is a win-win situation for many event venues—you have less trouble with event goers, and you make money from allowing the sale of cannabis at your venue. Now let’s assume that I have convinced you that allowing marijuana to be sold and consumed at your event is the way to go. What does cannabis event organizer license allow you to do, and who is able to get one? How to Get a “Marihuana Event Organizer” License The first thing to understand about the marijuana event organizer license is that it’s not the only step you need to take in order to put on an event with marijuana sales and consumption. What the event organizer license allows you to do is then apply for a temporary marijuana event license for your specific events. So how do you get a marijuana event organizer license? You need to submit a license application to the Marijuana Regulatory Agency and pay the $6,000 application fee. Once you submit a completed application, and pay the annual licensing fee to the State, you should receive your marijuana event organizer license within 90 days. Michigan cannabis event organizers are subject to the same background check that other MRTMA applicants are subject to. Don’t fret, however. That marijuana possession charge you got a couple years ago will not disqualify you—the only disqualifying charge is selling controlled substances to minors. Also don’t fret about not having enough money to meet capitalization requirements since there are none under the MRTMA, and the license fee for an cannabis Event Organizer license is only $1,000. How to Get Temporary Marijuana Event License Now that you have a marijuana event organizer license, you are well on your way to obtaining a temporary marijuana event license. Before you apply for a temporary marijuana event license, you will need the municipality to expressly approve the temporary marijuana event license for your specific venue. This will likely require the municipality to pass an ordinance establishing a process for obtaining approval for locations or generally approving marijuana events at your specific venue. This will likely be the hardest step in the process. Once you get local approval, you can apply for the temporary marihuana event license. You can get the event license for a single day or several days if the event is multi-day, though you can’t get one for more than 7 days in a row. Each event that you want to have on-site sale or consumption of marijuana will require a separate application to the Marijuana Regulatory Agency. You will also need to apply at least ninety days in advance to ensure MRA has enough time to review your event application. The application requires the following information: The applicant’s name The marihuana event organizer license number and each marihuana establishment license held by the applicant. The address of the location where the temporary marihuana event will be held. The name of the temporary marihuana event (e.g. Hash Bash, Doobie Brother’s Concert, etc.) A diagram of the physical layout of the temporary marihuana event. The diagram shall clearly indicate all of the following: Where the temporary marihuana event will be taking place within the event space All entrances and exits that will be used by participants during the event. Marihuana consumption areas. Marihuana retail areas where marihuana products will be sold. Where any marijuana waste will be stored. Areas where marihuana products will be stored. The specific location of each marihuana vendor The dates and hours of operation for which the temporary marihuana event Contact information for the applicant’s designated primary contact person for the event Contact information for the designated contact person(s) who shall be onsite at the event and reachable by phone during the entire event Written attestation on a form provided by the agency from the municipality authorizing the applicant to engage in onsite marihuana sales to, and onsite consumption by, persons 21 years of age or older at the temporary marihuana event at the proposed location. A list of all licensees and employees that will be providing onsite sales of marihuana products at the temporary marihuana event. While these requirements may seem like a lot, keep in mind that once a venue does this for one event, they will have most of the information compiled and ready for the next event, which will make this process progressively easier as time goes on. Conclusion A marihuana event license is perfect addition to many event spaces and festivals. It allows the event space to make more money, will likely lead to a less “rowdy” crowd at your event, and has the added benefit of regulating and controlling where marijuana is smoked or consumed within your event. The biggest hurdle to having a marijuana event will likely be getting municipal approval for your specific event location, but once that hurdle is overcome, you will be well on your way to making “high profits” (I couldn’t resist). https://www.oak-law.com/blog/what-michigans-recreational-marijuana-rules-mean-for-microbusinesses monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/3fb4bddf-c74d-4b5c-9ae6-7c23b656b065/unsplash-image-NxRx7_mPdEk.jpg Blog - What Michigan’s Recreational Marijuana Rules Mean for Microbusinesses - What Rec Rules Mean for Microbusinesses The Emergency Rules issued by the Marijuana Regulatory Agency under the Michigan Regulation and Taxation of Marijuana Act (“MRTMA”) were released on July 3rd, 2019. These eagerly anticipated emergency regulations set forth the rules of the road that Michigan microbusinesses must comply with when operating a marijuana microbusiness facility. One of the biggest takeaways is that each part of the microbusinesses’ operation will be regulated as if it was a licensed marijuana facility in the same way as the equivalent recreational licensee holder. To illustrate, the rules applicable to recreational marijuana retailers—also known as dispensaries—are also applicable to the marijuana retail portion of the microbusiness. In other words, there are no special exceptions or special treatment for microbusinesses. This is in contrast to the special treatment given to larger cultivation facilities, who are able to obtain an “excess marijuana grower license” that excepts them from the 5 Class C limitation found in the MRTMA statute. The practical effect of treating microbusinesses like the other license types is that the costs to start up a microbusiness will be significant. Because they have to comply with all requirements applicable to the licensed activities they are engaging in, compliance costs will include not just legal and licensing fees but also substantial property buildout costs. The costs of adding fire-rated walls, expensive HVAC systems, commercial locks and more will be substantial and will serve as a barrier to entrants that are not able to raise or obtain enough money or financing to comply with these requirements. This will also likely mean all but the most well financed marijuana microbusinesses will not immediately start processing marijuana due to the substantial costs associated with starting up an MRTMA-compliant processing facility. These rules answer many of the unanswered questions on what a Michigan microbusiness can and cannot do. While many of these rules came out as expected, there were some deviations and nuances that warrant further exploration. Below we have outlined six additional takeaways from the MRTMA rules that could effect your plans to open up a cannabis microbusiness here in Michigan. Delivery is Allowed The MRTMA allows persons to place deliveries, pay for product online, and allows deliveries to home residences and designated consumption areas. While Michigan microbusinesses must comply with all of the regulations that are applicable to retail sales by a marijuana retailer (which is what the MRTMA calls dispensaries), they also get some of the privileges given to retailers. Likely the biggest benefit is delivery, which will be an important aspect of many microbusiness business models, if not the entire business model. The MRTMA allows a retailer or microbusiness to establish a delivery program that is subject to review and approval by the MRA similar to the MMFLA’s delivery program. One item of note is that under the MRTMA Emergency Rules applicable to delivery, microbusinesses will not be able to share delivery drivers with other microbusinesses or retailers. This will make it difficult for microbusinesses to pool their resources together for a delivery program, as each will have to have their own separate drivers. Application Costs Our firm has been asked some variation of “how much will it cost to apply? or “how much will a license cost?” by almost every aspiring microbusiness company that we have consulted with. Now, we finally have the answer—it will be a $6,000.00 application fee, and an $8,000.00 microbusiness license fee, which is in line with what we were expecting. The fee for renewing your microbusiness may vary from this initial $8,000.00 fee since it is based on total revenue generated by the facility, though not by much. The $8,000.00 assessment will represent the median amount paid by a microbusiness licensee, with the bottom 33% of microbusinesses by revenue paying $6,000, the middle 33% paying $8,000, and the top 33% paying $10,000. Must Operate from One Facility The Rule on Microbusinesses states that a “marihuana microbusiness shall not operate at multiple locations.” This was certainly a disappointing inclusion as the MRTMA was drafted specifically not to require that retail activities take place in the same facility as your cultivation and processing operation. The practical effect of this rule will be that there will be a limited number of “prime” microbusiness locations for potential applicants to choose from. This is due to the fact that a location must be chosen for two, somewhat contradictory traits—high traffic retail and low cost cultivation and processing space. In other words, not many prime retail locations will also have access to sufficient low cost space for cultivation, and low cost cultivation space will likely not be in high traffic retail locations. Each microbusiness will have to find the appropriate trade-off between these two traits, while also ensuri-ng compliance with municipal zoning requirements For delivery and destination microbusiness concepts, this won’t be that big of a deal. Microbusinesses focused on delivery probably don’t want to be in high traffic retail areas—road and highway access will likely be more important factors when choosing a location. For microbusinesses that are relying on the “microbusiness dispensary model”, the location of the microbusiness dispensary will be key. However, as discussed in the next takeaway, there are some exceptions to this rule that microbusinesses will be able to take advantage of with respect to outside sales. Microbusiness Farmer’s Markets and Event Sales Temporary event sales could become a key component of microbusiness sales and could spurn its own industry of regular marijuana events similar to seasonal farmer’s markets found in many Michigan cities. Here, an example comes to mind that illustrates the potential power of the new “marijuana event organizer” and “temporary marijuana event” licenses. That example is in the infamous nightclub Studio 54. The story goes that Studio 54 was waiting to obtain a liquor license in New York City—yet the club was open during this time and plenty of liquor being served up at Studio 54. How was this possible? Well, Studio 54 was continuously applying for temporary one day event licenses that allowed it to serve liquor for that day. They were able to rack up a significant amount of liquor sales through these temporary licenses before this loophole was eventually closed by the State of New York. While I am not recommending that you open up a separate storefront and indefinitely apply for temporary event licenses—like what happened with Studio 54, that is probably not sustainable over any significant amount of time—what I am suggesting is that this could be used on a regular basis for a marijuana farmer’s market or similar arrangement. These type of events could be a regular part of a microbusinesses sales, or in some cases, a microbusiness could be able to subsist just on event sales without ever needing to open up a storefront or develop a delivery program. Similarly, certain annual or one-off events could become a big part of a marijuana microbusiness’ revenue. While Electric Forest announced that it was not going to allow marijuana at its 2019 festival, this will likely change as there is “high demand” (see what I did there?) for marijuana at these types of events. I could easily see a two or three day festival such as Electric Forest or Movement generating sales that would otherwise take months to generate from a traditional storefront. Stringing together several of these festivals and concerts could allow microbusinesses to survive solely on event sales. As a result, a microbusiness could base their entire business model merely on catering to these types of events. Here Comes Cannabis Lounges Yes, cannabis lounges are coming to Michigan! MRA decided to step into the regulatory fold and will be regulating public use establishments, as opposed to simply leaving this issue to the municipalities to decide. MRA doesn’t exactly call them “cannabis lounges”—the term they use is “designated consumption establishments”, but you get the drift. Regardless of what you call them, you will be able to open up a cannabis lounge in Michigan by early next year, assuming your municipality is on board. However, you cannot sell marijuana from within the designated consumption establishment, meaning you would likely have to have a separate neighboring facility or otherwise partition the building such that there are separate entrances and exists for the microbusiness and cannabis lounge. A microbusiness also has the ability to deliver directly to the consumption area if you are not able to site your microbusiness in the same building or right next door to your cannabis lounge. Michigan Residency Requirement and Capitalization We knew that microbusiness applicants needed to be Michigan residents for the first couple years of the program, but what we didn’t know is if there will be a certain length of time they needed to be a resident prior to receiving a microbusiness license. We now know that as long as a microbusiness licensee is a resident of the State of Michigan when they apply, they will meet this requirement. This is good news to out-of-state residents who were eyeing the Michigan recreational market’s Class A and microbusiness licenses. Another piece of good news is that there are no “capitalization requirements” for recreational marijuana microbusiness licenses. However, as discussed above, that doesn’t mean you will be able to start up a microbusiness on a shoestring budget. Since microbusinesses will still need to comply with all rules applicable to each activity it engages in, potential microbusiness owners will need substantial capitalization in the form of debt or equity in order to build out a fully compliant cannabis facility. https://www.oak-law.com/blog/contingencies-in-cannabis-real-estate-purchase-agreements monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/e066d307-cee3-47a2-97a2-607c5573870d/unsplash-image-HJckKnwCXxQ.jpg Blog - Contingencies in Cannabis Real Estate Purchase Agreements - Contingencies in Cannabis Real Estate When evaluating a Michigan marijuana real estate opportunity, one of the first questions we ask is “is it contingent?” What this question really means is whether the seller will let the buyer back out if they are not able to ensure the necessary approvals or other important items needed to operate on the property. These contingencies can be drafted many ways, with some requiring the buyer to sacrifice part of his or her good faith deposit if they are unable to meet the contingency, and some simply entitling the buyer to a full return of the buyer’s earnest money deposit. How these are drafted depends on how the deal is negotiated and how sophisticated the parties to the transaction are. Oftentimes, real estate purchase agreements are simply photocopied form contracts that allow you to “check” one or more contingency boxes. These forms are often used to avoid having to involve a Cannabis real estate lawyer in the transaction. While they can sometimes be useful when a buyer wants to put in numerous offers on several parcels of real estate, a tailored and well crafted purchase agreement can save both the buyer the seller a lot of headaches and ensure that each is protected with respect to the proposed transaction. Whether you are the party protected or not may depend on whether you have a real estate attorney on your side that understands the ins and outs of purchase agreements, or if you simply have a broker or agent who only has a cursory understanding of which provisions are important in cannabis real estate transactions. Contingency provisions are especially important for buyers when you consider the current price of Cannabis properties in Michigan. A property that is in the “green zone” for a provisioning center, for example, might be worth $200,000.00 prior to being zoned in, but listed for a million dollars once the zoning ordinance is passed. With the high multiples being paid by the purchasers of cannabis properties, it is that much more important that the purchaser is protected so that he or she doesn’t get stuck vastly overpaying for a property they cannot operate a marijuana facility on. Whether you are a real estate broker, buyer, seller or attorney, “contingency” may be one of the most commonly used words in Michigan cannabis real estate transactions today. In this article, we will explore some of the common contingencies used in cannabis real estate transactions, when they should be used as a buyer, and what to look out for as a seller. The Municipal Approval Contingency Out of all of the contingencies we utilize when negotiating and drafting real estate purchase agreements in the Cannabis industry, this is the most common. This contingency is also what is being referred to when a cannabis property broker or purchaser asks “is it contingent?” A municipal contingency is a provision whereby the buyer is not obligated to close until they receive municipal approval to operate a marijuana facility, which is sometimes explicitly stated in the purchase agreement or sometimes simply referenced as the purchaser’s “intended use.” In its most basic form, municipal contingencies are used to ensure that the buyer doesn’t get stuck with the property without being able to operate a licensed marijuana facility on it. As an example, let’s imagine that you wanted to purchase a “green zoned” provisioning center property in Warren, Michigan. Warren had a very competitive provisioning center application process, with only about 20% of the dispensary properties that applied set to receive a provisioning center license. If you were to close on the property prior to approval or denial, instead of having a contingency, then you may have been stuck paying several millions of dollars and still not being able to operate a provisioning center. With a municipal contingency, you would only need to close on the provisioning center property if your municipal license application was approved. If it was not, you could have walked away from the deal, maybe only losing part of your earnest money deposit and some due diligence costs As the above example illustrates, if the property does not already come licensed, this type of contingency is a must for buyers of cannabis real estate. Even if licensed, buyers may want to nonetheless have the purchase contingent upon the transfer of the license since transferring municipal cannabis licenses is not always a straightforward process. Due Diligence Contingency This contingency is also very common to cannabis real estate transactions, and is perhaps the most used contingency in real estate transactions generally. There are several specific contingencies that are often grouped together with the due diligence contingency—e.g. environmental contingencies (i.e. Phase I, Phase II and BEAs), structural or other construction related contingencies (i.e. subject to inspection by a professional building inspector), and so forth. Basically, a due diligence contingency allows you a certain amount of days—e.g. 30, 60 or 90 days—to investigate the property. Sometimes these provisions are crafted to individual items to be investigated and sometimes these are crafted to be open ended. Either way, these provisions provide the potential purchaser will the ability to back out of the transaction if they discover items during the due diligence process that are not to their liking. When representing the seller, we often try to make the due diligence provision as specific as possible and allow the seller to “cure” any problem the buyer may have with the property. When representing the buyer of a cannabis property, we do the opposite. Similar to the municipal contingency, what happens to the deposit depends on how the purchase agreement is drafted. It could be drafted to provide the buyer a “free look” at the property, meaning he or she has a certain amount of days to decide whether to move forward, after which the buyer’s earnest money deposit becomes partially or wholly non-refundable. It could also be drafted to become “hard” immediately or after a shorter period of time—e.g. the deposit becomes hard after the first 30 days of a 90 days due diligence period. Financing Contingency While common in other areas of real estate, this type of contingency is not too common in cannabis real estate transactions for the simple reason that it is very difficult to obtain financing for cannabis transactions (but not impossible!). In my experience, this contingency is often simply added by the potential purchaser of the transaction to give the purchaser an “out” if they later decide not to close on the transaction. It is also sometimes included simply by mistake—the template the broker, agent or owner used for a prior transaction contains the financing contingency language, and no one knew enough to take it out. Put simply, a financing contingency in cannabis real estate transactions should be seen as a potential red flag worth looking into. If you are a seller and the buyer includes this language, chances are they just wanted to give themselves an extra “out” if they decide they don’t want to go through with the transaction. While it is possible that the buyer actually has a commitment for debt financing—we work with a handful of lending brokers that specialize in the Cannabis space —this is very uncommon in Michigan marijuana property transactions. As a seller, the presence of this contingency should at the very least trigger further investigation into who the purchaser is working with to finance the transaction and how credible the offer to finance actually is. Title Work Contingency If purchasing using a warranty deed, the buyer and seller will almost always engage a title insurance company to “insure” the title of the property. Typically, the seller will obtain a commitment for title after signing the initial purchase agreement, and the buyer will then be given a chance to inspect the title work before agreeing to enter the transaction. Regardless of whether you are the buyer or seller, you will likely want to make sure that the title company you are working with is Cannabis friendly In most title contingencies, if a buyer sees a title exception they don’t like—e.g. a use restriction, undisclosed easement, a second potential chain of title, etc.—they give written notice to the seller of the specific exception they don’t like. The seller can either “cure” the exception, and if the seller is unable to cure, the buyer is given the choice to either walk away, renegotiate the deal, or move forward with the title defect. This type of contingency is extremely common in real estate transactions, and virtually a must-have for purchase agreements that transfer the property by warranty deed. Title insurance is generally not too expensive and well worth the protection it provides. However, you do need to be careful that you are not invalidating the terms of the title insurance when you enter into a cannabis transaction. Most title companies will not ensure marijuana property, and if they find out a property they insured is operating as a marijuana facility, they may refuse coverage if a title issue later arises . It is therefore important to work with a cannabis-friendly title company that will stand by its title insurance policy. Conclusion Contingencies are an important part of nearly all Michigan cannabis real estate transactions, yet some buyers, sellers and agents will overlook the importance of these provisions in protecting the parties’ interests. For this reason, Michigan cannabis real estate purchasers should ensure that the person handling their transaction is well versed in purchase agreement contingencies. Michigan Cannabis Properties has legal staff at the ready to protect its clients interests and to make sure they are not “caught holding the bag” at the end of a real estate transaction. https://www.oak-law.com/blog/michigan-outdoor-marijuana-and-hemp-be-careful-of-your-neighbors monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/8a33fa7b-8505-4d37-b802-8c3c7fb1306c/unsplash-image-MqISkm2iLGc.jpg Blog - Michigan Outdoor Marijuana and Hemp: Be Careful of your Neighbors - Be Careful of your Neighbors As a cannabis attorney, you hear many horror stories from hemp and marijuana licensees. These horror stories can range from massive safety testing failures, incorrectly designed cultivation and processing facilities, and pest infestations and crop failures. While attending the NoCo Hemp conference in Colorado, there was one story in particular that seemed to stand out from the rest, not just in terms of the frequency, but also in terms of catastrophic results. One such horror story from the out-of-state hemp and marijuana market will likely play out in Michigan for those who are not aware of the problem this can cause. While I’ve heard several variations, the basis of the story is as follows: A marijuana licensee is growing marijuana outdoor. Unbeknownst to them, a neighbor—either on a property directly adjacent to them or, in some cases, a property as far as five miles away, decides to grow hemp outdoors. The result is that the marijuana licensee’s cannabis crop cross-pollinates with the neighbor’s hemp crop, and the marijuana licensee’s crop is virtually ruined or at the very least filled with seeds. This scenario will almost assuredly play out here in Michigan since Michigan has created two separate licensing programs with no coordination between the two programs or even the departments that administer them. Michigan’s Department of Agriculture and Rural Development (“MDARD”) is currently granting hemp cultivation licenses for agricultural land throughout the state, whereas Michigan’s Department of Licensing and Regulatory Affairs (“LARA”) is granting marijuana cultivation licenses for outdoor farms. While municipalities can restrict where outdoor marijuana farms are located, they cannot currently restrict where hemp farms are located. MDARD has not indicated that it plans to restrict where outdoor hemp cultivation takes place, and LARA also is not restricting where outdoor marijuana cultivation takes place. With nothing to stop hemp and marijuana from growing in nearby farms, the result will be low quality, seedy marijuana and “hot” hemp crops that will need to be destroyed under state law. Cross Pollination Generally speaking, there are two types of cannabis—marijuana and hemp. The main difference between the two plants, at least as far as the law is concerned, is the concentration of THC found in the plant. Cannabis Sativa with more than 0.3% THC is considered marijuana, whereas Cannabis Sativa with less than 0.3% THC is considered hemp. Otherwise, marijuana and hemp are the same species and can easily interbreed with one another. This becomes a problem because they can cross-pollinate one another, and each has been bred over decades, if not centuries, for a specific and entirely different purpose. Put simply, marijuana is essentially hemp that has been carefully bred over generations to have a high THC content and to produce the sticky, crystallized buds that consumers have come to enjoy. If a male hemp plant pollinates a marijuana plant, the result is a cannabis flower that is full of seeds, low in THC, and virtually worthless on the open market. Hemp goes to seed very quickly and therefore has the ability to quickly pollinate any marijuana plants growing nearby. This can pose a huge risk for outdoor marijuana cultivators since a few unfortunately placed hemp plants can ruin their entire crop. While I have heard about this happening several times, one specific story that stood out was where a hemp crop five miles away ruined the entire valley’s marijuana crop on a particularly windy day. The outdoor marijuana crop was worth several millions of dollars. Needless to say, the marijuana cultivators were up in arms at the hemp cultivator, who may not have even been aware that all that was needed was one particularly windy day to send pollen from his farm to marijuana cultivation facilities five miles away. There have even been reports that hemp planted as many as 20 to 30 miles away from outdoor marijuana cultivation facilities has pollinated marijuana crops, resulting in lower quality marijuana flower that contained numerous seeds. No Legal Way to Prevent Neighboring Hemp Cultivation While the state of Michigan is working on a plan to be submitted for approval under the 2018 Farm Bill, the state is currently accepting applications under its 2014 Industrial Hemp act. Hemp cultivation is controlled by the Michigan Department of Agriculture and Rural Development, meaning municipalities have no more control over hemp farming than they do over corn or soybean farming. This could have particularly disastrous results for outdoor marijuana cultivators in Michigan. They have no legal way to stop their neighbors from cultivating hemp and thus possibly ruining their outdoor marijuana crop. That means an outdoor medical marijuana facility that took over a year to site, license, build a facility, and put plants in the ground could have their entire operation rendered utterly useless by a nearby farmer who decided to plant an acre of hemp on a whim. Similarly, hemp that cross-pollinates with marijuana will almost certainly become “hot”, which is the industry term for having more than the allowable 0.3% THC. A hot crop would be considered marijuana in Michigan and would need to be immediately destroyed, otherwise the hemp farmer would be at risk of being prosecuted under Michigan’s marijuana laws. This seems to be a particularly glaring hole in Michigan’s cannabis laws, as these two types of Cannabis simply do not mix well when both grown outdoors, but there are no regulations governing their proximity. What’s an Appropriate Distance? With reports of hemp pollinating marijuana plants over twenty miles away, at what distance should an outdoor marijuana cultivator worry about a nearby hemp field? Hemp, while generally pollinating by the wind, can also pollinate by bees, who can fly hundreds of miles to pollinate another plant. So should a Michigan outdoor marijuana farmer worry about hemp fields tens or even hundreds of miles away? To answer this question, I conducted a cursory review of some of the academic articles written about this topic in other states. Generally, it would seem that about 10 miles can be a safe distance, assuming there are adequate windbreaks between the two farms. Many experts believe that this distance may actually be playing it overly safe, and a distance between 3 and 7.5 miles would be a safe buffer unless there is open water or open fields separating the two farms. If two farms were sitting on opposite sides of a bay, for example, this buffer distance may increase to 30 or more miles. Regardless of the exact buffer, this issue will pose a problem with Michigan cannabis farmers, whether their focus is on hemp or on marijuana. Since both have a right to legally plant their crop, there are no clear legal remedies for a marijuana farmer to prevent a nearby hemp farmer from growing industrial hemp, or vice versa. Given the absence of any available legal remedies, the best advice I can give to outdoor marijuana and hemp cultivators is to simply be good, friendly and watchful neighbors. If you hear about a nearby farmer looking to plant hemp or marijuana near your field, I’d recommend starting a conversation with him or her. Neither of you may be willing to budge—which could lead to an unfortunate game of chicken—but it may be possible to work together to at least mitigate the possibility of significant cross-pollination through timing the growing cycles and adding additional windbreaks. Addressing the problem with your neighbor, even if the solution isn’t perfect, is certainly a better strategy than burying your head and hoping for the best. https://www.oak-law.com/blog/michigan-launches-hemp-pilot-program monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/6ec243d2-0192-42b7-b5ff-97c9aa7cb5d2/unsplash-image-bYZn_C-RswQ.jpg Blog - MICHIGAN LAUNCHES HEMP PILOT PROGRAM - HEMP PILOT PROGRAM On April 18, 2019, Governor Gretchen Whitmer and the Michigan Department of Agriculture and Rural Development (MDARD) announced the launch of the state’s Industrial Hemp Ag Pilot Program for the 2019 planting season. Although the U.S. government is implementing a national hemp program under the 2018 Farm Bill, which authorized the commercial production and processing of industrial hemp in the United States, the State of Michigan has the authority to authorize the growing of industrial hemp for research purposes. The federal government’s program under the 2018 Farm Bill may not be ready until 2020. This program is an interim step conducted under the 2014 Farm Bill designed to allow the state’s hemp farmers and processors to prepare for the upcoming implementation of the state’s hemp program under the 2018 Farm Bill. The program will immediately begin accepting applications from industrial hemp growers and processors / handlers. The program requires farmers and processors / handlers to enter into a research agreement with MDARD, which expires on November 30th, 2019, at which time licensees will need to reapply with MDARD. Michigan’s Industrial Hemp Ag Pilot Program allows farmers to test out whether growing and processing hemp could be a financially viable crop for them, as well as pave the way for Michigan growers to enter a permanent licensing program. Now that hemp is treated like other agricultural commodities, hemp producers may be eligible for federal crop insurance as well as U.S. Department of Agriculture research grants. Farmers looking to grow hemp will be entering a booming market. Industrial hemp has countless uses, including paper, clothing, textiles, biodegradable plastics, building materials, health food, automobile parts, and fuel, just to name a few. In addition, farming industrial hemp is ideal for Michigan farmer’s looking for another crop for rotation, especially since hemp cultivation actually improves soil quality. The hemp cultivation program is open to anyone who has not been convicted of a felony relating to a controlled substances in the last ten years. The program also restricts persons from leasing land from persons convicted of a controlled substance felony in the last ten years. In addition, as part of the program, you will need to submit to any and all inspections of the property, regardless of whether you are given advanced notice of the inspection. You will also need to submit an end of the year research report summarizing the “research” you conducted. You do not need to limit your research to medical purposes—you should be able to “research” cultivation methods involved in growing hemp, as well as “research” the market for hemp products here in Michigan. It should be noted that not all hemp is the same and the end use can determine the type of hemp grown and the cultivation methods utilized in growing hemp. High CBD hemp is labor intensive and most similar to growing Cannabis or tobacco, whereas hemp grown for industrial purposes is much more similar to traditional row cropping methods utilized by Midwestern farmers. Our firm is currently working with an individual who has substantial experience growing hemp for industrial uses in Windsor. He may be available as a resource for those interested in industrial hemp (but not CBD hemp) cultivation. It should also be noted that there are some risks to growing industrial hemp. Although similar to cannabis, industrial hemp means a plant containing a THC concentration of no more than 0.3% on a dry weight basis. Growing hemp with THC levels above 0.3%, even slightly, will be considered marijuana, subject to much stricter state and federal laws. An accidental spike in THC levels of a crop will be considered illegal without the licenses required to grow medical or recreational marijuana, and this accident may lead to legal consequences, including destruction of your entire hemp crop. If one is interested in growing industrial hemp or processing hemp in Michigan, farmers aged 18 years or older must first obtain a license and enter into a research agreement with MDARD. Forms for a grower registration, a processor-handler license, and participation in MDARD’s 2019 Hemp Ag Pilot Program are available now, and the department will begin accepting applications on Tuesday, April 23, 2019. The grower registration fee is $100, and a license to process and handle hemp costs $1,350. Payments must be made by certified check or money order payable to the State of Michigan. Processor and Handler applications are available here: https://www.michigan.gov/documents/mdard/Processor-Handler-Application_652870_7.pdf Grower applications are available here: https://www.michigan.gov/documents/mdard/Grower-Application_652868_7.pdf As part of the application process, applicants will need to enter into a form research agreement with MDARD as well as fill out the relevant paperwork above and provide maps on 8.5” x 11” paper of all locations where you will grow, handle, store, process, broker or market industrial hemp. You will also need to provide an iChat background check. You can run an iChat background check here: Michigan State Police, Internet Criminal history access tool (ICHAT). If you are applying as an entity, you will need to provide the full name of each officer and director, and partner, member or owner owning in excess of 10% of equity or stock, including his or her birthdate, title and valid/monitored electronic mail address shall be included on the application. In addition, a notarized attestation that these individuals are free from felony drug convictions must be submitted. The State of Michigan is encouraging applicants to apply on-site at licensing events at the MSU Pavilion for Agriculture and Livestock Education in Lansing. Dates and times are as follows: Tuesday, April 23rd 8:30 am –11:45 am, 1:00 pm-**4:00 pm Wednesday, April 24th 8:30 am –11:45 am, 1:00 pm-**4:00 pm Monday, April 29th 8:30 am –11:45 am, 1:00 pm-**4:00 pm Tuesday, April 30th 8:30 am –11:45 am, 1:00 pm-**4:00 pm You can call the MDARD Customer Service Center at 1-800-292-3939 (M – F, 8 am – 5 pm) to reserve a spot. https://www.oak-law.com/blog/more-than-just-cbd-the-market-for-industrial-hemp-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/c03323b1-4d55-4dd2-8e0c-ef0d79bdebab/unsplash-image-YWD6qA4yxsE.jpg Blog - More than just CBD: The Market for Industrial Hemp in Michigan - The Market for Industrial Hemp in Michigan Due to legal and regulatory changes in the industry, including the 2018 Farm Bill and recent changes in the implementation of Michigan’s 2014 Industrial Hemp Research Act, the information contained in this Article may no longer be accurate. Please contact an attorney before relying on any information contained in this Article. For more information on cultivating hemp, or the Hemp Pilot Program in Michigan, check out our recent article. The market for high-CBD hemp is booming, with certain farmers netting tens of thousands of dollars per acre for high-CBD hemp. In the U.S., much of the country’s hemp is being grown for the CBD or related markets, though cultivating high-CBD hemp outdoors can be a high risk / high reward venture. While the hemp plant is remarkable in its ability to adapt to different climates, good genetics for high-CBD hemp for outdoor growing in Michigan are hard to find, and genetics from other states such as Colorado will likely not do well in Michigan’s climate. Good genetics are not the only obstacle to growing high-CBD hemp in Michigan. High-CBD hemp is also significantly harder to grow than industrial hemp. Many farmers struggle to make the change to growing high-CBD hemp unless they have experience growing tobacco or cannabis. It is not uncommon for these farmers to have most if not all of their initial crop fail, or to underestimate the labor needed to tend and harvest the crop, leaving much of their profits on the field. While high-CBD hemp may not be the best choice for all farmers, especially those who lack experience growing similar crops such as cannabis and tobacco, there are other types of hemp that would make for an easier transition for farmers that are used to the traditional row-cropping farming practices common in the upper-Midwest. While we do anticipate there still being a thriving market for CBD products, the rush of new players will make it increasingly difficult for new companies to carve out a niche in the CBD supplement market. As both new CBD companies and existing blue-chip companies rush to enter the CBD market, we expect the market for CBD-hemp to start to saturate over the next few years, ultimately driving down prices. For these reasons, farmers may want to start exploring other markets for hemp products that are currently being overlooked in the midst of the current “CBD mania.” Given this context, we want to discuss an opportunity that may better suited for some Michigan farmers and processors looking to establish a long-term niche in the Michigan hemp market. While not as lucrative in the short-term as CBD, this market may provide better long-term prospects for both farmers and aspiring Michigan hemp entrepreneurs. This is the market for industrial hemp and industrial hemp products. Industrial v. High-CBD Hemp It is important to first understand that there are several different sub-types of hemp, which require different genetics and different sets of skills to grow. High-CBD hemp farming is similar to cannabis farming in that it requires a great deal of specialized skill to grow due to the fact that the cultivation and harvesting process does not lend itself well to mechanized agriculture. The hemp flower currently needs to be picked by hand, which is particularly labor intensive. In addition, while there are plenty of CBD hemp strains tailored to climates such as Colorado and California, there is a lack of such strains tailored to Michigan’s climate. As farmers from other states will attest, hemp strains that do well in Colorado do not necessarily do well in other states. The strain of hemp being grown needs to be adapted to local climate conditions in order to achieve good results. This difficult and highly specialized farm is in contrast to industrial hemp production. Industrial hemp production is much more similar to the typical row-crop farming popular in the Midwest. Due to the fact that industrial hemp has been cultivated for several decades in nearby Canada, much of the genetics and production methods already exist for industrial hemp to be grown in Michigan. Industrial hemp is also relatively easier to grow than high-CBD hemp, which may make it better suited for Michigan farmers that lack experience in Cannabis or tobacco farming. The Promise of Industrial Hemp in Michigan The United States has lagged behind other national markets in terms of industrial hemp production and processing. The current leaders in industrial hemp are France and China, the latter of which holds roughly half of all patents related to industrial hemp production. However, Michigan’s combination of large amounts of arable land and its strong industrial and manufacturing base makes it the perfect place for industrial hemp to flourish in the U.S. The most obvious niche within the industrial hemp marketplace that Michigan companies could fill is the use of hemp products in auto parts. European automakers already use hemp derived products in their cars and hemp auto parts have already made their way to the U.S. market. Flexform Technologies in Indiana currently utilizes hemp in the production of certain auto parts. Michigan car and auto part manufacturers have been slow to adopt hemp-based products, mainly due to Michigan’s previous industrial hemp statute that limited hemp production to universities and other research institutions. In addition to auto parts, there are over ten thousand other products that could be made from hemp and sold into the national and international market. These products range from clothes and textiles, food and animal fee, paper products, plastic replacements, and more. With the market for sustainable products growing globally, now is the time for Michigan companies and business persons to start positioning themselves within this fast growing market. The Catch-22 Once the Michigan Department of Agriculture and Rural Development starts granting hemp licenses, the main impediment to Michigan quickly developing its own industrial hemp industry is the lack of available industrial hemp (or “biomass”) for purchase by an industrial processor. Similarly for farmers, the lack of large-scale buyers in the U.S. makes it tough for a farmer to cultivate hemp knowing there is an existing purchase agreement in place. This creates a “catch-22” situation—farmers won’t grow industrial hemp without having a market, and the market will be difficult to start up without having large-scale production at the ready. There are at least two ways to break this potential deadlock. The first would be if a company such as Ford, General Motors, or a large auto-supplier announced that it would need a certain number of tons of industrial hemp by a set time. If this were to be the case, Ford, G.M., or a large auto parts manufacturer, could contract with local farmers to purchase their industrial hemp, thereby breaking free of the catch-22. Another way to break this deadlock would be for smaller farmers to form a Hemp Co-op, which would allow farmers to reach out to suppliers that they otherwise would not be able to identify or transact with on their own. This will also encourage local companies to jump into the market as they will be able to secure sufficient biomass to move their businesses forward. Conclusion The Michigan hemp market is ripe for development, and there is potential for Michigan hemp farmers and entrepreneurs in terms of cultivating and processing hemp for CBD and other cannabinoids as well as cultivating and processing hemp for the industrial market. Michigan, with its strong manufacturing base and large amounts of land under agricultural production, is well suited to lead the nation with respect to industrial hemp production and manufacturing. What is clear though is that if Michigan does not step up to the plate, other state’s will, and Michigan will be left playing catch-up well into the future. https://www.oak-law.com/blog/how-can-i-legally-transport-hemp monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/858f260c-fa31-4953-bedc-830a997cdcbf/unsplash-image-tjX_sniNzgQ.jpg Blog - How Can I Legally Transport Hemp? - Legally Transport Hemp With the passage of the 2018 Farm Bill and the legalization of the commercial hemp market in the United States, you would think that transporting commercial hemp and hemp derived products between states would be a non-issue. This is especially true since the 2018 Farm Bill actually contains a provision guaranteeing the right of hemp farmers and hemp producers to transport hemp across state lines. However, as several transporters have learned the hard way, there are still legal issues with transporting hemp across state lines. This is mostly due to three reasons: 1) court cases have found that the 2018 hemp bill’s protection for interstate transport only applies to hemp grown pursuant to the regulatory scheme created by the 2018 farm bill, 2) inconsistent testing methodologies, and 3) local and state police’s struggle to tell the difference between marijuana and hemp. For police, the struggle is real. High CBD hemp and marijuana are virtually identical in appearance and smell. Even the most experienced marijuana connoisseur will likely not be able to tell the difference, let alone a local police officer whose experience with marijuana is limited. Adding to this problem is that the roadside drug tests that police utilize are binary tests—meaning they simply test for the presence of THC and are not able to distinguish between commercial hemp with a permissible amount of THC (i.e. below 0.3%) and a “hot batch.” Even after the passage of the 2018 farm bill, hemp transporters have been subject to seizures and arrests as they transport commercial hemp across state lines. In certain cases, those involved in the transportation of hemp are facing decades long jail sentences for controlled substance trafficking. In one such case, thousands of pounds of CBD-grade hemp worth approximately $2,000,000.00 was seized and the driver and security guards were arrested in Oklahoma. Fellow McAllister Garfield attorney Frank Robison represents the transporters in that case and has represented clients in many similar cases. He believes these sort of cases “stifle the industry”. 2018 Farm Bill and Inconsistent Testing Methods The interstate transportation provisions protecting the transportation of hemp and hemp derived products only protect hemp grown pursuant to the 2018 Farm Bill. Court cases have found that this excludes all the hemp not grown by a facility licensed by the state’s department of agricultural pursuant to the 2018 Farm Bill, meaning there will still be a gap in terms of the ability of the provision to protect interim hemp transportation. This is why cases like the one described above can still happen even after the passage of the 2018 Farm Bill. Nonetheless, even when transporting hemp grown under the 2018 Farm Bill, there may still be legal issues with respect to interstate hemp transportation. This is due to the inconsistent testing methods used by each state to determine whether hemp contains more than the legally prescribed 0.3% THC—or in industry lingo—is “hot.” As an example, a load of hemp could, on average, test at 0.2% total THC, but if several tests are performed, chances are that not all batches would uniformly test at 0.2%. Instead, some hemp batches would test at 0.1%, some at 0.2%, and some may test at 0.3% or greater. If even just one test finds THC levels above 0.3%, then a state could declare that at least part of the hemp is “marijuana” and therefore subject to that state’s marijuana laws. Unfortunately, there is currently no standard methodology for sampling. That means that until federal rules are released, which could take years, there is no uniform way to determine whether a batch is “hot.” Accordingly, one state could consider a batch of commercial hemp to be compliant under its testing methods, while another state could reach the opposite conclusion. Until there is standard testing methodology, or until courts establish that states must give “full faith and credit” to another state’s testing results and methodology, the issue of inconsistent testing methods will continue to cause problems in the hemp industry. While there are some things you can do to protect yourself when driving hemp across state lines—e.g. choosing your route carefully and having documentation available—this will continue to be a problem until such time as the FDA or the U.S. courts address the testing issue head-on. Planes, Trains and Automobiles While the most common form of transport still appears to be by car or truck, the combination of inconsistent testing and overzealous local police has caused some hemp transporters to utilize other methods of transport. One method of commercial hemp transportation that seems to have caught on recently is trains. Why trains? The answer is simple—a police officer can’t pull over a train. Shipping by train, though potentially more expensive, can solve the problem of overzealous local law enforcement. While we certainly recommend that you still include all the paperwork that you would have when shipping by car or truck, there appears to be significantly less risk of local law enforcement holding up or seizing shipments. For this reason, transporting hemp by train is growing in popularity and was a commonly discussed topic at the 2019 NoCo Hemp conference. In addition to rail or trucking, we will discuss one last shipping method—shipping by mail, either by the U.S. Postal Service or by FedEx or UPS. As you can imagine, USPS will not ship several tons of biomass, though it may still be a viable option when shipping concentrated hemp derived products like CBD tinctures and isolate. To this end, USPS recently came out with the following guidelines to follow for shipping CBD and other hemp-derived cannabinoid products through the postal system: A signed self-certification statement, subject to the False Statements Act (18 U.S.C. § 1001). Statements must be printed on the mailer’s own letterhead, must be signed by the mailer, and must include the text “I certify that all information furnished in this letter and supporting documents are accurate, truthful, and complete. I understand that anyone who furnishes false or misleading information or omits information relating to this certification may be subject to criminal and/or civil penalties, including fines and imprisonment.” The industrial hemp producer possesses a license issued by the Department of Agriculture, for the state where the Post Office/acceptance unit is located, which includes documentation identifying the producer by name and showing the mailer is authorized by the registered producer to market products manufactured by that producer. The industrial hemp, or products produced from industrial hemp, contains a delta-9 THC concentration of not more than 0.3% on a dry weight basis. While these requirements could be considered over-kill, they nonetheless represent a step in the right direction. Previously, CBD companies like Pure Spectrum out of Colorado have fought with the U.S. postal service over shipping CBD products. Now, CBD companies will be able to ship commercial hemp derived products like CBD and CBC without the threat that their shipment could be arbitrarily seized by USPS. Conclusion There are many ways to transport hemp and hemp derived products such as CBD. While the 2018 Farm Bill does provide protection for transporting hemp and CBD across state lines, there are still risks and additional costs associated with transporting hemp and hemp products across state lines. As a Michigan hemp attorney, I would recommend that commercial hemp transporters give careful thought into how they plan on transporting hemp, especially in the interim period before the 2018 Farm Bill’s protection take effect. https://www.oak-law.com/blog/michigan-cannabis-business monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7d37a782-e294-497e-a132-1d9028210261/unsplash-image-6Y6OnwBKk-o.jpg Blog - Michigan Marijuana Industry Financing Options - Financing Options One of the major hurdles for Michigan cannabis business owners is finding financing for their medical and recreational marijuana projects. Due to the fact that marijuana is considered a controlled substance under the Controlled Substances Act, traditional bank and credit union financing is not available to plant-touching cannabis businesses. While it is certainly more difficult to obtain financing for your cannabis company, it is not impossible. As Michigan Cannabis Attorneys, we work with cannabis investors as well as cannabis lending brokers who are able to connect Michigan marijuana companies with private lenders. Below we will outline options for Michigan cannabis companies looking to raise capital for their marijuana facilities. Debt Financing Contrary to popular belief, debt financing is available in the cannabis industry, though lenders are few and far between. As cannabis business attorneys, we work with two cannabis industry lending brokers that connect private lenders with cannabis companies. Each lending broker has his own network of private individuals, hedge funds, and non-bank capital companies they work with to secure debt funding for marijuana businesses. While debt financing is available, the terms are usually much less favorable compared to traditional bank lending. The reason is simple—there are lots of cannabis companies looking for financing, and not that many individuals and entities looking to lend to them. Add in the additional legal risk arising from the fact that marijuana is still a controlled substance under federal law, and the result is lending on terms that are much less favorable then traditional business loans. When evaluating financing opportunities, lenders are focused on three main items. The first is hard assets, which can be assets owned by the company—such as real estate or equipment—or assets owned by one of the owners that is put up as collateral. These assets are then used to secure the loan through the use of mortgages for real property or the UCC for personal property such as equipment. In the cannabis space, lenders generally don’t go beyond 60% “loan to value”. This means they will not lend more than 60% of the value of the assets securing the loan. Just as important as hard assets is cash flow, which can represent a catch-22 for start-up cannabis businesses looking for a loan. A business may not be able to achieve cash flow without financing, but cannot obtain financing without cash flow. While it is certainly possible to obtain financing without securing the loan with such cash flow, it does become more difficult. Most lenders will not allow owners to use income derived from their jobs as cash flow as it’s assumed that they will leave their jobs to run the business. Instead, they are looking for non-employment sources of cash flow, either from the company’s revenue or from other sources, such as real estate income. Finally, the last major factor cannabis lenders look for is operating experience and management expertise. Cannabis companies are often risky ventures—with high reward often comes high risk. This risk is compounded if a company’s owners and management team are not familiar with the cannabis industry. Put simply, cannabis lenders want to see industry experience, as well as a track record of success. Companies that are able to show both of these may be able to overcome shortcomings in other aspects of their loan, such as insufficient cash flow or a lack of sufficient hard assets to lend against. Equity Financing As discussed in more detail in our previous article, Five Keys for Michigan Companies Seeking Cannabis Investors, equity financing is available in the cannabis industry. While we have a network of potential Michigan based investors, in our experience, clients who raise money from friends and family are almost always able to get better terms than our investor networks. If this is available to you, friends and family are likely to offer the best investing terms for your cannabis business. The reason is simple—friends and family know who you are, and if they are willing to lend you money, it usually means they trust you. The “trust factor” is often the greatest hurdle cannabis companies need to overcome when seeking out equity financing for their cannabis company. Absent raising money from friends and family, there are a few options available to start-up cannabis companies. One option is to identify a partner, as opposed to a mere investor. The different between a partner and an investor is not always clear cut, but the gist of it is that a partner is involved in the business beyond just a mere investment, whereas an investor would simply invest money in your marijuana business without being actively involved in the operations of your business. The advantage to adding partners is that you get more than just additional financing—you get help in launching your cannabis business. The downside, of course, is that a partner will usually want more equity than an investor, since a partner is investing both time and money into your business. Another option is to put together a solid pitch deck and take your show on the road. We have had clients raise millions of dollars from investors based on the strength of their pitch deck and investment presentation. When creating a pitch deck and investor presentation, sometimes less is more. You will want to provide an investor with the basics of the investment opportunity, as well as information on the projected rate of return. Here, it is important that you will be able to defend the assumptions underlying your projections and not paint too rosy of a picture. I’ve seen clients project $50 million in profits within the first year based on overly-optimistic assumptions regarding the wholesale price of marijuana as well as their cost factors in running their marijuana facility. While seemingly counter-intuitive, nothing scares away investors faster than sky high profit projections and returns on capital. Too rosy of a projection will lose potential investors trust, which will in turn make it a virtual impossibility that they will invest money with you. Instead, you will need to be realistic in your revenue and project projections and explain the assumptions you used when calculating your return on capital. Conclusion As a cannabis company, there are two main avenues to raise money—debt and equity financing. Individuals and entities willing to lend money to cannabis businesses are few and far between. For debt financing, single digit interest rates are exceedingly rare, and the terms are often incredibly unfavorable compared to traditional bank financing. While this could change if the SAFE Banking Act is passed, for the time being banks and credit unions will not lend to the Cannabis industry, leaving companies to chase after a handful of private lenders. In contrast to private lending, more individuals are willing to invest in cannabis companies than are willing to engage in pure debt transactions. While friends and family will likely offer you the best terms, you may be able to raise financing on favorable terms with a combination of a well-crafted pitch deck and being in front of the right cannabis investor. https://www.oak-law.com/blog/michigan-provisioning-centers-tips-making-customers-feel-safe monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/34f6db29-ae75-4043-867b-f657be8e1f52/unsplash-image-4pZu15OeTXA.jpg Blog - Michigan Provisioning Centers Tips: Making Customers Feel Safe - Making Customers Feel Safe Recent polling data shows that Americans and Canadians alike are incredibly concerned about the safety of their medical and recreational marijuana purchases. With local news articles highlighting any crime that occurs at or near any cannabis businesses, and the slew of recalls announced on a near-weekly basis by Michigan’s licensing department, safety remains a significant factor in determining how the modern marijuana patient chooses their dispensary. Providing a feeling of security to your clientele can be difficult as the industry grows and changes so rapidly, but the payoff can be a loyal customer base and a better experience for everyone involved. Michigan differs from many other states that have entered the legalization process, such as Colorado and Oregon. It can take a little more to make a client feel safe in Detroit than it might in other markets, but many concepts are still the same. Below we have outlined some ideas for Michigan provisioning center owners to improve their customer experience and keep clients coming back again and again. These ideas are based off our knowledge of the cannabis industry, including Ms. Pennington’s experience working in Oregon dispensaries. Parking Lot Your dispensary storefront and your parking lot are the first things that a potential customer sees when considering your provisioning center. Putting time and care into seeing that your lot looks clean, well-tended and secure is an intelligent investment into your dispensary. Customers care about first impressions; if they see loiterers around your business, if the lot is dotted with potholes and trash, or if they suspect that they or their car might be otherwise unsafe, potential customers are likely to never walk through your dispensary’s door. Cameras and Security Guards While required by the MMFLA, and likely the MRTMA as well, camera surveillance makes a lot of people uncomfortable, especially in the Cannabis industry. Thanks to years of stigma from criminalization, many customers understandably do not want to be on camera while making their purchases. Cameras inside of a provisioning center often feel impersonal, while those on the outside, especially those watching the parking lot, add to a feeling of safety. We therefore recommend that your outdoor cameras be as conspicuous as possible—you want your customers to know that their vehicle is being monitored. In contrast, your indoor cameras should be more inconspicuous—you do not want your customers to feel like “big brother” is watching them buy their medical marijuana. The presence of a security guard can also cause customers to feel safe at your provisioning center, especially one in uniform with an easily visible security badge. While far from acting as a guarantee of safety, they do make an invaluable addition to any Michigan dispensary’s team. Not only can a security guard help to usher patients in and out of waiting areas and monitor your parking lot, but they also provide a way for everyone, including the rest of your staff, to feel a greater sense of security from any problems coming in from the street. ATMs While it may seem rather straightforward to have an ATM, it is important to recognize their influence upon the appearance of safety at your dispensary. Marijuana provisioning remains a mostly cash-only business for now, and as such, your customers know that anyone seeing them walk into a dispensary can reasonably assume they are carrying cash on them. As dispensary purchases can often exceed a hundred dollars at a time, many patients do not want to arrive with that much cash in their pockets. Providing an ATM service with reasonable fees to your clientele offers them the opportunity to spend more money and feel a greater sense of safety while doing so. While it may be tempting to charge big ATM fees, this could cause customers to feel “ripped off”, even if they are getting a good deal on their marijuana purchase. Facility Safety Making a customer feel safe doesn’t end once you’ve gotten them in the door. Customers notice your safety precautions. Erring too far on the side of caution can result in an impersonal experience. Today’s cannabis consumer wants to feel welcomed at their provisioning center; putting too many layers of glass and steel between them and you creates an atmosphere that causes many patients to feel uncomfortable and unsafe. There is a careful balance to be struck between seeming too casual and being too careful. Too many security barriers may make your customers feels insecure, whereas not enough security measures will do the same. Put simply, do not sacrifice all warmth and personality in the name of security. Should your provisioning center be in a high-risk area, know that most security breaches happen after a store has closed. You would be better off investing in a good safe as well as reinforced exterior walls and roofs—a favorite entry point for dispensary burglars—rather than layers upon layers of bullet proof glass. Product Testing and Certifications Many customers are willing to pay higher prices if their product is thoroughly tested and the results are easily accessible to them. Customers want to know the THC and CBD ranges of the products they are buying before they make their purchase. Opting in to a higher level of product testing as well as making the results easily accessible to customers prior to their purchase can increase customer satisfaction and make patients more likely to return to your provisioning center. In addition to testing, having product certifications can also help reassure your customers that the products being sold are safe. Products in the cannabis industry come in a far greater range than flower alone. Many customers are interested in trying these newer forms of product, but they may have fears or reservations about the process in which their cannabis product was created. One thing that many customers find great comfort in is organic labeling on their products, and there are several companies that provide such certification for the cannabis industry. Even though your customers may not have the time to understand exactly how a product was produced, they still want to feel like they know what they’re buying, and organic labelling and other similar certifications can help in this regard. What is important to the customer is that they can feel like your products are safe for them to buy. Articles are published nearly every day on the unsafe elements found in untrustworthy cannabis products. Certain Michigan cannabis brands have started to develop a reputation for unsafe testing results. By avoiding these problem brands, and instead carrying product with clear labeling and transparent testing results, dispensary owners can vastly increase their patients’ feelings of safety and security when they purchase cannabis products. Conclusion Security in the marijuana industry is not a given. When patients discuss with each other where to go for their medical marijuana, they don’t always talk about prices. They also discuss whether a dispensary is “safe”, in terms of both the facility’s safety as well as the products being sold. If your customers feel safe in your provisioning center, they will be much more likely to return in the future. Thus, creating a feeling of safety as well as investing in the security of your product lines, your staff and your customers can increase repeat business, which will in turn drive your bottom line. https://www.oak-law.com/blog/gifting-marijuana-clever-or-criminal monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1e2ddb13-4150-4d20-8f3b-7e1211712b3c/unsplash-image-u5iuO_DQYm4.jpg Blog - Gifting Marijuana: Clever or Criminal? - Clever or Criminal? In November, Michigan voters approved a proposal to legalize recreational marijuana called the Michigan Regulation and Taxation of Marihuana Act, or the MRTMA. However, the state has yet to create the laws and infrastructure to allow businesses to sell recreational Cannabis in Michigan. It will likely take at least several months, if not a year, for the state to finalize procedures that will make recreational marijuana commercially available. So, for the time being, how can people who are not medical marijuana patients legally get their hands on marijuana? One intriguing method has emerged: “gifting” marijuana. Various small businesses are taking advantage of what they see as a loophole in the law. The idea is that these companies will sell you products (t-shirts, chocolate, snack boxes, etc.) and include a free “gift” of marijuana with the purchase. That way, the company can claim that they are not technically selling you marijuana; they’re selling you a t-shirt, and the marijuana is simply a generous gift from the company free of charge. Some of you may be thinking, “How is that legal?” Take a look at section 5.1 of the MRTMA. It says, [T]he following acts by a person 21 years of age or older are not unlawful…. (d) giving away or otherwise transferring without remuneration up to 2.5 ounces of marihuana, except that not more than 15 grams of marihuana may be in the form of marihuana concentrate, to a person 21 years of age or older, as long as the transfer is not advertised or promoted to the public. So, it may be the case that savvy entrepreneurs are reaping the benefits of a gray area in Michigan’s marijuana laws. Or, are these companies taking a legal risk? Many marijuana business attorneys, including the Cannabis attorneys at our firm, think these companies are flying in the face of the law’s intent, which is to allow the giving of marijuana from one person to another without an exchange of something of value. But when there is an exchange of money followed by an exchange of marijuana, is that really a gift, or to put it in legalese, does that constitute “remuneration”? And, if you think it is, are you willing to risk criminal prosecution for that interpretation? The Wayne County sheriff has weighed in on this issue, saying he believes the law is clear and that you cannot distribute marijuana without a license, period. Should a problem arise, the Sheriff would work with the county’s Prosecutors and address the issue. But so far, no problems have come up. So, where does this leave us? Looking to Other Laws “Remuneration” is not a word used very often by most people, but it is used in other statutory schemes, healthcare being one such example. Federal healthcare laws provide the following definition of remuneration: “any payment, discount, forgiveness of debt or other benefits made directly or indirectly, overtly, in cash or in kind.” Under this definition, it would seem rather clear that the “gifting” of marijuana after the purchase of another item would be an indirect benefit of purchasing the item, and therefore considered remuneration under the MRTMA. Thus, these sorts of transactions would not be permitted by the MRTMA, and would therefore be considered illegal. Looking to Other States To get a clearer understanding of this issue, it may be wise to look at how other states have encountered the gifting dilemma and how courts have interpreted similar provisions in federal healthcare laws. Cannabis gifting provisions are on the books in almost every state that has legalized marijuana: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington state, plus D.C. Most instituted the measure specifically as part of their new recreational marijuana program. In Colorado, where recreational businesses have been operating since 2014, more than 15 gifting businesses were shut down by law enforcement in 2017 alone. In Vermont, the state’s top prosecutor issued guidance that said gifting marijuana in exchange for another purchase is illegal. A senator from Maine had a similar take on the issue, saying “Under any fair reading of the law, these businesses are illegal.” However, there are virtually no accounts of these businesses facing criminal charges. A highly publicized case in Massachusetts in which marijuana distribution charges were brought against a store owner who gifted marijuana to her customers was dismissed, but charges can be filed at a later time. Most states have tried to stem abuse of the laws by prohibiting businesses from advertising marijuana giveaways. However, businesses find ways to obscure what they’re doing and rely largely on word of mouth to make sales. Customers can infer how much marijuana they’re ordering judging by the price and size of the items advertised. If a Tree Falls in a Forest… So, can these businesses gift pot or not? From a strictly technical legal perspective, probably not. However, as the cases above indicate, just because something is technically illegal doesn’t mean that there will be any consequences for those that violate the law. It’s technically illegal to drive a couple miles per hour over the speed limit, but the risks of doing so are rather minimal. There is an well-known adage that is particularly popular in the legal community that we believe can be used to sum up the legal status of gifting marijuana as part of another transaction. As the saying goes, “if a tree falls in a forest and no one is around to hear it, does it make a sound?” In other words, whether this type of gifting is technically legal may not be the right question to ask. The real question is whether there is a Michigan governmental entity willing to enforce the law. The Michigan State Police and Attorney General have yet to publicly weigh in on this issue, and to our knowledge, have yet to take any sort of action against entities gifting marijuana along with the purchase of an unrelated item. The Wayne County Sherriff, as noted above, has weighed in to say that it’s not permitted, but as of yet has not taken any action to back this up. While you could certainly say that’s because they haven’t “caught” anyone engaging in these transactions, there has been at least a few companies who have openly sought to engage in these sorts of transactions. Three companies—High Road LLC, Smoke’s Chocolate LLC, and CannaMich have all publicly stated that they intend to offer a “free” gift of marijuana with the purchase of one of their products. It appears that these companies are mostly limiting their activities to Wayne and Washtenaw counties—counties that have historically taken a more Cannabis friendly approach to enforcement of state marijuana laws. To date, no enforcement action has been taken against any of these three companies. Until state regulators officially weigh in on the issue, or the legislation changes, some businesses will likely continue to operate in the gray area of the law despite the risk of being shut down or potentially facing criminal action. The risks of engaging in these types of activities will likely depend on the willingness of municipalities and counties to take enforcement actions, and not all municipalities and counties will approach this issue the same way. Some are very Cannabis friendly, like Washtenaw County, and some simply have more pressing issues to deal with than gifting small amounts of cannabis, like Wayne County. Other counties that have historically taken less than friendly approaches to marijuana issues—such as Oakland County—may see things differently. So what’s the bottom line? As Cannabis Business attorneys we believe it’s still technically illegal. However, the risks of gifting marijuana as described are likely related more to where you set up shop than anything else, including the technical legal status of gifting marijuana under the MRTMA. https://www.oak-law.com/blog/cannabis-business-selecting-the-best-corporate-structure monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/7dbc64b3-60bd-4808-b73a-c85998369c1c/unsplash-image-9ZWtkOCMxbM.jpg Blog - Cannabis Business: Selecting the Best Corporate Structure - Selecting the Best Corporate Structure After deciding to start a Michigan Cannabis business, one of the crucial next steps is choosing the right corporate structure for your business. To make this decision, it’s important to consider your business strategy, the complexity of creating and maintaining a particular corporate structure, and the tax implications of that structure. Choosing between a C-Corporation, S-Corporation or Limited Liability Company (LLC) should be done on a case-by=case basis because each business entity type is unique and this decision should be tailored to your specific situation. Before we discuss the different entities, we want to clarify a commonly misunderstood distinction when it comes to discussing entity types. An entity can be both a limited liability company and a corporation—it just depends on the lens through which you view it. There are two ways to look at an entity when it comes to corporate structure—the entity for purposes of taxation, and the entity for purposes of state law. To use my own law firm as an example, I am a limited liability company for purposes of state law, which is why there is a “PLC” at the end of my company’s name. The “PLC” stands for professional limited liability company. Being an LLC allows for greater flexibility when it comes to the internal management of the company. However, I am an S-Corp for federal and state tax purposes, which allows me to avoid the entity level taxation that applies to C-Corporations. In this way, my firm is both a LLC and corporation, it just depends on how you look at it. When it comes to deciding whether to choose an LLC or corporation for state law purposes, one of the key factors to look at is how many owners there will be and whether the company plans on bringing on additional investors. The advantage of the LLC is that is allows for maximum operational flexibility—you can specify how you want specific decisions to be made and who is able to make them. For example, it is common to have a manager or managing member that runs the day-to-day operations of a Cannabis business, while also reserving bigger decisions to a majority or super-majority of the members—e.g. deciding to purchase real estate, or making a purchase greater than a set dollar amount. In contrast, a corporation’s internal structure is relatively rigid. The shareholders elect board members, who in turn appoint officers to handle the day-to-day decision making. This structure doesn’t allow the owners to easily carve out certain decisions, nor does it allow for more nuanced governing structures. The advantage of this structure, however, is that it makes it much easier to bring on investors as well as agree upon an internal operating structure. A company with 20 owners may find it hard for everyone to agree on the operating agreement structure. Alternatively, a corporation, with its mostly set-in-stone structure, generally doesn’t usually have this problem. Typically, smaller Cannabis companies choose the LLC structure, whereas larger companies with more owners elect corporations. However, regardless of the state-level entity type they choose, most Michigan cannabis operating companies fall into one of two tax categories: S-Corp and C-Corp. The main exception to this rule is that the underlying real estate is generally held by a partnership-taxed LLC. While we always suggest that clients first consult with a qualified Cannabis industry accountant prior to choosing their taxation status, we have outlined the general features and tax implications for these two taxation categories: C-Corporations: When a corporation is originally chartered by the state Michigan, it exists as a C-Corporation. If you do nothing more after forming your Michigan corporation, it will remain a C-Corporation. Unlike “pass-through entities”, a c-corporation has a distinct legal and tax life separate from its shareholders. The main drawback of being a C-Corporation is what is commonly referred to as “double taxation.” This means that there is both an entity-level tax paid by the company as well as an individual-level tax on salaries and dividends paid to the owners. Shareholders do not report any business income or expense on their individual tax return. The corporation files tax returns and pays its income taxes while the individual shareholders report and pay personal income taxes solely on money paid to them by the corporation. However, Shareholders are required to pay income taxes on salaries and dividends paid by a C-Corporation even though income taxes have already been paid at the corporation level. In sum, Michigan C-Corporations best serve owners who want limited liability, a more formal business structure, and the ability to accumulate assets in the business. The other main advantage of C-Corporations, which also is its main disadvantage, is that the profits and losses of your cannabis company do not “pass-through” to the individual owners. Why Your Provisioning Center Should Probably be a C-Corp Provisioning centers are generally better off as C-Corporations because of the specific tax treatment cannabis dispensaries encounter. Section 280E of the federal tax codes mandates that legal cannabis companies may deduct only the cost of goods sold (COGS). Put simply, COGS are the expenses associated with the production of a product. Thus, costs associated with distribution, sale, administration, management, promotion, advertisement, overhead and support are not allowable deductions for provisioning centers under 280E. These include rent, shipping, most employee expenditures, most contractor expenses, legal, management, accounting, overhead, and compliance costs, to name a few. For most provisioning centers, costs that do not fall into COGS comprise a large percentage of the overall costs of the organization, leading to effective tax rates as high as 70%. It is therefore possible, and surprisingly common, for a provisioning center to both be profitable on paper and lose money once they tax bill is due. Since taxes are calculated based on a simple formula—revenue received minus cost of goods sold—you could make money for purposes of the IRS, but in actuality lose money since you still have to pay your employees, rent, etc. in addition to a substantial tax bill. You therefore run the risk of your seemingly profitable business losing money once taxes are paid to the IRS. It is also not entirely uncommon for an audit to result in a large tax bill or penalty, which if you are a pass-through entity, gets imputed onto the owners. Because a C-Corporation has its own distinct tax life, these tax bills stay with the entity and are not imputed onto the company’s owners, protecting them from substantial tax losses. Knowing this, individuals can avoid the potential tax liability that comes with operating provisioning centers in Michigan by choosing a C-Corporation structure. That way, if an audit reveals a huge tax bill or your company simply does not make money after its taxes, the tax bill does not pass-through to the individual owners. S-Corporations: An S-Corporation begins its life as a C-Corporation. To become an S-Corporation, IRS Form 2553 must be filed with the Internal Revenue Service. Like C-corporations, an S-Corporation is recognized by the law as an individual entity, separate from its shareholders. Unlike C-Corporations, a Michigan S-Corporation does not itself pay any income taxes. Instead, the company’s income, and thus the taxes owed by the company, “passes through” or “flows through” to the owners. While an S-Corporation with more than one shareholder does file tax returns, the individual shareholders must include their share of the corporation’s income or loss on their personal tax returns. Thus, the fact that income and loss and the taxes associated with it flows through to the individual owners can also be a big disadvantage as the shareholders cannot simply “roll up” the company if they are hit with a tax bill they are unable to pay. Instead, each of the company’s owners is stuck with their pro rata portion of the tax bill. Why Your Grow / Process Entities are Typically S-Corps We explained why provisioning centers should be organized as C-Corporations—most of their deductible COGS are not related to the cost of production, which opens up the company to potentially devasting tax liability. This is not the case for other cannabis businesses—the production of products is what MMFLA licensed growers and processors are all about. In contrast to provisioning centers, grow and processor entities can reap the benefits of a more favorable tax rate under 280E. They are able to deduct most employee labor costs, rent, and most other costs associated with production. These entities are therefore much less likely to be hit with a huge tax bill since they are taxed similar to other non-Cannabis businesses (with some notable exceptions). Thus, the owners of a licensed grower or processor entity end up paying less tax on their profits compared to C-Corporations due to the fact that S-Corps allow flow through taxation, meaning they are not “double taxed” like C-Corps. Conclusion This article broadly touched on the factors and considerations owners of a Michigan cannabis business should consider when deciding what type of entity to choose for the licensed marijuana business. While we do help clients choose between LLC’s and corporations, we always recommend clients and potential clients discuss tax election issues with a qualified Cannabis industry certified public account prior to making the final decisions with respect to deciding how you want your entity to be taxed. Our cannabis business law firm works closely with a number of industry accountants, which we are happy to refer our clients to. https://www.oak-law.com/blog/new-year-new-amendments-to-the-mmfla monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1a76656c-9ce6-44dd-9fed-7ddb3878028c/unsplash-image-dbpLrMALyiM.jpg Blog - New Year, New Amendments to the MMFLA - New Year, New Amendments As one of his final moves in office, former Governor Rick Snyder signed a bill that amended sections of the MMFLA. The amendments were signed on December 28th and took effect on January 1st. The Senate Bills 1262 and 1263 effect specifically the application process of the MMFLA. In as broad a sense as possible these bills make the licensing process more practical for entities, companies, and corporations that have multiple members. Please hold your applause until the end—it’s not all good news. This article will explain the most important amendments coming from 1262 and 1263 respectively, as well as how those changes effect the current application process. Whether or not the amendments actually make the process easier, and any other important information you should know about these changes, will also be addressed. SB 1262 Under SB 1262 amendments are being made to parts of the MMFLA application process that concern other ownership interests in the licensee. As you probably already know, under the previous MMFLA rules anyone who held even a 1% interest in a licensee or potential licensee needed to be put through the same process as any other applicant. In addition, anyone with an indirect profit interest—e.g. giving an employee 2% of profits as part of a profit-sharing program—would make that employee a “true party of interest.” As we had previously written about, the term “true party of interest” was ambiguously defined, which gave LARA a great deal of leeway in deciding who would or would not be considered a true party of interest. Prior to the enactment of SB1262, any person or company considered to be a “true parties of interest” had to be included on the MMFLA application. However, the fun did not end there. In addition to being listed on that page of the applicaiton, a “true party of interest” was also required to have their own full supplemental application filled out. Also, if that “party of interest” had a spouse, their spouse needed a full application as well. You can see how this could get out of hand rather quickly. SB 1262 removes the entire “true party of interest” section from the license application. Instead of having a section that requires disclosure of all people who hold any direct or indirect interest in your company, SB 1262 defines exactly who needs to be disclosed in the application process. The specific language used in SB 1262 requires those who have a more substantial ownership interest in your company. You might be thinking, what does substantial interest mean? It means managerial employees of the applicant and persons holding an indirect or direct ownership interest in the applicant of at least 10%. For other ownership arrangements like partnerships, LLC’s, etc., a person is not considered an applicant unless they hold a stake of at least 10% in the company or exercise control over or participate in the management of the business. Another interesting change spurred by SB 1262 is the changes governing transfer of ownership requirements. Under the previous rules any transfer in ownership of a license required Board approval from the Medical Marijuana Licensing Board. SB 1262 changes that rule to only require Board approval when the transfer would result in an equity change of 10% or more. This change will likely help both smaller start-up entities and larger national companies when it comes to Michigan licensing This change will help smaller Michigan cannabis companies more easily attract outside investors to their project. As cannabis business attorneys, we have seen many an investor balk at having to go through the supplemental application process. This is especially true for wealthier individuals and business owners due to the sheer amount of financial information being requested by LARA for MMFLA applications. The current work-around—convertible instruments—simply does not provide the certainty that many investors are looking for with respect to their investment. Put another way, investors do not want their equity stake to be contingent upon the whims of the seemingly arbitrary decisions of the licensing board. As Calvin Johnson’s example illustrates, everyone before the licensing board is one out-of-state traffic ticket away from denial. Conversely, this change opens up the Michigan cannabis market to large, publicly traded cannabis companies such as Canopy or Aurora, as well as private companies with private equity investors. The MMFLA’s previous transfer rule, which required any transfer of ownership be reported to LARA, and the 1% rule requiring any owner of 1% or more of ownership to submit a supplemental application, made it virtually impossible for public companies to enter the Michigan market. It also made it difficult for private companies with substantial private equity backing. With this rule change, public companies are able to enter the Michigan cannabis market. While that may not seem like positive news to most Michigan cannabis companies, there is one silver lining—Michigan-based cannabis companies will be able to take their company public. SB 1262 also officially makes the change of definition for industrial hemp and removes it from the definition of marijuana. This is not a surprising move at all as the 2018 Farm Bill, which became effective January 1, 2019, and provides a path for legal commercial hemp production in the U.S.. Although it is not surprising, it is nonetheless a welcome sight and could mean further changes and amendments to hemp licensure in the state. SB 1262 also revamps the criminal punishments for operating a marijuana facility without a license. The criminal guidelines will include for first time violators a $10,000 fine and $25,000 and/or 93 days imprisonment. The first-time violation will also be considered a misdemeanor. Subsequent violations could be punished with up to a year in prison, in some instances that result in serious injury or death up to four years. SB 1263 SB 1263 does little more than to actually update the criminal code to reflect the new punishments for the above listed crimes. Since the above listed criminal punishments do not “go live” until June 1, 2019, some have read this new law to allow unlicensed operation until this date. As cannabis attorneys, we believe that is incorrect as the law currently does not allow the operation of an unlicensed marijuana facility, notwithstanding certain communities condoning otherwise illegal caregiver centers. These bills simply make the punishments steeper. Additionally, LARA has stated previously that the operation of an unlicensed facility will be considered an impediment to any future marijuana license application…in short, don’t do it! HB 6422 I know what you are thinking, we never mentioned a third bill. Consider this a bonus and one you will want to pay specific attention to going forward. It has a lot to do with our previous article on banking in the marijuana industry. HB 6422 would amend the Marijuana Tracking Act to allow a person licensed under the MMFLA to authorize LARA to disclose that licensee’s information and data to financial institutions identified by the licensee. This is an important development because your information as a licensee will be taken from statewide tracking software and will be verified. This will help financial institutions implement their specific cannabis banking compliance programs, thereby making their jobs a little bit easier. This may allow for banking in the industry to flourish a lot quicker than previously assumed. TAKE AWAY SB 1262 by far is the big change here. Licensing in the state seems to be heading in a much more favorable direction. This could be a result of the coming change to recreational licensing, or more likely simply the fruits of an effective lobbying campaign by a combination of larger cannabis companies seeking to enter into the Michigan market and Michigan cannabis companies eyeing an initial public offering. Either way, this amendment does help the industry move forward as it helps streamline investing in licensed entities and provides investors additional certainty that they can own a piece of the entity that are investing in. However, it does effectively kill Michigan’s Mom and Pop marijuana market. https://www.oak-law.com/blog/marijuana-licensing monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/a2fdfdb8-d9f3-4551-ab2d-c1b3324ab07f/unsplash-image-3q4V539j_bw.jpg Blog - Overview of Medical Marijuana Licensing - Medical Marijuana Licensing If you are looking to enter the Michigan cannabis industry, the first step will likely be to apply for a medical marijuana license. Except for microbusiness licenses and 100 plants recreational marijuana grow licenses, all Michigan recreational cannabis licenses first require that you obtain a Michigan medical marijuana license first. Below is an overview of the Michigan medical marijuana licensing process. Where do I apply for a license? The Department of Licensing and Regulatory Affairs accepts license applications in person at 2407 N Grand River Ave. Lansing, MI. However, most applicants apply What license types were created? Grower Class A - Grower license for 500 marijuana plants Grower Class B - Grower license for 1,000 marijuana plants Grower Class C - Grower license for 1,500 marijuana plants Processor - License authorizes purchase of marijuana from a grower and sale of infused-products or marijuana to a provisioning center. Secured Transporter - License authorizes storage and transportation of marijuana and associated money between facilities. Provisioning Center - Licensee can sell marijuana to a qualified patient or primary caregiver. Safety Compliance Facility - License authorizes the facility to receive marijuana from, test marijuana for, and return marijuana to only a marijuana facility What are the fees for licenses? The initial costs of a license at the state level include the application fee, which is paid when you submit your application, as well as the regulatory assessment, which is paid immediately prior to receiving your license. Additional costs at the state level are authorized under the Medical marijuana Facilities Licensing Act (MMFLA) and may be required but have rarely if ever been applied to applicants. An applicant may also need to pay a fee to its municipality of up to $5000. State License Application Fee: The application fee is non-refundable and offsets the cost for LARA, the Michigan State Police (MSP), and/or contract costs for investigative services for conducting the background investigation of those applying for licenses. The nonrefundable application fee, which must be submitted before an application will be processed, will be $6000. State Additional Costs: If required, the applicant may need to pay additional costs. The MMFLA authorizes the following: Late renewal fees as established by rule (Sec. 402(11)) 3% tax on each provisioning center’s gross retail receipts (Sec. 601(1)) Actual costs of investigation and processing that exceed the application fee paid by an applicant (Sec. 401(5)) Is the state going to limit the number of licenses issued? No. However, the local municipality has the authorization under MMFLA to restrict or limit the type and number of facilities licensed in their boundaries. Requirements: Entity/Individual Prequalification Documents Completed Application Copy of Applicant’s Gov’t Issued ID Application Fee Applicant’s Passport Quality Photograph Attestations A – Applicant’s Acknowledgment, Agreement, & Consent (notarized) B – Applicant’s Authorization to Release Information (notarized) C – Applicant’s Verification & Affidavit of Full Disclosure (notarized) D – Attestation & Disclosure of Submitter, if applicable (notarized) E – Temporary Operation Attestation, if applicable (notarized) F – Acknowledgment of Federal Law & Waiver (notarized) Entity Information DISCLOSURE 1 – Entity Information Official Registration Document (e.g., Articles of Incorporation) Copy of Bylaws or Other Governing Documents Certificate of Good Standing Approval to Conduct Business Transactions in Michigan Trademark/Insignia Documents (if applicable) Copy of Organizational Structure (if applicable Authorizing Resolution (if applicable) Certificate of Assumed Name (if applicable) Ownership Interest DISCLOSURE 2A – Ownership Interests DISCLOSURE 2B – Ownership Interests Public Officials DISCLOSURE 2C – True Party of Interest DISCLOSURE 2D – marijuana Entity Ownership Interests DISCLOSURE 2E – Other Interests Financial DISCLOSURE 3A – Financial Information DISCLOSURE 3B – Real Property Ownership DISCLOSURE 4 – Debt, Insolvency, or Bankruptcy Actions DISCLOSURE 5 – Tax & Tax Compliance CPA Attested Financial Statement Documenting Capitalization Copy of Financial Institution Statements for Past 3 years Income Tax Returns for Past 3 years W2s and/or 1099s For Past 3 years Copy of Documents Related to Property Ownership or Use Copy of Notice of Tax Liability Due (if applicable) Copy of Debt, Insolvency, Bankruptcy Order (if applicable) Regulation DISCLOSURE 6 – Governmental Regulation Copy of Any Other Commercial Licenses (if applicable) Copy of Any Comparable License from Other Jurisdictions Criminal History DISCLOSURE 7 – Criminal History Evidence of Charge/Dismissal/Conviction/Expungement (if applicable) Copy of Parole or Probation Information (if applicable) Litigation DISCLOSURE 8 – Litigation History https://www.oak-law.com/blog/lara-update-new-safety-compliance-testing-guidelines monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/8d6aeab9-c192-4132-aa83-295f8b3469fa/unsplash-image-XLhDvfz0sUM.jpg Blog - LARA Update: New Safety Compliance Testing Guidelines - Safety Compliance Testing Guidelines LARA recently released new guidelines for safety and compliance testing of marijuana and marijuana infused products. The first thing that jumped off the page in our reading is LARA’s designating this document as a living document. This means that these guidelines can, and likely will, be updated by LARA as the Medical Marijuana program continues to be developed. This article will be a brief summary of the new regulations and the procedures associated with the recently published LARA guidelines. LARA has broken down each type of testing procedure for different marijuana products and the accepted methods for testing. The testing categories include the following: Microbial Pathogens and Total Yeast and Mold, Residual Solvent Testing, Pesticide Residue Testing, Potency Determination, Validation Guidelines, and; Sampling Guidelines. The testing methods for each type of procedure is included in the document with a link to the specific method identified. For the sake of keeping this article brief, we will not get into the specifics of what each testing method entails (4-6 methods per testing procedure). We will, however, list the most prevalent sources for accepted testing methods. For the above listed testing procedures that involve testing impurities in marijuana, acceptable methods for testing are coming from the Association of Analytical Communities (AOAC), Food and Drug Administration (FDA), International Standards Organization (ISO), and U.S Department of Agriculture (USDA). For contaminants in marijuana, LARA seems to be approaching the solution as it would approach preventing contaminated food from spreading. The guidelines do not require testing companies to use all the applicable methods in their testing. However, safety compliance testing centers will be required to use one of the accepted methods, which includes the applicable controls. For testing of materials, LARA’s focus is on error prevention and pharmaceutical level regulation. The applicable testing methods are coming from the American Society for Testing Materials (ASTM), Environmental Protection Agency (EPA), RESTEK Solvent Method, and U.S Pharmacopeia (USP). These methods tell us that in addition to the testing being regulated more so like traditional instrument testing materials in the pharmaceutical industry, LARA wants to minimize risk of outside contamination from products used in the testing process. Potency testing gets a bit tricky. Specifically, LARA has required certain methods but also states that they have not been validated to the level of a standard method like the ones above. For this reason, it is likely that this is the segment of LARA’s cannabis testing guidelines most likely to “evolve” with time. This also means potency could be a problem area for testing facilities if the methods are not validated extensively or one of the methods applicable now becomes disfavored later. For current potency testing methods of Cannabis in Michigan, LARA has drawn from the Journal of Chromatography, Analytica Chimica, Cannabis potency and Cannabinoid Profile, and American Herbal Pharmacopoeia. Moreover, since potency testing has not been validated and the validation guidelines are dictated by traditional companies, there may never be an officially validated method for potency testing of Cannabis in Michigan. SAMPLING GUIDELINES The guidelines for sampling are not set in stone, as LARA has framed there more as a recommendation or best practice. LARA will require all safety compliance facilities to maintain their own internal standard operating procedures. LARA is requesting these operating procedures be tailored in such a manner that they minimize both imprecision and bias as well as list chronological steps that ensure a consistent and repeatable method. LARA additionally stipulates that sample sizes must be just large enough to cover the testing requirements. Specifically, this requirement is aimed at preventing any diversion or waste disposal issues. LARA does require a 0.5% of usable marijuana sample size in order to be representative of the group. COLLECTION PROCEDURES While LARA has included example collections procedures, it does not require safety compliance facilities to follow those examples. Instead, LARA simply requires that facilities have their own collection procedures. Example collection procedures detailed in the guidelines are Representative sampling, which involves a variety of samples taken from the different types of plants and products produced by a company, and Random Sampling, which is self-explanatory. LARA also details the different types of equipment and supplies necessary for testing facilities. Most importantly, LARA requires extensive record keeping for licensed safety testing facilities operating within Michigan’s medical marijuana market. The sampling method and results should be recorded and readily accessible. LARA does not require that specific information be used to identify the samples, however, they provided a list for facilities to reference what information could be used. TESTING PROCEDURES I do not want to spend too much time fiddling with LARA’s suggested procedures, but there are many valuable tidbits of information in this section. First, LARA will require a 95% confidence level in the accuracy of a licensed safety testing lab’s tests. Second, equipment used for sampling must be certified clean prior to use by a facility. A report is required to demonstrate compliance with certified cleaning. Third, prior to testing samples, Michigan safety testing facilities need to show an initial demonstration of capability or competency assessment. This showing will have to be repeated with changes in personnel or method. Fourth, internal audit checks and field audits will be necessary to ensure compliance and accuracy. Audits that result in deficiencies will also need to be accompanied by an immediate initiation of corrective action where variances from the procedures are identified or discovered. REQUIRED TESTING For required testing, LARA focused this section on limits. Specifically, potency, chemical residues, water activity, solvents, microbiological impurities, and heavy metals. Potency testing is focused on the reporting of THC v. CBD values in the marijuana, as well as an emphasis on the preference of using “as is” values, as oppose to calibrated results based on moisture content. Chemical residue testing is focused on preventing banned ingredients such as toxic pesticides from making their way into marijuana products. LARA will require a strict adherence to the list and all values must be under the detection limits. A full chart complete with the detection limits for banned products is included in LARA’s most recent guidance. Solvent testing is concerned with the exact same problem except this deals with the use of solvents to produce marijuana products and concentrates such as cannabis extracts, oils and wax. Residual solvents from the concentrate process are listed in a table with their action limits. Microbiological testing is specifically focused on keeping known pathogens out of marijuana and marijuana products. Additionally, this testing will be required to identify the natural and expected microbes v. the foreign unexpected pathogens. LARA has provided a list that includes water activity and foreign matter tests for identifying the microbes that should be tested for. Michigan outdoor grows may have trouble meeting these requirements due to the fact that it can be difficult to limit microbes and pathogens in an uncontrolled, outdoor environment. Heavy metal testing is very stringent. LARA requires testing for heavy metals and has a strict denial policy for marijuana that has present in it any of the following: inorganic arsenic, lead, mercury, cadmium, or chromium. PROFICIENCY AND ACCREDATION LARA will have a proficiency testing program that will designate the level of proficiency needed to be displayed by safety compliance facilities. It will required at least once annually. The proficiency test will require that Michigan safety compliance facilities have a set of proficiency tests for all tests, within the scope of testing conducted by the facility. Numerical values will have to be presented, as oppose to a pass/fail system. For testing parameters that do not have a proficiency test, another licensed safety testing facility with similar testing methods should perform the same test to confirm the results. LARA will also be conducting unscheduled random testing of matrix matched samples to evaluate the performance of safety compliance facilities. https://www.oak-law.com/blog/where-can-i-put-my-money-cannabis-banking-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/f2b9294b-035a-45e1-b7d9-843eb45d8d3a/unsplash-image-5OUMf1Mr5pU.jpg Blog - Where Can I Put My Money?: Cannabis Banking in Michigan - Where Can I Put My Money? “Where can I put my money?” is one of the most prevalent questions in the cannabis industry. As licensed cannabis business attorneys our clients ask us this all the time. In the past several institutions, primarily credit unions, had a “don’t ask, don’t tell” approach to accepting money from the cannabis industry, which meant that your money was not really welcome there but no one at the institution asked you for the source. This cycle has led to many cannabis business clients to “credit union hop”, which is where they would open up an account, have it closed when the credit union found out they were in the cannabis industry, and then move on to another credit union. While this was not an ideal solution, it was one of the only ways to have a business account for everything from payroll to paying taxes…and you better believe us when we say you have to pay those taxes. The question, “where can I put my money?” entails much more than just having a place to store your money. What this question really asks is what do I do with the piles of cash at my business, how do I accept payment in non-cash forms, how do I pay my employees with checks as opposed to cash, how can I accurately audit my business without having to sift through cash, and how do I pay my taxes? The answer to all of these solutions is a reliable Cannabis banking system, which will integral to the future growth of the Michigan cannabis industry. This article will explore emerging Cannabis banking options for Michigan entrepreneurs, how they could help Michigan cannabis businesses, and what we as Cannabis business attorneys believe the best option for banking is for the Michigan cannabis industry. STATE CHARTERED BANKING This idea had been kicked around, and was even touted as the best solution to this banking problem. Think about it, what better way to ensure cannabis business owners have the opportunity to easily and securely store their money and manage their business, and what better way for the State to keep track of all of it to make sure taxes are being paid. Now we are not saying that a state chartered bank would be the solution to every problem facing the Michigan cannabis industry, but it would present a much better alternative than trying to fly under the radar at a bank or credit union. While we do believe this would be a great solution to the cannabis banking problem, federal hurdles continue to pop up, and this solution has lost favor here in Michigan over the last six months or so. A good example to look at for problems with state chartered banks is California. In California, the state Senate approved a bill that would have set up state banks to serve the cannabis industry. The bill was recently axed by the Assembly. Many of the concerns that got this bill shut down are some of the same concerns with starting a state charter bank anywhere, including Michigan. A big concern was how these state chartered banks would be able to interact with the broader banking industry. Could they invest in other states? Make deposits in other bigger banks? And so on and so forth. Additional concerns were raised after a full analysis of the bill. Specifically, the fact that the bill did not protect the new state banks from federal law enforcement, not to mention the fact that the FDIC would not insure the bank’s deposits. This would mean that the new state banking system would need to rely on private insurance, which would be difficult considering the legal ramifications of insuring a bank funded by activity still considered illegal under federal law. No one would feel safe putting money in a bank that could have its doors kicked in by the feds at any minute. Thus, state chartered banking systems will continue to run into problems until there is a change of law, or even just a change in tone, on the federal level. PUBLICLY OWNED BANKS This mid-term election the City of Los Angeles proposed Proposition B. Proposition B was to our knowledge the first time that a city voted on amending its city charter to allow a public bank in the Cannabis space to be issued. The idea was met with staunch opposition from big banks, who claimed that this type of venture would create unfair competition. Proponents of the publicly owned bank argued that this proposition would help improve efficiencies. In the current system a big bank holds on to customer deposits and taxpayer money, then lends money out at a higher rate of interest than what is paid on its deposits. A publicly held bank, rather than simply chasing the highest interest rate spread, would be free to issue loans for public projects and projects that would have a positive impact on the local community. The public banking idea certainly has potential, with the public sector benefits and the ability to directly impact the community. Unfortunately, Proposition B did not pass in Los Angeles, losing by just north of 11% of the popular vote, and the same problems that could plague state chartered cannabis banks would also affect other publicly owned banks. So at this point you might be asking yourself what viable options are there? Enter Safe Harbor Banking. SAFE HARBOR BANKING If you look up what safe harbor means in the finance realm, you will find that it means a legal provision to reduce or eliminate liability in certain situations. Safe Harbor Private Banking is appropriately named as it services the cannabis industry. Safe Harbor Private Banking is a division of Partner Colorado Credit Union. It launched in early 2015 and has been helping cannabis businesses in Colorado ever since. Safe Harbor Private Banking has not officially expanded into Michigan just yet, but we do expect them to do so in the very near future. While the Safe Harbor Program will allow cannabis businesses to deposit their money in a financial institution, the program still requires extensive due diligence and continuing compliance requirements. The Safe Harbor Program involves an in depth review of your business to ensure that you are operating in compliance with state law and applicable tax and banking laws. The Program will ensure that your cannabis business is following Financial Crimes Enforcement Network (FinCEN) guidelines. After undergoing initial due diligence and training, the Program will connect you to banks and credit unions that are participating in the cannabis industry. The Program will also allow you to easily track and monitor your bank accounts, as well as generate detailed reports for your business. So what are these FinCEN guidelines? In 2014 FinCEN issued guidance on what banks should watch out for when deciding whether or not to provide services to those in the cannabis industry. The guidance, although tricky, establishes a safe harbor from federal prosecution for giving marijuana businesses banking services. Notwithstanding this guidance and the Cole Memo issued with it in 2014, national banks nonetheless continue to treat cannabis banking as the red-headed step child of the banking industry. The catch here is that former Attorney General Jeff Sessions rescinded the Cole Memo and reintroduced the idea of prosecutorial discretion. Meaning prosecutors could, at their discretion initiate actions against banks that would provide services to the cannabis industry. However, recent communication with FinCEN has cleared up that the guidance, allowing banks and credit union to enter the Cannabis banking space. Specifically, the guidance creates a checklist for banking institutions to use when evaluating whether or not to provide services to the cannabis business. This is why the Program is and should be a very impactful new system, and one we believe to be the ultimate answer to the question of “where do I put my money.” The Program will ensure your compliance with all the FinCEN guidelines so that you are not a risk to financial institutions, with the added benefit of ensuring you don’t unknowingly violate federal banking laws. This type of model works only with financial institutions that are willing to participate and as of now those are hard to come by, but we do know of one such institution here in Michigan that is preparing to enter the program. TAKE AWAY The Safe Harbor Banking program is a well-designed system and will soon be making its way to Michigan. The passage of recreational marijuana has come with a great deal of interest in the cannabis industry. Michigan is expected to be one of the biggest markets in the nation for recreational marijuana, with some saying it will be second only to California. In order for Michigan cannabis businesses to thrive, they are going to need reliable cannabis banking. In order to have reliable cannabis banking, a system like the Safe Harbor program will need to be set up, but it cannot work without financial institutions that are willing to open their doors. Safe Harbor banking officials recently spoke at the Marijuana Law Section, a confederation of Michigan Cannabis lawyers, and we expect them to announce a presence here in Michigan soon. And when they do, we will finally have a definitive answer to the question—“where do we put our money?” https://www.oak-law.com/blog/the-hemp-bill-you-havent-heard-of-but-need-to-know-about monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/85b46c1e-1f7e-4c0b-9719-06a664cef6d4/unsplash-image-KdC5agsz6ik.jpg Blog - The Hemp Bill You Haven’t Heard Of, But Need to Know About! - Hemp Bill You Need To Know About! Due to legal and regulatory changes in the industry, including the 2018 Farm Bill and recent changes in the implementation of Michigan’s 2014 Industrial Hemp Research Act, the information contained in this Article may no longer be accurate. Please contact an attorney before relying on any information contained in this Article. For more information on cultivating hemp, or the Hemp Pilot Program in Michigan, check out our recent article. With all the recent buzz around recreational marijuana, you may have forgot about another key aspect of Proposal 1—the legalization of commercial hemp production. Though it hasn’t gotten much attention with all of the hoopla surrounding the state’s legalization of marijuana, big things are happening in the hemp industry, especially here in Michigan. For those who aren’t familiar with its history and past uses, hemp is an incredibly versatile product that can be used to produce paper products, oils, linens, fabrics, mesh, rope, and plastic substitutes. Hemp is also considered a “superfood” by many and can be used to cost effectively produce CBD. It was previously grown throughout the U.S. due to its incredible versatility. However, after passage of the Marihuana Tax Act of 1937, commercial hemp production began a precipitous decline, with the Controlled Substances Act of 1970 being the final death knell. Nonetheless, hemp production is making a comeback here in the U.S., and as we will explain below, Michigan is poised to be on the forefront of the commercial hemp resurgence. Current Legal Status of Hemp in Michigan The Michigan Regulation and Taxation of Marihuana Act—also known simply as “proposal 1” or the RMLA—legalized the production of commercial hemp here in Michigan. However, due to certain legal technicalities that were not addressed in the ballot language, commercial hemp production would still be federally illegal unless its produced in conjunction with a state University under the Michigan Industrial Hemp Research Act. There are three bills making it through the Michigan legislature that would fix this technicality as well as make clear that commercial hemp is not subject to the state’s marijuana laws. You may have read our previous article on hemp production, as it relates to the production of CBD products. In that article we briefly mentioned a bill that had been introduced in front of the house, HB 6330, which would not only change the name of the Industrial Hemp Research Act to the Industrial Hemp Research and Development Act, but would also update the definition of industrial hemp. The expanded definition would include all parts of the plant including derivatives, extracts, and cannabinoids. HB 6330 was also handcuffed to two other proposed House Bills referenced in the above link. They are HB 6331 and 6380. HB 6331 focused on changing the definition of industrial hemp in Michigan’s Public Health Code, while HB 6380 would amend sections 102, 206, 502 and 505 of the Medical marihuana facilities licensing act. If you are interested in the future of the industrial hemp industry, we have good news for you. All of the aforementioned House Bills have passed by Michigan’s state House of Representatives and have now moved to the State Senate for consideration. This article will detail what potential changes these bills could mean for not only Michigan CBD producers, but also what we expect to be the very lucrative hemp farming industry, an industry we expect to eventually be even larger than the recreational marijuana market here in Michigan. HOUSE BILL 6330 House Bill 6330 as passed included some changes and amendments that were not included in the original House Bill that was introduced. The changes are subtle but important. First, the Bill as introduced included the creation of an Industrial Hemp Advisory Board. The Advisory Board, as proposed, included members of LARA, State Sheriff’s office, and President of Michigan Association of Chiefs of Police among many others. The removal of the Advisory Board at this stage places the power of the Industrial Hemp Research and Development Act solely with the Department of Agriculture and Rural Development. You know, the department that would know the most about farming and development procedures! Second, the Bill as passed removed the requirement that applicants for a grower or processor-handler license, also submit with their application a “research plan”. This development could impact commercial hemp production here in Michigan. At first blush, it looks like a loosening of the belt on the restrictions surrounding industrial hemp. However, in other areas of the Bill, it still states that “A grower shall not grow, handle or store any industrial hemp for a purpose other than research under the act”. That, of course, begs the question what exactly constitutes “research purposes”, as a farmer could easily claim that they are “researching” the viability of commercial hemp production by planting and processing hemp. Here, we hope the State Senate includes additional language allowing for “pilot programs” authorized under the 2014 farm bill, which would clarify and expand the scope of commercial hemp production in Michigan. Third, the Bill removed the requirement for a criminal background check for those that are applying for grower and processor-handler licenses, though the Bill does still contain language stating that “An applicant may be denied if they do not demonstrate a willingness to comply with the Department’s rules, instructions or laws”. Language like that could mean that the department will consider criminal history in approving and denying licenses, though its highly unlikely potential producers will be subject to the same level scrutiny are medical marijuana facility applicants. Finally, added into the language of the Bill is the requirement that a potential hemp grower request the ability to sell industrial hemp to a licensed MMFLA processor as part of their license application, though this would not apply to sales to a non-MMFLA hemp processor. Formally, the Bill did not require an express request by the applicant. This requirement, if nothing else, helps in drawing a fine line between industrial hemp and medical marijuana. HB 6331 This Bill was actually amended to be slightly shorter than when it was introduced. The change, although minor, could be very important going forward. The amended part of this bill now states: “Marihuana does not include industrial hemp”. Whereas, when introduced the bill read in part: “Marihuana does not include industrial hemp grown or cultivated, or both, for research purposes under the industrial hemp research act. HB 6380 This Bill remained mostly the same. Most of the changes that happened were simply rearranging of the contents and a removal of most of the definitions included in the very beginning. However, the Bill did take a more direct approach to addressing what the goal is. Specifically, in lines 4-5 of the first page in bold face font, it states: “to allow certain licensees to process, test, or sell industrial hemp”. From a strictly legal perspective, this changes practically nothing, but it does make the Bill a little clearer for those who did not like reading between the lines of the Bill as it was introduced. This Bill still seems to contrast the stance taken by HB 6330 & HB 6331, where those Bills seem to distinguish hemp from marijuana. In contrast, this bill specifically addresses MMFLA licensees’ ability to buy, process, and sell industrial hemp. However it is not time for a collective sigh, because some very good things could be coming. WHAT DOES THIS MEAN FOR CBD PRODUCERS AND HEMP FARMERS Yes, we know this was the part you were waiting for! Under the language that was amended in HB 6330 & HB 6331, it seems industrial hemp is experiencing a progressive push forward. Research and requirement plans being cut out of licensing requirements will help make the process more streamlined. Eliminating the need for an Advisory Board made up of LARA members also hints at less oversight, and red tape, from multiple state departments. Removal of applicant criminal background checks helps to expand the potential pool of applicants. As hemp and CBD attorneys, these changes indicate to us a change is coming. While many of these changes seem very beneficial at this stage, they may be walked back when they get to Senate review. In the meantime, it is our opinion that these changes are indicative of an opening door in the arena of hemp and CBD production as well as regulation more similar to other commercial crops, as opposed to a scheduled narcotic. This could mean big things for Michigan CBD and hemp producers. Specifically, removing industrial hemp from the arena of marijuana regulation without adding the stipulations for research plans could lead to a more open and integrated market. For those looking to become hemp farmers…deep breath…it could mean actually being able to grow hemp without being subject to red tape from multiple governmental agencies. The consolidation of regulatory power over hemp into Department of Agriculture could help hemp farmers actually, you know, just BE FARMERS! Also contained in this Bill as passed was the ability for anyone over the age of 18 to apply for a hemp grower or processor-hauler license. This is important because, when combined with the new definitions of industrial hemp, it creates an entirely legal market for hemp, and those that would process it without fear of the DEA busting down your door. THE BOTTOM LINE The future looks promising for industrial hemp in Michigan. Whether it will stay that way depends on what happens when these Bills come in front of the Senate. Michigan was one of the many states this election period that experienced a “blue wave” in pivotal leadership seats, and that could spell the end of needless and inane restrictions on the growing and cultivation of hemp and CBD in the state. The days of Bill Schuette and Rick Snyder placing needless restrictions on the sale and consumption of CBD should hopefully soon be a thing of the past. It took roughly two weeks from when these bills were introduced to when they passed through the house. It has already been five weeks since they have passed, hopefully news should be coming fairly soon about the senate review, but that may be coming after the election musical chairs is over. In any case it should not be long before we have more concrete information on this issue. In the meantime, subscribe to our blog for the most up-to-date information on CBD and hemp related issues. https://www.oak-law.com/blog/recreational-marijuana-is-legal-in-michigan-now-what monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/40a0db0f-1f45-4f52-93e2-f60bc596c7f4/unsplash-image-UoXLndT32Hg.jpg Blog - Recreational Marijuana is Legal in Michigan: Now What? - Now What? If you are like us, you were probably glued to election results on Tuesday, frantically refreshing your computer or phone, flipping through channels, or listening to the radio. If you did any of that then you already know Michigan just became the next state to legalize the recreational use of marijuana. <<Queue celebratory music>> It has been a long time coming. Although we as licensed Cannabis Business Attorneys thought Proposal 1 would pass rather easily, we were still a tad nervous when the results started coming in. But it was all for naught, as Michigan voters turned out in droves and overwhelming voted to enact Proposal 1, which legalizes the sale and possession of recreational cannabis in the great state of Michigan. With the passing of Proposal 1, Michigan became the first state in the Midwest to legalize marijuana (sorry North Dakota, maybe next time). However, you are probably not reading this to learn about what you already know. You are probably curious about where we go from here. This article will address what the future of marijuana legalization holds for Michigan and what that means for you. IS MARIJUANA LEGAL NOW? The short answer is not yet. To explain, marijuana will not be legal recreationally until after election results have been certified. Specifically, we will have to wait ten days after the election results are certified. Based on previous elections, results can take a little while to be certified. At the latest that would be early December. While LARA and the State mull over regulations on use, licensing, and sales, most people no longer have to worry about being arrested for possession charges. Post certification, Proposal 1 allows for people in the state who are 21 years or older to possess up to 2.5 ounces on their person or up to 10 ounces in their home. Proposal 1 also allows for individuals to grow up to 12 plants for personal consumption in their home. The caveat with growing those plants is it must be grown for personal use. If you are in the cannabis industry you know that 12 marijuana plants produces much more product than just 10 ounces and much more than most consumers can even imagine smoking. There are also restrictions for where you can grow marijuana you intend to use personally. Do not expect to be planting them in your community gardens or in your front yard. Proposal 1 does not allow for you to consume marijuana in public places or while driving. Our Marijuana business attorneys want to remind you that you can still be arrested for smoking in public and for driving under the influence of marijuana…DON’T DO IT! The Michigan Regulation and Taxation of Marihuana Act does not legalize public consumption of cannabis—that still needs to be done on private property. Even though marijuana will become recreationally legal, do not expect your employers to stop testing you for it if they already do. Proposal 1 allows for employers with existing drug use restrictions to keep those restrictions in place post legalization. The same goes for your landlord’s restriction on smoking marijuana, though landlords cannot restrict the consumption of non-smokable cannabis products. WHAT’S THIS NEW LAW CALLED Proposal 1 is officially called the Michigan Regulation and Taxation of Marihuana Act, which doesn’t exactly roll off the tongue. It has also been known as the MiLegalize initiative, the RMLA (Regulate Marijuana like Alcohol), the “rec law”, and Proposal 1. While the acronym MRTMA doesn’t exactly roll off the tongue either, this will likely become the way the Michigan cannabis industry will start referring to it. HOW WILL RECREATIONAL LAWS BE DIFFERENT THAN MEDICAL? The Medical Marijuana Facilities Licensing Act (MMFLA) passed in 2016. The MMFLA has specific guidelines and requires an intensive and comprehensive application process. The state licensing agency LARA has updated and modified the rules of the MMFLA many times since they have been implemented and have added questionnaires and requirements that are not on the actual MMFLA application. Whether or not LARA uses the current medical marijuana laws and regulations and application process as a base for the recreational laws is still up in the air. We do know that the language in Proposal 1 is different and in many ways more lenient than the MMFLA. We are really excited to see how the “licenses shall be granted” language is implemented as opposed to the current language in the MMFLA, which usually leads to inconsistent and unpredictable denials from a licensing board made up of political appointees. Additionally, new faces in high positions in Michigan could aid in a speedy implementation of the new laws. Specifically, new Governor elect Gretchen Whitmer committed verbally to cleaning up LARA. Dana Nessel, the new Attorney General, has been a vocal supporter of loosening restrictions on marijuana and its recreational legalization. This all fairs well for recreational marijuana. However, as cannabis lawyers we want you to know that there is still a lot up in the air regarding how the Michigan Regulation and Taxation of Marihuana Act will be implemented. Anyone that says otherwise is either misinformed, making educated guesses based on rumors, or trying to sell you something. The Department of Licensing and Regulatory Affairs will still need to draft and implement rules to fill in the blanks. There are some key differences specifically in how licenses are issued, reviewed, and regulated. The differences will depend what the new regulations look like. The MRTMA allows LARA twelve months to issue regulations and start accepting applications—and if the past is any indicator—they will take the full twelve months. A key difference and one that has been hotly debated is the excise tax. Michigan will be one of the states with the lowest excise tax. At 10% on top of the 6% sales tax Michigan marijuana businesses could thrive in a market that is expected to include 20% of Michiganders 21 and up. Keeping the tax on cannabis low ensures that Michigan’s black market does not continue to make up a large portion of Michigan’s cannabis market. While there have been rumors that the state legislature may try to increase this tax in the lame duck session, we hope that the tax stays low since this will ensure cannabis sales stay in the regulated market. WHEN CAN I SELL/BUY RECREATIONALLY? As of today there is not a specific day we can point to and say this is the day you will be able to sell or buy marijuana legally without a medical card. So don’t let your medical card lapse just yet, and if you don’t have on, don’t expect to stroll into your medical marijuana dispensaries in Detroit, Ann Arbor, Lansing or Flint anytime soon. You will still need a medical marijuana card to purchase marijuana from a dispensary, though the MRTMA does allow the transfer of certain amounts of marijuana between consumers. This would be where having a friend with a medical card comes in handy. We do know that LARA will be required to accept application for recreational marijuana facilities within 12 months of the certification date. If it fails to do so, then cannabis facilities can operate under municipal licensing only, though don’t except LARA to give up that kind of authority. Even so, the actual recreational marijuana application process is still somewhat shrouded in mystery. What we do know is that the Michigan recreational marijuana facility applications will need to be processed within 90 days, which is a welcome relief to medical marijuana applicants who have had to wait close to a year to have their applicants processed. As licensed cannabis attorney’s we do expect the process to be less time consuming than the process now under the MMFLA. We also expect that the arbitrary licensing board denials to no longer keep qualified individuals out of the new cannabis market, though the Medical Marihuana Licensing Board will still serve as a gatekeeper for most license types, as discussed below. The legislature could also make changes to Proposal 1 before it goes into effect, but that would take a lot of cooperation by the legislature. By that we mean that it would take a three/fourths vote to institute any changes to the proposal as it is. So it is highly unlikely that anything on the books now changes before implementation, despite rumors that the state legislature might try to up the excise tax. In sum, as far as selling and buying cannabis recreationally, we are looking at about a 12 month wait for the recreational market to be up and running. At this point you might be asking yourself, is there a way in or a step I can take now? WHAT CAN I DO NOW? Legalizing marijuana in Michigan has been a long journey, and now that it is official you want to know how to get in on this market before it takes off. The first thing to know is that you will not be able to apply for a recreational marijuana license if you do not already possess a medical license, with two exceptions—a Class A Growers License and Microbusiness license. It is our official legal opinion that a Class A growers license are essentially worthless if your goal is to sell to the general public. There could be some value if your goal is merely developing genetics, but these licenses will likely be unable to compete against large Class C facilities. Alternatively, the Michigan Microbusiness license. will present opportunities for those not already in the licensed medical marijuana market to enter the state’s recreational marijuana market. https://www.oak-law.com/blog/growing-marijuana-outdoors-under-the-mmfla monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/dfcf6512-aa96-493e-b245-475e1baeaa0b/unsplash-image-SzVdCamMZl0.jpg Blog - Growing Marijuana Outdoors under the MMFLA - Growing Marijuana Outdoors Building an indoor cannabis facility is not cheap. In my experience as a cannabis attorney, Medical Marihuana Facilities Licensing Act (“MMFLA”) and Michigan Regulationa and Taxation of Marihuana Act (“MRTMA”) growers will spend anywhere between $100 to $200 per square foot on their interior buildout and equipment. And if you are an MMFLA licensed or MRTMA licensed grower, you will likely have to pay quite the premium just to purchase the underlying cannabis property. As more and more prequalified cannabis growers are looking to build a licensed marijuana grow facility in Michigan, or are seeking to expand their facilities to include a MRTMA adult-use grower license, building a cost-effective grow facility is not an easy task. Some of the best MMJ grow facilities in Michigan are often quickly snapped up by real estate speculators, sometimes before a municipality decides to even “opt-in” to the MMFLA. As a Michigan cannabis business lawyer, I’ve represented several of these real estate speculators, who use their advanced political knowledge, deep pockets, and even a bit of guess work, to tie up the best Michigan cannabis grow facility properties. Other indoor marijuana grow facilities can take up to a year or even longer to fully build out. Depending on the state of the building, indoor growers may need to install a new roof, upgrade the building’s electrical system, install brand new HVAC and fire suppression systems, and more. Retrofitting a building for cannabis use can be both expensive and time consuming. Due to the high price per square foot of MMLFA and MRTMA grow facilities in Michigan—where $100 SF is not uncommon for a decent green-zoned building in the Metro Detroit area, some Michigan growers have decided to seek out an alternative that is both significantly less costly and quicker to market. For some, this means a greenhouse, where lower end models can be built for as little as $40 / SF, though even these involve significant build out, equipment and utility costs. Not to mention, the quality of greenhouse grown medical marijuana is generally not seen as up to par with other indoor growing, making it harder to sell directly to MMFLA provisioning centers and MRTMA retailers. There is another, often overlooked, option that allows for much less expensive build out, equipment and maintenance costs—outdoor growing. Growing cannabis outdoors in Michigan eliminates the need for a lot of costly equipment, eliminates the need to pay six or even seven figure annual utility bills, and eliminates the need for purchasing buildings at $100+ SF. It can also produce much higher yields, which means less time and effort and more bang for your buck. For these reasons, commercial outdoor cannabis farms are popping up throughout the state. The Market for Michigan Outdoor Cannabis There are some downsides to growing medical and adult-use marijuana outdoors in Michigan. The first and most obvious is that it gets pretty cold here in the winter, and our climate does not support a winter crop. Thus, while your yields and marijuana plants can be much bigger during the grow seasons, they are non-existent come January and February. The second downside is quality. Greenhouses suffer a similar weakness, but not nearly to the same extent as pure outdoor cannabis. As medical marijuana patients become more “sophisticated” when purchasing marijuana, and recreational purchasers all wanting “the best stuff”, the direct to consumer market for mid to low quality marijuana isn’t strong. But there is one cannabis sub-market that is growing faster than most imagined possible—extracts, processed goods, and edibles. When making processed marijuana products, you don’t need the “best” marijuana flower. In fact, a lot of processed cannabis goods are made from the trim of the marijuana plant, though trim often makes for poor quality extracts. Inexpensively grown outdoor cannabis is the perfect input for processed goods, and processed goods are quickly taking over the Michigan market. In more developed recreational states, processed marijuana products make up more than half of all sales, and this number is rising quickly. Growing Outdoors in Michigan: MMMA, MMFLA, and MRTMA Whether an outdoor MMJ facility is allowed in the municipality where you want to locate your licensed MMFLA or MRTMA facility depends on that location’s municipal ordinance. Under the MMFLA and MRTMA, it is up to each local unit of government to decide whether to allow marijuana growing in the municipality, and what restrictions, if any, to put on these MRTMA and MMFLA-compliant facilities. That means that it is up totally up to each municipality to decide whether to allow outdoor commercial cannabis grows. The MMFLA is not like the Michigan Medical Marihuana Act (MMMA) in this respect. The MMMA allows registered patients and caregivers to grow a limited number of plants outdoors, regardless of the municipality, provided that they meet the following requirements: not be visible to the unaided eye from an adjacent property when viewed by an individual at ground level or from a permanent structure; be grown within a stationary structure that is enclosed on all sides, except for the base, by chain-link fencing, wooden slats, or a similar material that prevents access by the general public and that is anchored, attached, or affixed to the ground; be located on land that is owned, leased, or rented by either the registered qualifying patient or a person designated through the departmental registration process as the primary caregiver for the registered qualifying patient or patients for whom the marijuana plants are grown; and, be equipped with functioning locks or other security devices that restrict access to only the registered qualifying patient or the registered primary caregiver who owns, leases, or rents the property on which the structure is located. This is because the MMMA is a broadly applicable state law that preempts any local ordinance in conflict with it, while both the MMFLA and MRTMA leave it up to each local unit of government to decide what type of facilities to allow, how many of each type of facility to allow, and what additional requirements each municipal applicant must meet. The MMFLA and MRTMA gives broad authority to each locality, except that a local government cannot enact regulations on the price or purity of marijuana or otherwise contradict the state law. So where and how can I grow outdoors in Michigan? On the state level, the rules that outdoor commercial marijuana grows must meet are minimal. One rule affecting outdoor MMFLA grow facilities is the requirement that any grow facility must be located in an area zoned as industrial, agricultural, or unzoned. This same requirement is not present in the MRTMA, however. Another restriction present in both the MMFLA and MRTMA is the requirement that there be a building adjacent to the cultivation area where drying, trimming and curing must take place. Other than that, and the requirement that the area must be fenced in and not visible to the public, the state-level restrictions are minimal. The number of cities and townships in Michigan that allow outdoor commercial cannabis cultivation under the MMFLA and MRTMA is growing, though the overall number is still somewhat limited. Even then, most of these municipalities impose additional land use requirements as well as additional restrictions on the outdoor grow facility. The municipal restrictions applicable to grows mostly fall into one of three categories. The first is setbacks—most municipalities that allow outdoor grows that we reviewed require that the outdoor facility be set back from the property lines—some only as little as 20 to 30 feet, others as much as several hundred feet. The second type of municipal restriction is lot size. Many municipalities require that the outdoor medical marijuana facility sit on property of at least one acre, and sometimes as much as five acres. Finally, at least one municipality specifies additional security restrictions over and above the MMFLA and MRTMA regulations, including requirements that the property be enclosed by fences at least eight feet high surrounding the entire facility as well as locked gates. In contrast, if you are growing outdoor cannabis as a caregiver under the MMMA, or a 12-plant personal grow under the MRTMA, you are not limited to the handful of municipalities that authorize commercial outdoor cannabis facilities under the MMFLA or MRTMA. You can grow outdoor plants in pretty much any municipality in the State of Michigan, though you are still subject to the restrictions outlined above. Takeaway There are a growing number of opportunities for commercial growers under the MMFLA and MRTMA to have outdoor grow facilities in Michigan. The advantage of outdoor cannabis facilities is that they don’t cost much to start up compared to indoor grows and they primarily feed the fastest growing cannabis sub-market—the market for processed marijuana goods such as edibles and extracts. In addition, while very labor intensive, the overall operational costs are less than growing an equivalent amount of indoor plants due to the significant energy savings. Put another way, sunlight is free, while HPS and LED lights can cost quite a bit in terms of energy costs. The disadvantages are that they are often only allowed in out-of-the-way places and there is not much direct consumer demand for outdoor cannabis. In California, some cannabis companies have been able to sell outdoor grown cannabis direct to the consumer as prerolls, but California’s weather is also much more conducive to outdoor cannabis cultivation than Michigan’s weather. Outdoor commercial growers in Michigan are therefore mostly limited to selling their product to a licensed processor, or to processing the products themselves in order to create their own cartridges, oils, and edibles. Not every opportunity is right for everyone, but if you think commercial outdoor growing in Michigan is right for you, contact us today to discuss your options. Our firm represents multiple MMFLA and MRTMA outdoor grow facilities, and can help your cannabis business identify and license Michigan cannabis properties for outdoor growing. https://www.oak-law.com/blog/mmj-marketing-and-social-media-under-the-mmfla-t-h-i-n-k-before-you-post monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/b178199d-49d3-442f-8dba-5267d6b9ccca/unsplash-image-Tk9m_HP4rgQ.jpg Blog - MMJ Marketing and Social Media under the MMFLA: T.H.I.N.K &nbsp;BEFORE You Post - T.H.I.N.K BEFORE You Post In this age of advancing technology, social medial has become an essential part of our day-to-day lives. It influences the service providers we choose—from MMJ business lawyers to cannabis safety testing companies, to the products we buy and the places we buy them from. From food to activities to medical cannabis, social media has informed the decisions we make and even how we see the world. Statistics show that a substantial majority of adults in America are using social media daily. It is no surprise that social media is now an integral part of business culture and medical marijuana marketing as well. Michigan cannabis businesses use social media to market and advertise events, products and services. Social media gives cannabis companies a direct line to medical marijuana consumers, giving patients information on pricing, product selection, and customer reviews from the comfort of their own home. Medical Marihuana Facilities Licensing Act Businesses Affected The Bureau of Medical Marihuana Regulation (BMMR) has taken a stance on social media marketing that effects everyone who is seeking licensing under the Medical Marihuana Facilities Licensing Act (commonly referred to as the MMFLA). While businesses in other sectors generally enjoy free reign to post on social media, cannabis businesses operating under the Medical Marihuana Facilities Licensing Act should exercise more caution. Several social media and Weedmaps posts have even been discussed by the State of Michigan Licensing Board and cited as a reason for voting against medical marijuana facility licensure, with the promotion and participation in events that promote “recreational marijuana” being a common issue. The Michigan Medical Marihuana Act (MMMA) and MMFLA legalized the use of cannabis for medical purposes. However, neither of these laws allows for recreational sales or use, though this may soon change (or depending on when you read this, may have already changed). Nonetheless, the medical and recreational markets are entirely separate markets that will have separate licensing requirements, though only businesses with an MMFLA license will be able to obtain a recreational marijuana license in the first two years of the program, with a couple exceptions. This means that it is important to practice good social media etiquette in regard to medical marihuana licenses now, even if you already have a license, because keeping that license in good standing will be critical to success in the recreational market down the road. When considering applicants for facilities licenses, the medical marihuana licensing board uses certain criteria to determine whether an applicant is fit for a license. Many of these were discussed in our previous blog post, written by Cannabis business attorney Scott Roberts, entitled, MMFLA Licensing: Ten Application and Licensing Tips from BMMR Director Andrew Brisbo. Some of these include failure to disclose criminal and financial information. One factor that is often over looked is social media and marketing activities. On the MMFLA prequalification application, applicants are asked to include any social media links the entity uses. As cannabis business and licensing lawyers, we can assure you that even if you don’t provide these links, LARA will comb through social media to find your social media pages. We once even had LARA ask about a client’s social media profile that he briefly used for a few days several years ago. THINK Before You Post The possibilities are endless when cannabis businesses properly utilize social media, whether that be a Facebook page, Instagram page, or a profile on a specialized app such as Weedmaps. However, there are some things to keep in mind when cultivating a social media presence for your business, especially with respect to medical marijuana businesses eyeing the expected recreational marijuana market. Here are some questions Michigan cannabis business owners should ask themselves about their social media and marketing efforts. Is this information that needs to be posted? One MMFLA licensing applicant almost opened the door to denial due to the fact that his son, who is a facility manager, apparently bragged on social media that he was the “owner” of a Detroit provisioning center. Of course, the Michigan Department of Licensing and Regulatory Affairs saw this post and included it in its report to the licensing board, and at least one MMFLA licensing board member used this as a reason to vote against the provisioning center’s licensing approval. This example also demonstrates that cannabis facilities need to not just worry about posts on their own business pages, but also the posts of managers and on-site employees as well. As another, this time-hypothetical, example, let’s take a budtender who posted pictures of marijuana consumption at the dispensary on their personal social media page. On-site consumption is a violation of the MMFLA rules. If LARA was to come across this post, this would likely trigger a surprise inspection. During the inspection, LARA would be able to review 14-days worth of video footage of every inch of their facility, and quickly confirm the violation and issue a citation or other administrative action. The key takeaway here, which should apply to all of your social media posts, is that you shouldn’t post information you don’t want to be made public. Seems simple enough, but almost everyone knows that one person they are friends with who constantly violates this simple rule of thumb. This goes for both the social media pages of a cannabis business as well as its employees. Reminding everyone to exercise a bit of discretion—and THINK before they post—will prevent many of these problems from arising, as will screening a potential employees social media profiles before hiring. Is it clear that the event is related to medical use only? Many events use creative names to entice people to show up—oftentimes they take the form of clever, and sometimes not so clever, marijuana puns. This is a marketing tool that has proven to be successful across several different business platforms. However, in the cannabis industry, it is very easy for this sort of creativity to cross the line from medical marijuana to straight recreational use. It is very important that in all posts, it is abundantly clear that the focus is medical only. This includes social events such as “happy hours”, which was brought up at the October 18th, 2018 licensing board meeting as “promoting recreational use.” Are recreational uses implied by the post? This question may seem redundant, but it is necessary. It serves as a second layer of checking to make sure that the intent of the social media post is purely the medical use of cannabis. Quirky posts with double meaning may be humorous, but there is nothing funny about a $6,000 application fee gone down the drain because that funny post had recreational implications. It is always better to play it safe and preserve your potential medical marijuana license, even if your real goal is to leverage your Michigan medical marijuana license into a recreational license. Would an outsider perceive this post as relating to recreational use? Often times when we post, we never stop to think of how our words may be perceived by people who may not be as familiar with the topic we are posting about. Even a well-intentioned post can be misconstrued to be in reference to something else. This is why it is extremely important for medical marihuana business owners to take extra care in making sure that these misunderstandings do not happen. Being intentional about the meaning of your posts is key to meeting the Board’s social-media standards. Takeaways In no way is this an exhaustive checklist, but it is important to consider if you are going through the prequalification process. In order to make sure your social media branding and materials are in compliance, we recommend running them past your MMJ attorney. Always T.H.I.N.K before you post! Truly Medical premise. Have the future and current license in mind. Intentional about meaning. Never referencing recreational use. Keep you keep your attorney in the loop. https://www.oak-law.com/blog/michigan-marijuana-microbusinesses-facts-hurdles-and-business-opportunities monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/ddd3023b-b65a-434f-8ac8-bbb68562ae62/unsplash-image-HgWtXLhNU6o.jpg Blog - Michigan Marijuana Microbusinesses: Facts, Hurdles and Business Opportunities - Facts, Hurdles and Business Opportunities By now you’ve probably heard of Proposal 1, which will be on the ballot this November (also referred to as the Michigan Regulation and Taxation of Marihuana Act. Proposal 1 is hoping to make Michigan the next state to decriminalize the sale and use of marijuana for adults over 21. According to the Coalition to Regulate Marijuana Like Alcohol (RMLA), the aim of this initiative is to make Michigan a national leader in smart-adult-use marijuana laws. The RMLA describes the effort to pass Proposal 1 as a coalition effort. The coalition includes many groups in the state, with the Marijuana Policy Project playing a leading role. MPP most recently has coordinated the successful campaigns to regulate marijuana like alcohol in Maine, Massachusetts, and Nevada. MPP also contributed to the successful campaign in California, Colorado and Alaska. Since Michigan’s state law regulating microbusinesses is very similar to California and Nevada, these two states provide a logical starting point when trying to predict how microbusinesses will be regulated and licensed in Michigan. In California, after the implementation of legalization, big business has swallowed up many of the smaller players and driven others out of business. According to a recently published analysis, 20% of cultivation licenses belong to just 12 licensees. Understandably, there are people in Michigan who fear that similar types of control on the industry could leave them without a viable avenue into the Michigan’s recreational cannabis market. This is because large cannabis cultivators are able to flood the market with marijuana at greatly reduced prices, often driving smaller cultivators out of business. However, the initiative as proposed in Michigan would allow state to grant six types of marijuana business licenses. The six licenses would be; cultivators, processors, testing facilities, secure transporters, retail stores and microbusinesses. At first glance you may be asking yourself, as we intially did, “What is a microbusiness?” According to the RMLA, by creating a marijuana microbusiness license, the initiative is ensuring opportunities for small marijuana businesses in Michigan. The RMLA compares the Microbusiness model to that of micro-breweries and micro-distilleries, though there are some stark differences between the business models. For example, Michigan microbreweries are able to produce and sell their own beer direct to the consumer as well as to beer distributors. The Michigan microbusiness license would allow for marijuana microbusinesses to cultivate up to 150 marijuana plants, as well as process, package and sell that marijuana directly to consumers. The license does, however, restrict the ability of those businesses to sell their marijuana or marijuana infused products to other marijuana establishments as well as restricting their ability to sell marijuana products produced by other establishments. Instead, Michigan marijuana microbusinesses can only sell directly to consumers. The goal of creating the microbusiness license was to carve out a place in the market for “mom and pop” businesses as well as avoid having these businesses pay to apply and hold four different licenses. A marijuana microbusiness license would allow small business owners the opportunity to consolidate their operation under the roof of one operation. One key element of the microbusiness license is that if you hold a microbusiness license, you cannot hold any other recreational marijuana license type. This protects Michigan microbusiness owners from being gobbled up by big business interests. However, the microbusiness model faces some hurdles, especially in areas related to zoning and municipal approval. As described above, marijuana microbusinesses will ensure the license holder the ability to go from seed to sale, all out of their own store or facility, though the sale of their cannabis products will be relegated to their own business and not anywhere else. Similar to the microbrewery and micro-distillery model, Michigan cannabis microbusinesses would be able to offer a more personalized marijuana experience, one that RMLA believes would not compete with bigger companies focused on massive, large scale grows. While this may be true, many Michiganders still fear that such sweeping legalization will lead to big business dominating Michigan’s medical and recreational markets, relegating those without deep pockets to the sidelines. Those fears are not without some justification—it seems anytime marijuana has entered the legal domain, big business has been quick to pounce. Even though Michigan’s medical market currently has barriers in place to prevent public companies from entering the medical market, these business interests are often able to work with legislators and governmental entities to twist and even change the rules of the game to their advantage. HURDLES One of the biggest hurdles facing the marijuana microbusiness model is the question regarding on-site consumption. California has dealt with this problem in the wake of legalization. In California, although legal to sell and use, consumption of cannabis in public is illegal. This represents a problem for microbusinesses because among other things, they are open to the public. However, the state has built a workaround to the public ban exception. Specifically, the state law allows cities and counties to allow on-site consumption if: (1) access to the area where the cannabis consumption is allowed is age restricted to guests 21 and older, (2) cannabis consumption is not visible from any public place or nonage-restricted area, and (3) the sale or consumption of alcohol or tobacco is not allowed on the premises. Section 4.1(e) of the MRTA places the same restrictions and allows for the same workarounds as the California law. So in the event that Proposal 1 does pass, we are likely to see similar regulation of on-site consumption. This could limit the potential breadth of business models for hopeful microbusiness owners, but would nonetheless still allow Amsterdam-style coffee shops to proliferate throughout the State. It could also lead to greater diversity in what is permissible from city to city. In California, some cities like L.A have completely nixed the idea of onsite consumption. In contrast, San Francisco has supported the idea of the Amsterdam-style cannabis lounge. Oakland is allowing dispensaries the opportunity to apply for, and obtain, secondary onsite consumption permits. With the law in California and the proposal being so similar, a lot of what has been implemented thus far in California could make its way to Michigan. Since the sale and consumption of tobacco will not be allowed on premises that allow onsite consumption, we cannot be sure if the same hurdles that Michigan hookah lounges and cigar bars have faced will also be problems for the cannabis lounges. Even so, many cigar bars and hookah lounges have been able to work around the ban of food or drink products in the same area as smoking. Usually, this involves the use of a sub-divided building that has two completely separate areas of preparation and addresses, with one address housing the food and beverage prep areas and the other the smoking area. In Nevada, microbusinesses face additional hurdles in the form of zoning restrictions. Specifically, since microbusiness licenses are a “seed-to-sale” product license, it is often difficult to find an area that allows all of the uses allowed under the license. For instance, you may be able to find an area that allows for retail and cultivation but not processing. This would cause a problem for microbusiness owners in Michigan because they would not be able to grow, process and sell their marijuana products from one, vertically integrated facility. Another potential hurdle is the fact that the MTRA leaves much of the details to LARA, which could become co-opted by “Big Cannabis” interests looking to squash smaller competitors. Since LARA will dictate the rules of the road, it has the potential to make the requirements so onerous and burdensome that marijuana microbusinesses will have a hard time competing with larger facilities. BUSSINESS OPPORTUNITIES While cannabis business owners may face some hurdles in starting a Michigan marijuana microbusiness, there are also plenty of opportunities for those able to obtain a license. When people think of microbusiness related to marijuana, they usually think Amsterdam-style coffee houses. It makes sense since those coffee shops are iconic tourist stops and offer not only the ability for you to purchase your cannabis but consume it along with a tasty beverage or snack. The problem is onsite consumption requirements. Upon legalization, Michigan cities and counties will be able to opt-in or out of those requirements. I imagine there will be some cities who allow such businesses and others that completely ban them. Even the cities that do “opt-in” and allow microbusinesses may nonetheless regulate them extensively. In addition to coffee shops, licensed microbusinesses in California are also able to deliver cannabis goods to their clients. This helps ensure that smaller operations are able to maximize their customer base. Delivery businesses will likely have to compete against provisioning centers here in Michigan, however, since the proposed MMFLA rules allow for delivery. Delivery-focused microbusinesses may still be able to compete with provisioning center delivery services if they are able to streamline their operations and keep overhead low, as provisioning centers face relatively high-fixed costs. The Michigan microbusiness license could be utilized for other types of cannabis businesses as well. For instance, a cannabis microbusiness could be a boutique edible shop, which would allow the holder of that microbusiness license to take their product from seed to finished product in-house. Additionally, many microbusinesses are considering an all-inclusive business model. These types of business would be similar to a vertically integrated grow / process / provisioning center facility, except that they may be able to offer their customers the ability to sample marijuana products produced by the microbusiness. In addition, these marijuana microbusiness could allow customers to take guided tours through the facility. Tours would involve seeing where and how the marijuana is grown, how it is processed, and how it gets to the final product. Such business models are being proposed by California-based companies, who expect a heavy influx of canna-tourism with the approval of recreational marijuana. This type of business model may be able to thrive because it differentiates not only the product you receive from microbusinesses, but also sets the microbusinesses apart from large scale grows or larger, vertically integrated cannabis businesses in a way that is distinct to smaller operations. These microbusinesses will be able to offer products tailored to their consumers and show the consumer every step involved in the process. This could also create a niche market for those who would consider themselves cannabis enthusiasts. Similar to how microbreweries and wineries offer custom tours of their facilities (that almost always, conveniently, end in a gift shop), marijuana microbusinesses could be able to tap into this business model as well. LARA LICENSING AND REGULATION Licensing right now is up in the air as the MRTA provides LARA with the ability enact rules regulating the licensing and operations of Michigan marijuana microbusinesses. What we do know is that the licensing fees must be related to the actual cost of administering the program, which should keep the fees relatively reasonable. This is in contract to states like Nevada, which sets its license assessments based on expected revenue, leading to license assessments ranging from $5,000 to $120,000. In addition to the license assessment fees, there are still many unknowns when it comes to Michigan microbusiness licensing and regulation. LARA is given broad authority to enact rules to regulate this license type, and it has until the end of 2019 to implement a system to license and regulate MRTA licenses, including microbusiness licenses. TAKE AWAY The marijuana microbusiness model, in all the states where it has been embraced, has been compared to craft breweries. A small operation that feels much more “mom & pop” than the industrial sized multiple Class C grows. This model would allow for the creation of a more diverse and individualized market. A market where microbusinesses could offer their clients something that big marijuana operations cannot; a personalized touch, a name and face to the product, and an in depth understanding of every step of the process that brought this product to them. This type of model could resonate well in Michigan, which has whole-heartedly embraced craft breweries, specifically in cities that have seen an influx of businesses and young professionals, like Detroit, Ann Arbor, and Grand Rapids. The character, spirit and charm of these cities is usually incorporated into the small businesses that occupy their buildings, and this sort of authenticity resonates with tourists and young professionals. What does this mean for you? It means the microbusiness model could offer you an alternative avenue into the marijuana market, especially if you are a caregiver unable to meet the MMFLA’s steep capitalization requirements. This license type may not be right for everyone, but is right for those that would like to offer a unique experience in the marijuana market. Whether the model you choose is an Amsterdam style coffee house, an upscale private smoke club (like the Barbary Coast in San Francisco) or the winery / micro-brewery type “tour and taste” operation, the MRTA’s microbusiness license may be your avenue into the Michigan Cannabis market. https://www.oak-law.com/blog/cbd-and-hemp-lawyers monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/331d6107-a952-44bf-b059-9525baac7e6b/unsplash-image-uzDCTCx6GXE.jpg Blog - The Legality of CBD and Hemp in Michigan: The Good, The Bad, and The Future - The Good, The Bad, and The Future Due to legal and regulatory changes in the industry, including the 2018 Farm Bill and recent changes in the implementation of Michigan’s 2014 Industrial Hemp Research Act, the information contained in this Article may no longer be accurate. Please contact an attorney before relying on any information contained in this Article. For more information on cultivating hemp, or the Hemp Pilot Program in Michigan, check out our recent article. If you are reading this, you probably already know a good deal about CBD. However, you probably have the same question as many of our clients, is it legal to make and sell CBD in Michigan. The answer? “It depends.” As practicing CBD and Hemp Attorneys, “it depends” is an all-to-common answer for questions involving CBD and medical marijuana. However, this article will be an in depth analysis of the current state of affairs with regard to CBD production and sale in Michigan and is meant to provide more context to this all-to-common attorney answer. The Bad News Michigan’s administrative guidance on legality of CBD is in line with the DEA’s guidance on this issue. LARA’s guidance state’s that “any extracts of marihuana or extracts of the marihuana plant will continue to be treated as marihuana.” LARA’s reasons are straightforward—because CBD can only be manufactured using marijuana or industrial hemp, and the state has not granted any industrial hemp manufacturing licenses, CBD regulation must fall under Michigan’s medical marijuana laws. In other words, LARA wants to regulate CBD as a controlled substance the same as it regulates marijuana. On the federal level, the DEA has stated that CBD is regulated as a controlled substance. There is one major caveat being: CBD derived from hemp grown in compliance with state and federal law is legal. According to the DEA, as long the hemp is grown in compliance with federal hemp laws, “such products may accordingly be sold and otherwise distributed throughout the United States without restriction.” Parroting that stance is Michigan’s hemp research statute, which defines industrial hemp as Cannabis Sativa with less than 0.3% THC. There is no qualifier in the definition for where or what purpose the CBD was produced. Most importantly for legal purposes, the second to last sentence of Michigan’s guidance on CBD states: “Marihuana does not include industrial hemp grown or cultivated (or both) for research purposes under the industrial hemp research act”. Another piece of bad news is that the current administration in charge of the executive branch of the federal government seems to not care about the actual legal status of CBD. One CBD producer out in Colorado—Pure Spectrum—reported that the U.S. Postal Service refused to ships its products, even after they established that the products were produced in compliance with federal laws. Loopholes and the Law This potentially leaves a glaring hole in LARA’s blanket CBD ban – CBD legally produced from industrial hemp outside of Michigan in compliance with federal and that state’s industrial hemp programs authorized under the 2014 Farm Bill. Out-of-state CBD produced in a state with a federal law compliant industrial hemp bill—e.g. Tennessee, Colorado, Kentucky and California—could therefore likely be legally sold by Michigan retailers and wholesalers. The flip side of this is that any CBD produced in Michigan would be regulated like Marijuana because the state’s hemp laws do not currently authorize commercial industrial hemp production. Instead, they merely authorize hemp production for research purposes. While such a hole is good for those that would sell CBD products, it puts Michigan CBD producers at a huge disadvantage. They cannot currently grow industrial hemp to produce CBD because Michigan has not approved any commercial “pilot programs.” For those that do produce CBD from marijuana, they are relegated to selling exclusively to Michigan residents with a MMMP card, which is less than 2.5% of Michigan’s population. Even more problematic for CBD producers in Michigan is the fact that the CBD produced under the MMMA or MMFLA is not cost competitive with CBD derived from commercial hemp. This type of stranglehold placed on Michigan CBD producers prevents them from competing in the growing national and international CBD market. For now this legal gray zone is where CBD exists in Michigan. The gray zone was only discovered by a close reading and analysis of current state and federal law. As CBD and hemp attorneys, the best we can do for CBD products and production is tell you where the State and DEA have drawn the lines, and where the spaces between those lines present an opportunity for you. Sellers of CBD products can operate but need to be thorough in their research. “Caveat Venditor” is Latin for, “let the seller beware”, and in the legal world it is usually relegated to contracts and property issues. However, when dealing in the legal minefield that is Michigan CBD law, CBD retailers in Michigan need to make sure their products are sourced from appropriate vendors. This means checking out the CBD producers to make sure they are actually operating in accordance with state and federal hemp laws. Otherwise, sellers open themselves up to prosecution on the state and federal level. Producers of CBD in Michigan, on the other hand, are relegated to a fraction of the market. They must operate in accordance with the MMMA and MMFLA, which are clearly defined in their parameters, but do not present to producers the same avenue for profit and growth as out of state producers. For in state producers and sellers, the risk of government overreach still exists. The fact that a valid legal defense exists has not stopped state action in the past. In Tennessee, “Operation Candy Crush” resulted in the arrest of 21 store owners in connection with the sale of CBD products. The arrests and charges were all dropped when it could not be proved that the sale of CBD products was actually illegal under state law. This type of overreach is a possibility with the current status of Michigan’s CBD laws. The Future—Hemp Bills Being Considered Currently there are three bills in front of the Michigan House of Representatives. The bills all address the classification of industrial hemp and how it will be categorized going forward. The bills are numbered as follows; HB 6330, HB 6331 and HB 6380. 6330 and 6331 were introduced on the 25th of September, 2018, while 6380 was introduced on the 26th. HB 6330 aims to change the name of Michigan’s Industrial Hemp Research Act to the Industrial Hemp Research and Development Act. Additionally, the bill would also update the definition of industrial hemp. The expanded definition would include viable seeds of the plant and all derivatives, extracts, cannabinoids, isomers, acids, salts and salts of isomers. The bill would also amend the act by adding several new sections. The most important and notable of which would require the Michigan Department of Agriculture and Rural Development to establish grower and processor-handler licenses, which would apply to all person 18 years and older growing industrial hemp in Michigan. The specific language of the bill does expressly give growers the ability to sell industrial hemp to medical marijuana facilities under the MMFLA. The bill makes no mention of whether CBD related products could be sold outside of the boundaries and requirements of the MMFLA. However, the expanded definition and ability to license outside of Colleges and Universities does seem like a promising shift, though the bill expressly requires that growers and processors also submit a “research plan” with their applications. HB 6331 is far less dense and is focused on the definition of industrial hemp. The definition would match the definition proposed in HB 6330. However, this bill would update industrial hemp’s definition within the Public Health Code. The bill would clarify the Public Health Code to make crystal clear that industrial hemp grown, processed or handled under Michigan’s industrial hemp laws would not be considered marijuana. What does this mean? It means that industrial hemp and products made from it would not, under the Michigan Public Health Code, be considered marijuana—as long as they are made in accordance with the Industrial Hemp Research and Development Act. Sound familiar? It should as this language almost exactly echoes the language used in the 2014 Farm Bill referenced above. HB 6380 is a bill focused on amending the MMFLA to exclude industrial hemp from the definition of marijuana plant for purposes of the Act. HB 6380 would also require that LARA make and set rules by the March 1st, 2019. The rules would establish standards, procedures and requirements for the sale of industrial hemp from a provisioning center to a registered patient. This bill attempts to contrast industrial hemp with marijuana, but is really just a call for an action plan when it comes provisioning centers and industrial hemp. It is hard to decide what to make of this bill. The previous HB 6330 and 6331 seemed to follow in line with the federal Farm bill while HB 6380 seems to tie the legality back to the MMFLA. The Future—The Michigan Regulation and Taxation of Marihuana Act The ballot initiative to “regulate marijuana like alcohol”, also known as the Michigan Regulation and Taxation of Marihuana Act or MiLegalize ballot initiative, specifically addresses the issue of hemp production. If passed, the RMLA would allow for the commercial cultivation of industrial hemp in Michigan as well as legalize the sale of products derived from industrial hemp in Michigan. This could help put the state back on equal standing with other states that have taken the lead on hemp and CBD production. There could be a snag, however. While the RMLA legalizes and authorizes the growing of hemp and processing and sale of hemp derived products such as CBD, it also gives LARA the authority to issue rules “to regulate the cultivation, processing, distribution, and sale of industrial hemp.” Here, we hope LARA exercises a “light touch” when it comes to regulating hemp and CBD production. With the state already years behind other states in terms of hemp and large-scale commercial CBD production, the last thing we need is more regulations to tie the hands of Michigan businesses looking to gain equal footing with other CBD producers. Even more concerning, is the fact that production under new recreational laws, may not be considered a “pilot program” under the Farm bill. Without the fix being proposed by HB6330, however, hemp production under the MRTA would still be illegal under federal law. However, this would still be a step forward for prospective Michigan hemp and CBD businesses since it would open the door to all Michigan CBD consumers, as opposed to just those with an MMMP card. The MRTA also has the potential to put Michigan hemp and CBD producers on equal footing with their out-of-state competitors, especially since the new hemp laws being proposed provide the additional fix that would bring Michigan commercial hemp production in compliance with federal law. As a result, the MRTA would be a much needed shot in the arm for CBD and hemp producers in Michigan. This initiative will carve out a place for CBD in our laws that is not reliant on loophole legality and greatly expand the market for Michigan CBD producers. Side note: Make sure you get out and vote in November! CBD and Hemp Under Current Laws While the future may be bright for Michigan CBD production, there are state laws that currently allow for the production and sale of CBD. Below is a recap of the state’s current Marijuana laws that could be used to legally produce CBD, as well as an explanation on how the state’s ballot proposal could be a game changer for Michigan CBD businesses. CBD Under the MMMA Michigan currently has two laws that would provide protection for the production and sale of CBD, but only under certain circumstances. The first law is the Michigan Medical Marihuana Act, or MMMA, which has been around since 2008. This law allows the sale of Marijuana from a registered caregiver to their patient. Because CBD is arguably considered to be legally the same as Marijuana, the protections in the MMMA for the sale of Marijuana also apply to CBD. That means that caregivers in Michigan can legally sell CBD produced from Michigan Marijuana to their patients. Technically, this only protects the sale of CBD to one of the caregiver’s registered patients and would not protect caregiver-to-caregiver sales or sales from a caregiver to another caregiver’s patient. In practice, however, caregiver-to-caregiver transactions and sales to other patients are common and the court cases prohibiting them rarely enforced. Thus, the MMMA would provide some practical protection for producers and sellers of CBD, even where the law does not technically provide for the type of production and sales that are common in the CBD market. CBD Under the MMFLA Next Up? The Medical Marihuana Facilities Licensing Act, or MMFLA. The MMFLA authorizes the commercial-scale growing and processing of Marijuana, meaning it would also authorize the large scale growing of Marijuana for CBD production and the processing of CBD and other cannabinoids such as THC and CBN. I’ve met many growers who plan on taking advantage of the MMFLA to produce CBD-only products as well as high-CBD Marijuana products. The problem with this law is that it would only authorize the sale of CBD to patients registered under the Michigan Medical Marihuana Program, or MMMP. Because the MMFLA only allows certain licensed provisioning centers to sell Marijuana products to patients, and only licensed processors to produce CBD products, the MMFLA still imposes severe restrictions that make it uneconomical compared to other methods of production and sale. While there are hundreds of thousands of MMMP patients in Michigan, these patients represent only a fraction of the millions of potential CBD customers in Michigan. CBD Under the IHRA That brings us to the Industrial Hemp Research Act. The problem with this law is that Michigan currently has not issued any IHRA Hemp production licenses. This is not because Michigan is discouraging potential license holders—according to LARA officials, there simply has not been much interest in hemp research licenses. The reason for this is that the IHRA is limited to research facilities. We looked into this issue for a client of ours and were somewhat surprised with how cooperative and even enthusiastic LARA officials were in going through the process to issue an IHRA license. We also learned that there is no official process in place for issuing these licenses. While this can be either a good or bad thing depending on the situation, given LARA’s interest in issuing a license under this program, this law could provide protection for CBD produced from hemp, but only to those that do so in conjunction with a college or university. The IHRA also does not authorize the sale of products derived from the growing of hemp “for research purposes.” Moreover, with most colleges and universities unwilling to jump into the political minefield that is CBD and medical marijuana regulation, it is not surprising that no licenses have been issued under this law. The Bottom Line Michigan commercial CBD producers can only currently produce CBD in compliance with the state’s medical marijuana laws—the MMMA and MMFLA. If and when the 2018 ballot initiative passes, however, Michigan companies would be able to derive CBD from state-legal, commercially grown industry hemp and sell these products to all Michigan residents, not just those with an MMMP card. This could allow Michigan businesses to profit from the lucrative and fast growing CBD market. https://www.oak-law.com/blog/temporary-authorization-deadline-changed-to-october-31st-2018 monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/08d91d80-1d68-4d08-aee4-f20b041b9804/unsplash-image-bn4PuDWVC1U.jpg Blog - Temporary Authorization Deadline Changed to October 31st, 2018 - Deadline Changed to October 31st, 2018 Dialing back previous guidance that gave temporary operators until December 15h to obtain an MMFLA license, LARA released guidance moving the temporary authorization deadline forward to October 31st, 2018. The deadline had just been extended till December 15th for certain temporary operators that had gotten their facility application in before July 15th, which was later subject to a restraining order allowing all temporary operators to stay open past the September 15th deadline. It is likely that many of temporary operators that would have been affected by LARA’s last guidance on this matter will be the ones who are affected by this latest change in guidance. What does this mean? Many medical marijuana dispensaries—it is currently unclear how many—will be forced to shut down while they await licensure from the State. This is not necessarily the fault of the applicants, however. LARA has been slow to process MMFLA license applications, though there have been rumors that LARA is “staffing up” to get through the backlog. The rationale behind this sudden decision appears to be a result of a focus by LARA to push licensees into the system. Currently, the State of Michigan has not required the testing of products or secure transportation and has allowed provisioning centers to buy from caregivers until there is enough licensees in the system for this to work. This of course begs the question—is there enough licensees for the system for this change to make sense? With only a limited number of safety testing facilities, secure transporters, and growers, it is possible that this ruling grinds the soon to be implemented system to a screeching halt. While this certainly hurts many Cannabis facilities who are slogging through the state MMFLA process, it will significantly benefits others. For example, if there are only a handful of MMJ secure transporters, these transporters will likely be swamped with business and can essentially set their own prices. Same goes with licensed safety testing facilities. With only two testing facilities licensed by the State, will they be able to handle all of the testing? Additionally, with the limited number of growers, is there enough Marijuana to supply the entire state’s patient population, or will patients be forced to call up their old caregivers or find a temporary one online? There are currently only 12 active licensed Medical Marijuana facilities in the State of Michigan according to BMMR records, though this is likely to increase significantly with the upcoming Licensing Board meeting in October as well as the facilities from September now deciding to pull the trigger on the licensing assessment. Even so, it is hard to imagine Michigan’s medical marijuana licensing system can run with only a dozen, or even a couple dozen, licensed facilities. With so many unanswered questions, it seems strange that LARA is rushing ahead to fully implement the system by the end of the month, especially with the possibility that the deadline could limit access to medicine for patients just a week before a hard fought election. Nonetheless, LARA is charging ahead with the new deadline, for reasons that are not quite clear. Changes Every Week There is certainly some irony in this decision. As the State is taking great pains to push people into the new licensing system, they will likely end up doing the opposite, at least in the short term. With the lack of facilities to actually service Michigan’s medical marijuana patient population, caregivers that were being pushed out of the system are being given a temporary reprieve. Put another way, there is simply not enough licensed growers to provide all of the state’s dispensaries with Cannabis products, so Caregivers will have to step back in. This also means that Michigan provisioning centers will be put in a pickle. If there are only a handful of growers, and every other provisioning center will be scrambling to but from one of those growers, can they? Most growers need 3-4 months after opening to harvest and cure their first crop, which by my unofficial count, leaves only one licensed grower with enough lead time to supply the whole state starting in November. This will almost certainly raise prices substantially, which will in turn cause patients to flee back to the old caregiver model. Another question this sudden departure from previous guidance raises is how MMJ owners and cannabis attorneys are supposed to operate in a system that seemingly changes by the week. How do owners plan ahead when the rules of the road are constantly changing? This isn’t the first time the process has changed. Previously, the State of Michigan officials were saying the whole application process would take four months. Now, an applicant would be extremely lucky to get through just Part 1 of the MMFLA application process in six months. The State is only beginning to process applications that were sent in more than three months ago. Another example would be the change in criminal disclosure requirements, which has driven most of the application denials. When the application was first released, a supplemental applicant only needed to disclosure certain types of felonies and misdemeanors, and only those that happened in the last ten years, or in some cases five years. The application was later changed to require ALL felonies and misdemeanors be disclosed, including traffic related misdemeanors, which caused significant problems for many applicants. If provisioning centers and other growers seeking MMFLA license knew about this in advance, like many of the other changes suddenly instituted by LARA< they likely would have had time to prepare. But without time to prepare, it is unclear how the system will work in the next few months without a sufficient amount of growers, safety testers, and transporters. New Patient Waivers It certainly was a busy day for LARA, which also released guidance today stating that temporary operators must obtain waivers from their medical marijuana patients with respect to products that have not been tested in compliance with the MMFLA rules. Provisioning centers will now need to obtain a waiver from each patient who buys a product that was not tested under the MMFLA rules. If you operate a provisioning center, this will certainly create a lot of additional paperwork and headaches. If you are a patient, you should expect longer lines as dispensaries deal with this new requirement, not to mention the increase in business by patients seeking to “stock up” before they potentially lose access to affordably priced medical marijuana next month. https://www.oak-law.com/blog/mmfla monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/5875fe5f-a3c4-49b4-afad-85717c55d074/unsplash-image-Dwheufds6kQ.jpg Blog - An Overview of the Proposed MMFLA Rules: Confirmations, Clarifications and Revelations - Confirmations, Clarifications and Revelations The Department of Licensing and Regulatory Affairs released a new set of draft rules to replace the Medical Marijuana Facilities Licensing Act (“MMFLA”) Emergency Rules. While in most cases the proposed rules are in line with the Emergency Rules, there were some substantial, and some subtle, differences between the two. Below is a summary of the proposed rules broken into three categories. The first category—confirmations—reflects situations where the proposed rules are in line with the Emergency Rules or what LARA has been advising us over the past year. In other words, the old requirements or guidance, many of which were potentially subject to change—are officially confirmed as part of the proposed rules. The second—clarifications—reflects some minor tweaks between the Emergency Rules and proposed rules. The final category—revelations—lists the instances where the proposed rules made major changes from the previous Emergency Rules and LARA guidance. Confirmations As LARA has been informally advising applicants, licenses are good for one year following the license issuance, as opposed to being calculated on a fiscal year basis. As we long suspected, all you have to do to have multiple facilities at the same property is to have “separate business suites, partitions or addresses.” LARA can enter your facility at any time, without notice or a warrant, to conduct an inspection. Co-located facilities still need to keep each licensee partitioned from other licensees, as well as have separate entrances and exits, inventory and recordkeeping, and more. No Coffee Shops. The sale, consumption or serving of food is prohibited at a facility, as is the consumption, use or inhalation or marijuana at a facility. Michigan will have to wait for Amsterdam-style coffee shops. Other than state officials, as well as registered primary patients or caregivers, only employees of the licensee are allowed inside the facility, with the exception of a waiting room for non-authorized personnel. Samples for safety compliance testing will be physically collected by the safety compliance facility, not a secure transporter. LARA can put an “administrative hold” on any marijuana product that is subject to an investigation for an alleged violation of the MMFLA or its rules. Not only that, but LARA can audit any records as well as take “any reasonable or appropriate action” to enforce the MMFLA, giving LARA quite the broad mandate to investigate and take action against licensees. Any change in location requires a new MMFLA application. Michigan provisioning centers can sell to out-of-state patients who are registered under their own state’s respective medical marijuana programs. A Michigan MMFLA application could cost more than $6,000, though I have yet to see LARA do so. The proposed rules state that if the cost of an investigation exceeds this amount, the applicant will pay for the additional cost. It’s not clear what costs are being counted to make this determination though—does the time of the LARA examiners count? If so, what is their “billable rate”? The attempted transfer, sale or conveyance of an interest in a Michigan MMFLA license without seeking prior approval is grounds for suspension or revocation of the license. What happens when an MMFLA violation is found? LARA has several options: license denial; license limitation; fines; revocation, suspension, nonrenewal or administrative hold on a license; or an order to cease operations. In other words, LARA has many tools in its toolbox to enforce the MMFLA. Fines are limited to $5,000.00 per individual. For companies, it’s the greater of $10,000.00 or daily gross receipts. While some variance is allowed between edible marijuana products, the acceptable allowable variation for weight and “homogeneity” (e.g. THC content) is plus or minus 10%. Less than one percent owners need to be disclosed, though they are still exempt from submitting a supplemental application. Instead, they must submit their date of birth, government issued ID, or any other documentation required by the act. Any transfer in an interest in a licensee also must be disclosed, and again, there still is no 1% ownership qualifier. This provision is a big deal as it effective prevents public companies from entering Michigan’s cannabis market (See: Michigan’s Mom and Pop Marijuana Market) Clarifications As we have been advising clients, you can use real estate that is encumbered by a mortgage for capitalization purposes. While the MMFLA Emergency Rules stated that no asset used for capitalization could be encumbered, the proposed rules now clarify that assets that are encumbered or have a lien cannot be used except for real estate that is encumbered by a mortgage. This merely codifies LARA’s existing practice of allowing mortgaged real estate to be used for the non-liquid portion of the capitalization requirements. The MMFLA license renewal process will not be a cake walk. You must apply for renewal at least 90 days before the expiration of your MMFLA license. LARA has outlined what is required for the renewal process, such as any material changes in information or suitability, owner and municipality attestations, and more. Not only that, but applicants must also pay for the cost of an additional background investigation. As they say, nothing good is free. Any addition or removal of owners must still be pre-approved by LARA before such transfer can take place. However, the proposed rules still do not provide much detail on how the approval process will work in Michigan. Secure transporters can only hold marijuana product for 48 hours without permission by LARA. Previously, the Emergency Rules stated only that a “reasonable” amount of time a secure transport could hold Marijuana was 48 hours. This would officially put an end to the idea some secure transport companies were considering—the “hub and spoke” business model. Under the Emergency Rules, video surveillance systems were only required to have videos of “sufficient resolution.” The proposed rules now clarify that video must have resolution of no less than 720p. The testing requirements for marijuana were slightly scaled back so that Michigan safety compliance facilities no longer have to test for terpenes. A marijuana product that is to be destroyed or is considered waste must be rendered unusable by grinding and incorporating the marijuana product into a non-consumable solid waste (e.g. food waste, paper waste, etc.) with the marijuana product being less than 50% of the total combined waste product. For packaging of edible marijuana products, not only must the packaging still be child proof, but the edible must also be packaged in a resealable, opaque package or container as previously provided in LARA guidance (but not in the MMFLA Emergency Rules). Revelations A brand new rule was announced that would allow for deliveries by provisioning centers. Specifically, a Michigan provisioning center may employ a delivery driver who can deliver to a patient’s home address. An MMFLA licensee must first create a home delivery procedure that is approved by LARA. A home delivery driver is limited to no more than 3 registered patients per trip. The driver is also prohibited from carrying marijuana valued in excess of the patient’s orders. MMFLA prequalification status (also known as “Part 1 approval”) does not last forever. While you can sit on a Part 2 application for a little bit, you can’t sit on it forever. A finding of prequalification is valid for one year, unless otherwise determined by the department. When collecting batch samples, a safety compliance facility in Michigan must sample not less than 0.5% of the total weight of the batch, and no batch may be more than 15 pounds of marijuana. Accordingly, while the maximum batch size is still 100 plants, the maximum batch size for testing purposes is 15 pounds of cannabis. Edible marijuana products must now state their expiration or use-by dates, which is the date that the product would no longer be fit for consumption or the date in which the marijuana product will no longer be optimally fresh. Processed marijuana must now have National Poison Control Center information on the label. In addition to daily sales limits, the proposed MMFLA rules would impose monthly sales limit on provisioning centers of 10 ounces of marijuana flower per patient. It is not 100% clear if this is calculated on a calendar basis or on a rolling 30-day basis. Not only must advertising still not be visible to the general public (i.e. billboards), but an MMFLA licensee must also not advertise in print, broadcast, cable, radio or digital communication except directly to registered patients. The handling of all marijuana products, not just processed marijuana products, must now be done in compliance with the Current Good Manufacturing Practice in Manufacturing, Packing or Holding Human Food, 21 CFR 110 (2017). In addition, the storage of any edible marijuana products must be separate from other marijuana products and must also comply with this regulation. While the above lists are not exhaustive, they highlight key changes as well as similarities between the MMFLA Emergency Rules and LARA’s proposed rules released August 23, 2018. It is important to note that the proposed rules are not final—at least not yet. Under Michigan’s rule making process, the rules must first be subject to public comment before they can be finalized by LARA. https://www.oak-law.com/blog/michigans-mom-and-pop-marijuana-market monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/28c1af8b-ddce-4dd8-a69f-d6a8500a0ab4/unsplash-image-qvWnGmoTbik.jpg Blog - Michigan’s Mom and Pop Marijuana Market - Mom and Pop Marijuana Market Marijuana stocks are all the rage in the United States and Canada, with cannabis companies being traded on the New York Stock Exchange, Nasdaq, and the Toronto Stock Exchange. Yet, none of these publicly traded companies have applied for a Michigan medical marijuana business license, despite the fact that Michigan is one of the biggest medical markets in the county. Not only that, but Michigan is set to vastly expand the size of its cannabis market if it successfully approves the recreational marijuana ballot proposal this November. Why have the bigger players stayed away? As we discussed in a previous article, part of the reason may be the Marijuana micro-business concept that is part of the recreational marijuana ballot initiative. But this doesn’t explain it all, as surely at least one of these publicly traded companies would dip their toes into the Michigan cannabis market. The market is simply too big and too lucrative for this to be the sole explanation. The MMFLA Rules So what’s keeping these large, publicly traded companies from coming to Michigan to get their piece of the pie? The answer is two seldom-discussed regulatory provisions, which were initially included in the Emergency Rules and eventually made it to inclusion in the proposed final rules. These two rules make it highly impractical for non-closely help companies to enter Michigan’s cannabis market, and virtually impossible for publicly traded companies to enter the state’s cannabis market. Nonetheless, these two rules have garnered little discussion in the newspapers, magazines and blogs covering Michigan’s medical and recreational marijuana markets. One rule covers the disclosure of MMFLA facility owners, and one covers the transfer of ownership interests in an MMFLA-licensed facility. The first rule simply requires an applicant “disclose the identity of every person having any ownership interest in the applicant with respect to which the license is sought including, but not limited to, date of birth, government issued identification, or any other documents required by the act.” While only those with 1% or greater interest must fill out a supplemental application and disclose their criminal and financial history, this rule applies to every person with an ownership interest in a licensed medical marijuana facility. For publicly traded companies, disclosing every owner would be incredibly difficult given how frequently ownership interests are traded back and forth on the stock exchange. But to also require that each owner also provide a government-issued identification would make it virtually impossible for publicly traded companies to own a Michigan medical marijuana facility. With publicly traded stocks having anywhere from thousands to hundred of thousands of owners, it isn’t hard to see why this rule would prevent public companies from entering the Michigan cannabis market. The second rule simply requires that every transfer of ownership be submitted for approval to LARA. Similar to the first rule, there is no minimum transfer threshold, below which no reporting is required. That would mean that every sale of stock or membership interest in a Michigan medical marijuana facility would need to be pre-approved by the State, which effectively prevents a cannabis company operating in Michigan from being able to list itself on a stock exchange. These two rules combine to not just prevent publicly traded companies from entering the Michigan marijuana market—at least with respect to the growing, processing, selling, testing and transporting of cannabis—but also to prevent many other larger private companies from entering the market. Application Process Serves as Additional Hurdle to Larger Companies While many companies fall into one of two categories—publicly traded companies with numerous owners and closely held companies with only a handful of owners—some fall somewhere in the middle of this spectrum. A company may instead have a few hundred small investors, a few dozen larger investors, or the backing of a private equity company or institutional investor that in turn has dozens or even hundreds of owners. These “middle ground” companies would also be affected by the rules, as it would make it difficult for these investors to sell their Michigan cannabis investments. Since many investors, especially those in private equity, invest solely to sell their investment for more money at a later date, the transfer restrictions in the second rule would make this process more difficult. The MMFLA approval process would also limit the number of available purchasers for an owner’s equity interest in a marijuana facility, which would in turn limit the total sale price a seller can attain. Michigan’s intensive background checks also serve to keep many of these companies out of the Michigan cannabis market. While only those with a 1% or greater interest in the company must file an MMFLA supplemental application, companies with dozens of owners with 1% or greater interest would be faced with quite the daunting application process. Now assume most of these owners are high net-worth individuals with dozens of financial institution accounts and business interests that need to be disclosed on the MMFLA application. These companies would be faced with thousands if not tens of thousands of pages of disclosures in the form of bank statements, tax returns, litigation documents and more. Michigan is for Mom and Pops Michigan’s facility licensing law, the MMFLA, is tailored to give smaller cannabis companies an advantage over larger, publicly traded companies or even larger, non-closely held private companies. But due to how the recreational ballot initiative is structured, this advantage would also extend to recreational marijuana if the ballot initiative passes in November. While the MMFLA governs medical marijuana, these rules would also have the practical effect of keeping larger companies out the highly lucrative recreational market. This is due to the fact that, for the first two years of the program, Michigan’s recreational law limits those who can hold recreational marijuana licenses to those who already have medical marijuana licenses, with the exception of micro-businesses and small 100 plant grows. Thus, the MMFLA rules serve to restrict publicly traded companies from entering both the medical and recreational markets. In the absence of large, established, and well-funded out-of-state competitors, local companies and smaller out-of-state players will control the Michigan cannabis market for the near future. These smaller mom and pop companies will have several years to build themselves up before facing eventual larger competition towards the end of 2021 after the recreational licensing process opens up. But even this isn’t totally bad for mom and pop cannabis companies in Michigan. Many marijuana business owners hope to eventually make an exit from the business in the form of a large, lucrative buy-out from a much larger company. Many larger companies may decide it would be easier to simply buy an existing facility or Michigan marijuana company than start fresh in a competitive market. This is compounded by the fact that companies also need municipal licensing in order to operate, and the most desirable municipalities and locations in Michigan will be mostly picked through. The Takeaway Michigan’s cannabis market is well-suited for smaller, mom and pop investors and cannabis companies, who are protected from competition with publicly traded companies and other large, institutionally backed cannabis companies. The sections of the MMFLA Emergency Rules that served to prevent larger companies from entering the market were included in the final draft rules released by LARA on August 23, 2018. This will solidify the advantage mom and pop companies have in the Michigan market. This situation contrasts with other large recreational marijuana markets like California and Oregon, both of which are being flooded with established national and international companies with financial backing from institutional investors, private equity, and public offerings. https://www.oak-law.com/blog/edible-marihuana-products-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/62826553-5d02-4d10-a084-0b559b2efd3e/unsplash-image-M5WX9Xr36N8.jpg Blog - Edible Marihuana Products in Michigan - Edible Marihuana Products in Michigan Michigan’s Department of Licensing and Regulatory Affairs (LARA) recently put out an advisory bulletin explaining the importance of processing safe, edible medical marihuana products. This advisory was put out to help guide Michigan Cannabis businesses looking to obtain a processor license under Michigan’s Medical Marihuana Facilities Licensing Act (MMFLA). The advisory sets forth guidelines for the production of edible Marijuana products in Michigan. Under the MMFLA, processors have the freedom to be creative and innovative while making marihuana infused products for the medical market. Processors are able to produce edible products ranging from your typical brownies, cookies and candy to not-so-common items such as salad dressing or hot sauce. Some of these products were discussed in our earlier article, “What Can You Do With An MMFLA Processor’s License”. As processors, you have a world of possibilities when it comes to producing edible products. However, it is important to be aware of the limitations in the MMFLA and emergency rules for edible products and packaging that MMFLA allows. What exactly do we mean by edible? The term “Edible marihuana products” refers to any marijuana-infused product that is safely intended for non-smoke inhaled, human consumption. Essentially, this is any product that can be eaten or drank rather than smoked. This could include: Baked Goods - Bread, Cookies, Muffins, Cakes, Fruit pies (cooked) Snacks - Popcorn, Granola, Nuts, Dehydrated fruits and vegetables, Chocolate covered pretzels, Marshmallows, Graham Crackers, Cereal bars Other common items - Dried pasta, Coffee beans (roasted or grounded), Jams and jellies, Vinegars, Pop No Cold Goods For safety, the MMFLA Emergency Rules restrict processors from making cannabis products that require refrigeration. Typically, foods that require refrigeration need the cooler temperatures to prevent the growth of microorganisms and toxins. These type of foods have a higher probability for bacteria, protozoa, and fungi, which can cause foodborne illness such as botulism. This means that all marijuana-infused products must be “shelf stable”, though that doesn’t mean you can’t sell cold products at all. For instance, a beverage that does not need to be refrigerated can still be sold refrigerated—the key is simply that it doesn’t need to be refrigerated. Shelf Stable? What’s that? Foods that can be stored on the shelf safely at room temperature are called shelf stable. The list of foods that meet this criteria is extensive, but it’s likely that if a food item has the label “Keep Refrigerated”, it is not shelf stable. To make perishable food shelf stable, LARA requires that the food be heat treated or dried to destroy the microorganisms that spoil food and cause foodborne illness. You will also need to be able to provide proof to LARA that the marijuana-infused edibles have been properly processed. Heal, not hurt The writers of the MMFLA had patient safety in mind when enacting Michigan’s medical marijuana facilities law, as did LARA when enacting the Emergency Rules. The goal of medical cannabis has always been to provide patients with plant based alternatives to other chemical healing methods and traditional palliative care. In other words, if your products are shelf stable, they are less likely to cause foodborne illness in patients and therefore more likely to help “heal” a patient taking the product for medical use. Because edible CBD and marihuana products are made from plants, additional considerations have to be made when processing products. This is to make sure that patients are only receiving the intended medical benefits from edible product and not unwanted illnesses. Some examples of products that are NOT able to be produced as edible marihuana products are: Desserts - Ice and ice products including ice cream, Pies/cakes that require refrigeration (banana cream, pumpkin, lemon meringue, custard), Cheesecake and cakes with glaze and/or frosting that requires refrigeration, Focaccia style breads with fresh vegetables and/or cheeses Fruit and vegetable products - Hummus, Garlic in oil mixtures, Vegetable jams/jellies such as hot pepper jelly, Canned fruit or vegetable butters like pumpkin and apple butter, Caramel apples, Products made with cooked vegetable products that are not canned, Products made from fresh cut tomatoes, cut melons and cut leafy greens Meat and Dairy - Milk, Butter, Cheese, Yogurt, Meat (fresh, dried, jerky), Fish (fresh and smoked) This list may seem long and limiting, but many products on this list can become shelf stable if additional processing steps are taken to make the end product safe for extended shelf life. There are quite a few ways that you can consider making your medical edible products shelf stable. Drying People have been preserving foods by drying for centuries if not millennia. There are two types of drying: heat drying and freeze drying. Heat drying, as the name suggests, requires heat from the sun or an artificial source. Special containers are available that capture heat and dehydrate the food item. Meat when dried without cooking still can pose a health risk and cause foodborne illness. When cooked, the meat must have enough water removed so that microorganisms are unable to multiply. Unfortunately, bacteria that are not destroyed by cooking can survive the drying process and still cause illness. Freeze drying makes foods shelf stable by placing food in a vacuum cabinet. This method essentially transforms ice from it’s solid state directly to a vapor state, which is then used to quickly freeze dry the product. Freeze dried products must be rehydrated with water for consumption, and the packaging must be moisture proof to prevent it from spoiling and bacteria growth. Packaging Last but not least is packaging, which was discussed in our previous guide for Michigan processors and provisioning centers, which discussed packaging requirements. Packaging can be used to stabilize edible products. Two common types of shelf stable packaging are retort pouches and aseptic packaging. Retort pouches are made from layered polyester, aluminum foil, and polypropylene. Commercial sterilization occurs at temperatures greater than 212 °F, typically 240 to 250 °F. The pouch is then filled with product and then sealed and heated to make it sterile. The retort packaging is shelf stable at room temperature. Aseptic packaging is a laminate of three materials: high-quality paperboard, polyethylene, and aluminum. The thin layer of foil forms a barrier against light and oxygen, removing the need for refrigeration. These packages are commercially sterilized by ultra-high heat and then rapid cooling. Conclusion Marihuana infused products are essential to the medical cannabis industry. Processed marijuana products, just like any other processed food sold at a grocery store, are subject to food safety requirements. Understanding safe ways to process Cannabis products is crucial to the success of any MMFLA-licensed processor in Michigan. https://www.oak-law.com/blog/what-can-you-do-with-an-mmfla-processors-license monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/2e5f04e9-efab-4f5e-b711-a164bb481ddc/unsplash-image-WbkfJ2TmSug.jpg Blog - What Can You Do With An MMFLA Processor’s License? - What Can You Do? Understanding what can be done with a commercial cannabis license under the Medical Marihuana Facilities Licensing Act (MMFLA) is crucial for those who are interested in becoming a part of Michigan’s cannabis industry. There are five types of licenses under the MMFLA: Grower Licenses. Processor Licenses. Secure Transporter Licenses. Provisioning Center Licenses. Safety Compliance Facility Licenses. For the most part, it’s pretty easy to guess what each license allows you to do. A grower license allows you to grow, a provisioning center allows you to sell, and a processors license allows you to process cannabis. However, what exactly constitutes “processing” and what that allows you to do is the subject of a lot of confusion. Here is a brief general overview of the privileges, responsibilities, and duties of a processors licensee. What is a processor? Under MMFLA, a processor is a commercial entity that is licensed to purchase marihuana from growers. Processors extract resin from the plant to create cannabis “concentrates” such as Cannabis oils and wax as well as create marihuana infused products for sale. Processed marijuana products are taking up an increasing share of the overall cannabis market, with such products representing approximately half of all marijuana sales in Colorado’s recreational market. For this reason, processors are an essential part of Michigan’s medical marihuana market. There are many different types of cannabis compounds that can be processed. There are two compounds that are most common, those that are derived from tetrahydrocannabinol (THC) and those that are derived from Cannabidiol (CBD) Though CBD and THC are both compounds of the same plant, CBD products are not psychoactive and are regulated somewhat differently. This means it does not alter the mind or get users “high”. Both THC and CBD have medical benefits that help treat disease, and both can come in the form of oils, pills, vaporization liquids and tinctures as well as edible products like coffee, gum, and candy. They also come in the form of specialty products like bath bombs, lip balm, and marihuana infused water. Processors have the ability to create a variety of products which in turn gives patients options in selecting the type of marihuana infused treatment that they would be most comfortable with. Privileges Licensed processors extract oils from plants that can be used to make a plethora of products, some of which are mentioned above. However, the only limit to the amount of products a processor can make is that processor’s imagination. You can make all types of edibles ranging from Marijuana-infused salad dressings to Marijuana-infused fudge or candy. This means that processors have the unique position of being at the center of innovation in the medical marihuana industry. Their function is essential to the growth of the market and processed products have the tendency to appeal to more casual marijuana users. Unlike the amount limitations that the MMMA places on patients and caregivers, the quintessential privilege of having a processors license under MMFLA is that there are no limits on the amounts that can be processed in one facility. In other words, one facility could conceivably serve Michigan’s entire marijuana market. Unlimited processing is important because only licensed processors will be able to sell to dispensaries once the MMFLA fully goes into effect. Processing under the MMMA will still be allowed, but a caregiver will have no one to legally to sell other than the caregiver’s five patients. Responsibilities and limitations While there are many privileges associated with a processors license, those privileges do not come without responsibility. Processor licensees have the ability to buy marihuana and sell marihuana infused products. However, they can only buy from licensed growers and can only sell to other processors and provisioning centers, not to individuals directly. The growers and processors that the licensee buys from or sells to must be located within the same facility as the licensee. Otherwise, processors would need to hire a secure transporter to pick-up and drop off product. The processor also has the responsibility to enter all transfers into the statewide monitoring system known as METRC. Currently under the MMFLA, processors are required to have two years of experience as a caregiver, or have an employee with such experience. However, it is important to note that those holding processors licenses cannot be registered caregivers and may not employ registered caregivers. A new licensee or employee must essential forfeit their caregiver status within five business days from their date of hire, if an employee, or upon receipt of the license, if an owner. In addition to these regulations, processors also have to take steps to ensure that they are safely producing infused products. While the number of products a processor can produce is only limited by their imagination, there are practical limits to the types of products, and more importantly, the processed product’s packaging. Regular, non-Cannabis infused products of this nature have packaging that is geared towards marketing to targeted audiences. For example, regular candy packaging is typically bright and flashy to appeal to children. Processors, in contrast, have a duty to make sure products are prepared with safe standards, and this duty also extends to packaging. Beyond allergen labels and shelf stability, the product’s shape, color, and outer packaging should be made in a way that cannot be easily confused with regular commercial candy or appeal to minors under the age of 17. This is a safety precaution to make sure that medical marihuana products do not get into the hands of a unknowing child. For this reason, all products must be equipped with child resistant packaging. A processors duties extend beyond the outer packaging of infused products. Processors also have a responsibility to ensure that extraction processes are safe. Facilities that have exhaust systems are regulated by the National Fire Protection Association (“NFPA”). While there are different ways to extract compounds from plants, extractions that involve flammable gasses and liquids require processors to take extra precautions. The flammable gasses of different material can be used in multiple processes but must also meet the requirements of NFPA and the International Fuel Gas Code. In addition, processes that extract cannabis oil from marihuana plants using flammable liquids and gasses must have leak and gas detection equipment. This equipment must meet the standards of the Bureau of Fire Safety and sometimes this could require additional construction to ensure safety. This is not an exhaustive list of the duties and limitations of a medical marihuana processor licensee. A full list can be found on the Department of Licensing and Regulatory Affairs (LARA) website. Processors licenses, like all Michigan medical marihuana licenses, are a privilege that can be revoked if the rules as outlined by the MMFLA and the Emergency Rules are not carefully followed. The best way to ensure compliance is to speak with a Michigan MMJ Attorney today. https://www.oak-law.com/blog/yes-you-need-to-disclose-that-on-your-mmfla-application monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/379dbe55-4163-4ab4-8adb-68634deaff99/unsplash-image-UrWI6z47rx0.jpg Blog - Yes, You Need to Disclose that on your MMFLA Application - You Need to Disclose that on your Application The August 9th, 2018 meeting of the Bureau of Medical Marihuana Regulation Licensing Board was mostly in line with previous meetings. Once again, the biggest issue facing MMFLA applicants was their failure to disclose material items on their medical marijuana application. Since this same issue seems to come up at every licensing board meeting, I thought it should be the subject of its own article. Yes, You Need to Disclose That The key take away from this meeting and the Licensing Board meetings is that full disclosure is always the best way to go when it comes to your MMFLA application. Let me say that again—full disclosure is the best policy. At the August 9th meeting, similar to past meetings Michigan Medical Marihuana Licensing Board Update and MMFLA Licensing is Getting Tougher, we yet again saw applicants get denied due to their failure to disclose misdemeanor and felony charges that otherwise would not have caused issues. Given the fact that the number one reason for denying MMFLA applications is “filing a false application”—in other words, failing to disclose criminal charges or arrests on your Disclosure 7-SA, this cannot be reiterated enough. Hell, I’ll even say it a third time—FULL DISCLOSURE IS THE WAY TO GO. From prior experience, I know a good amount of MMFLA applicants and potential MMFLA applicants reading this article are thinking: “well, my charge was expunged, so I don’t need to disclose it.” This could not be more wrong. Yes, they will find that expunged charge from 18 years ago, you can pretty much count on that. And yes, they will also find that misdemeanor traffic violation that happened when you were 17. You need to disclose everything, or else you put your MMFLA application in serious jeopardy. This also goes for charges that were filed and then dropped or dismissed. As a matter of fact, we tell our cannabis clients to disclose any arrest, even if no charges were brought, even if it was a big misunderstanding. Having watched nearly all of the MMFLA licensing board meetings, I can tell you that the criminal investigation portion is very thorough, and they could very well find a record of that arrest even if no charges were ever filed. Don’t believe me? You need to look no farther than the August 9th Licensing Board meeting to see what I am talking about. During this meeting, one MMFLA applicant was denied due to a failure to report a marijuana delivery charge. There were two attempts to clear up the issue and allow the supplemental applicant a chance to disclose it, yet the applicant still failed to do so. And guess what the result was? The unanimous denial of the applicant’s MMFLA license. Not many denials are unanimous, but when you make it this easy for the Licensing Board, you can’t pretend to be surprised that you were denied. A second application during this same meeting was denied for failing to disclose a domestic violence charge, which led to a spirited discussion among board members and LARA as to what constitutes an intentional failure to disclose. During this discussion, it was reiterated on several occasions that the MMFLA supplemental disclosure form 7-SA says have you ever been arrested, charged, convicted, etc. of ANY misdemeanor or felony. It does not specify a specific age, meaning that MIP you got when you were 16 would count. It also doesn’t specify a type of charge, meaning that reckless driving ticket from 10 years ago also counts. It doesn’t even specify that the charges were even prosecuted, meaning that arrest that was just a big misunderstanding where charges were dropped a couple days later also counts. It was at this point that LARA felt the need to weigh in on this constantly reoccurring issue. A LARA official said that they are seeing that a lot of people are not disclosing traffic or juvenile offences, despite the clear language of disclosure 7-SA. Nonetheless, some lawyers are advising clients to leave these off their criminal disclosures, for reasons I find hard to understand. As a matter of fact, the LARA official, when discussing this issue, flat out said that some lawyers are giving bad advice on this. Hopefully your cannabis business attorney is giving you good advice (and if not, we offer free consultations and have helped applicants clients fix application issues caused by other attorneys!). Not convinced Yet? Well, here’s a third example from that very same meeting. An applicant was arrested for delivery of marijuana in 2013 and did not disclose the arrest on their initial application. Two other charges were disclosed, but this charge was left off. Somewhat predictably, this application was denied, in part due to failure to disclose and also possibly in part due to their inability to explain large cash deposits. Still not convinced, just three applications later, the Licensing Board unanimously denied a fourth application for failing to disclose a marijuana delivery charge. Hopefully at this point you get the picture—disclose your arrests! Report What You Know…. If you are like some of my cannabis clients, you are thinking some version of—“I remember getting arrested in the 90s, don’t think there were charges and don’t remember exactly where it happened, but I do remember being in the drunk tank for a couple hours.” There are many versions of this story, but the bottom line is the same—you only remember bits and pieces, don’t remember if it was a misdemeanor charge, or don’t remember exactly where the incident took place. Don’t fret–this is perfectly OK. In a lot of situations we have encountered, we have undertaken investigations only to only have incomplete information on the arrest. For example, you may not remember the exact city, the exact charge, the case disposition or case number, or some other detail LARA is requesting. So what do you do? You just report what you know and what you were able to find out. On more than a few MMFLA applications I have written some version of the following, “in 1998, or substantially around that time…”, or “in or around the City of Detroit.” If the incident or incidents was long enough ago, then you may not even remember that level of detail. If that’s the case, you just report the details you remember and can find. If that means simply reporting that you remember getting arrested a number of times as a teenager and can’t recall the exact number of times or locations, then that’s what you do. The important part is that you report what you knww and all the details you can remember. But Put It In Its Proper Context…. When we disclose arrests or convictions, we find it’s useful to also add some context to those disclosures. For example, a criminal theft charge may sound bad, but if it was a result of a misunderstanding, then that should be included in the disclosure. We also help our clients contextualize their disclosures for the licensing board. For example, if you had a drug charge, and since that charge you sought treatment for drug addiction and have turned your life around, then let the Licensing Board know! You don’t have the chance to advocate in front of the licensing board, so the best you can do is advocate as part of the application process. These additional disclosures, cover sheets, and supplemental narratives are what sets us, and a few other select lawyers, apart from all the other “licensing experts” or attorneys. If you are just providing the documents and info in the application and nothing more, you are doing it wrong. Conclusion So what’s the bottom line? When in doubt, disclose! The last MMFLA board meeting saw four commercial medical marijuana applications denied, in whole or in part, due to the applicants failure to disclose criminal charges. This is a pattern that has gone on practically since the first licensing board meeting. The number of MMFLA application denials for actual criminal charges pales in comparison to the denials for failing to disclose, so this should be a no-brainer. Also, if you are going to disclose charges, it can be helpful to provide some additional context surrounding the charges. There may be mitigating circumstances, or maybe that incident caused you to turn your life around. Either way, it can help your application if you provide more details surrounding your arrest. Let’s face it, “indecent exposure and public lewdness” sounds a lot worse than “I was walking home from a college football game when I was 19 and stopped to pee behind a bush.” https://www.oak-law.com/blog/marijuana-and-cannabis-industry-lingo-how-to-sound-like-you-are-in-the-cannabis-industry monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/45f78da0-67a4-4ade-8f1c-a2497086685a/unsplash-image-POMpXtcVYHo.jpg Blog - Marijuana and Cannabis Industry Lingo: How to Sound Like You are in the Cannabis Industry - Marijuana and Cannabis Industry Lingo: So you’re thinking about entering the commercial cannabis industry, either in a medical marijuana state or a recreational marijuana state. Maybe you go to a few cannabis business conferences like MJBizCon or CannaCon and notice that the people who have been in the industry for a while tend to speak a little differently than those who are just entering. Or maybe you have already entered the industry and want to sound like you are a grizzled industry veteran. In either case, you need to learn the cannabis industry lingo. Like nearly all industries, the commercial cannabis business has its own lingo and way of speaking. If you talk to a cannabis industry veteran, you may notice they almost never say “weed”, “tree”, “ganja”, “reefer”, or any number of slang terms for marijuana. They will almost always refer to it as marijuana or cannabis. In general, cannabis industry professionals generally avoid using all of the street slang that has developed over the years, instead using more scientific or technical terms for marijuana and cannabis. For instance, despite the fact that there are lots of searches for “420 lawyers” or “420 attorneys”, I’ve never heard anyone in the industry ever use either term. The same goes for terms like “blunts”, “spliffs” or similar terms. My entirely unofficial general rule is this—if a 19 year old stoner would say it among their friends, a cannabis business professional probably wouldn’t. Depending on how long you have been “familiar” with marijuana and marijuana lingo, these habits can be hard to break. If you’ve been “familiar” with these terms for decades, it can take months if not years to finally break old bad habits and have industry lingo naturally roll off your tongue. I occasionally still find myself using slang terms when talking to clients or other industry professionals, but I’m slowly breaking the habit. One term that is almost constant throughout the industry and which I’ve had a hard time getting myself to use, at least use in any sort of natural way, is cannabis. If you look at my previous articles , I use the term marijuana way more than I use the term Cannabis when referring to the cannabis business. Yet, if you are talking to industry professionals, they generally use the term “cannabis industry” as opposed to “marijuana industry.” Calling it the “cannabis industry”, calling yourself a “cannabis business,” or calling me “cannabis attorney” is seen as slightly more professional than saying you are a “marijuana attorney.” I’m trying to start using the term cannabis more, as you can probably tell from this article. I’ve also talked to people who disagree and think that marijuana and cannabis are interchangeable. But in my experience, cannabis tends to be used much more in the commercial and business context, whereas marijuana is used more in the criminal or colloquial context. Why does cannabis seem to be implicitly favored among commercial cannabis businesses? My guess is that it’s because it comes from the technical, scientific term—i.e. Cannabis Sativa. The longer someone has been in the cannabis industry, the more they use technical and scientific terms as opposed to slang or other terms. Another example of this is the word “trichomes”, which I had personally never heard of before entering the cannabis business. For whatever reason, those who have been in the industry for a while don’t talk about “crystals.” Instead, they talk about “trichomes”—unless of course they are dealing directly with the consumer, in which case its back to crystals or kief. That brings us to actual dried marijuana. If you are new to the cannabis business, you probably just call it “bud” or simply refer to it as “weed.” But these terms are rarely used in the industry. I would say using the term “weed” would probably be the biggest giveaway that someone is new to the cannabis business, or at least the legal cannabis business. If you are in the cannabis industry, you almost invariably refer to it simply as “flower”. Don’t’ ask me why—that’s just the way it is. I don’t make the rules. When talking about “dabs”, oils, “wax”, “shatter” and the like, these are generally referred to as “concentrates” and the methods for making them “extraction.” You’re not going to find many cannabis industry professionals talking about “dabs” or “shatter” unless they work in a dispensary and are talking to a customer or have been making them well before doing so was strictly legal. While industry professionals don’t generally use street slang, we do have our own slang that sometimes confuses outsides. When writing emails, or even sometimes when talking over the phone, I will call the medical marijuana industry “MMJ” for short. I’m definitely not the only cannabis professional to do this. I don’t even really know where I picked this up from but have found myself using it more and more in emails and texts to clients. Finally, let’s talk about marihuana v. marijuana, since that seems to be a common question I’ve heard on a number of occasions among people first entering the cannabis business. Here in Michigan, all cannabis statutes and regulations talk about “marihuana” or “medical marihuana”—they do not use the commonly accepted spelling of marijuana. However, I’ve never actually seen anyone use “marihuana” outside of referring to statutes and regulations that use it, with the exception of one or two companies that use it for marketing to try to be clever. In the end, this term is not used outside of the context of referring to Michigan marijuana statutes and regulations, and its pronounced the same anyways. https://www.oak-law.com/blog/mmfla-licensing-ten-application-and-licensing-tips-from-bmmr-director-andrew-brisbo monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/d2a2b0d2-396b-4219-9290-36ed2941c4d1/unsplash-image-3Rn2EjoAC1g.jpg Blog - MMFLA Licensing: Ten Application and Licensing Tips from BMMR Director Andrew Brisbo - Ten Application and Licensing Tips The MMFLA application for Michigan medical marihuana facility licensing is both intricate and detailed. The MMFLA application is divided into two parts—the prequalification step and the facility licensing step. The pre-qualification step is perhaps the hardest and most time-consuming hurdle to overcome when trying to obtain an MMFLA license. While LARA officials initially stated that the whole MMFLA licensing process will take no more than four months—they appeared to have backed down from this statement. Instead of the whole process taking four months, just the prequalification step is taking certain MMFLA applicants more than four month. However, there are a number of tactics that can be used to expedite the MMFLA licensing process and increase the chance of getting your medical marijuana facility quickly approved. According to LARA Bureau of Medical Marihuana Regulation Andrew Brisbo, medical marijuana businesses can use a number of strategies and best practices to speed up their MMFLA licensing application. Mr. Brisbo recently spoke on this very topic. Here are ten tips on MMFLA licensing straight from Director Brisbo himself: The number one priority is completeness. The department prioritizes applications in the interest of fairness. First by the order received, and then by the completeness of the application. An MMFLA application missing essential elements or information will have a hard time moving through the process. Include a flow chart of your organizational structure. The more organized and complete your MMFLA application is, the faster BMMR can process and present your application to the board for a decision. An organizational flow chart will assist them to understand how you are currently running (or plan to run) your business. It will also let sooner assess if they require additional information. It may be a good idea to include a short personal statement or introduction with the application. It is important to remember that part of the criteria that your MMFLA application will be judged upon is subjective. Since you and your attorney will not have the opportunity to meet with the Board directly to present or further explain the information in your MMFLA application, it may help to introduce yourself, and your business, so the Board has more than the neutral report compiled by BMMR, to go on. A short personal statement has the ability to rehumanize you when the Board is reviewing your MMFLA application. Be responsive and attentive to requests from the BMMR. If there are questions about your MMFLA application that are unanswered, then the BMMR must wait for you to provide the answer before they can complete the investigation. In addition to making sure you present your MMFLA application with all of the relevant and required information, you also need to be prepared to answer questions that may arise for your unique case. Ultimately, make sure that when you receive a request from the BMMR, you are timely in your response. If you aren’t sure it is relevant, disclose anyway. One of the biggest hinderances of moving an MMFLA application through the process is lack of necessary information and a delay in reply from the applicant. You can mitigate both of these by giving the BMMR more information than you may think they need. If you are preparing your MMFLA application and you are not sure if some information is relevant, disclose it. In the eyes of the department, it is better to give them more information than they need than for them to find out something you didn’t tell them. Remember the timing and method of how the information was obtained by the department is going to be given to the board to consider when they see your MMFLA application. You do not want to give the board any reason to believe that you were omitting on purpose or were trying to avoid or circumvent the rules. Make sure to disclose all financial information. Since we are talking about disclosure, it is important to remember to make a full and complete disclosure of your financial information with your application. This includes financial records for other business that you may have, even if they are not related to the industry. The most forgotten detail is personal financial records. It may seem like those are irrelevant because you have accounts set up for your business, but personal financial data is also important. BMMR needs that information in addition the business accounts to verify where the money coming into and leaving your business is coming from. Failure to include this information will delay the application. Additional managers will need to go through the approval process. Managers and owners as defined by the rules need to go through the MMFLA application approval process. This also applies to managers or owners added after the application has begun or is completed. A manager or owner is someone who has decision making power of the business. Simply put any person not already included in your MMFLA application at the start of your application that has some measure of control over your business must submit a supplemental form to your application and provided all relevant data BMMR does not make a recommendation on whether or not your application should be approved. Despite rumors to the contrary, the BMMR does not submit an opinion on your MMFLA application when they present it to the Licensing Board. They only compile facts, perform their investigation, and submit your completed application with a report and summary. The decision to deny or approve rests with the Board alone. Make sure to review the administration rules for facility compliance before your inspection. The BMMR has a list of compliance factors for each type of facility available online here . Getting online and making sure you are complying before the inspection is another way to help the process move efficiently. The department will of course let you know of any problems or changes that have to be made in order for you to be in compliance but those changes will also have to be inspected and you can’t be approved until the inspection is complete. Take the time to find out if you are in compliance or if you need to make changes before your site is inspected. Proactive changes and behaviors will greatly benefit you while you work towards full licensure. Remember to dispose of out of state-sourced materials. If you have out-of-state sourced materials your site cannot be certified until they are gone. At this time the department is not confiscating any products, but the presence of out-of-state source materials will hold up your application. If you have been following our Medical Marijuana Licensing Board updates (available here and (MMFLA Licensing here ) or have read our article on the politics of licensing, you know that not everyone is getting a license. Just because you are initially denied a MMFLA license by the licensing board does not mean that all is lost. There is an appeals process if your MMFLA license application is denied by the Licensing Board. Presently, you have 21 days to respond to a denial of an application. Your appeal then goes to an administrative law judge, who conducts factfinding and makes a recommendation to the MMFLA Licensing Board. You are able to request LARA’s licensing report that was provided to the Licensing Board members, which can help you with the appeal process. It is possible that one or more MMFLA Licensing Board members based their decisions off facts not contained in the report, which could form the basis for a successful appeal. After the factfinding, the ALJ makes a recommendation to the Licensing Board, which then reconsiders your MMFLA application in light of the new evidence and recommendation. If denied once again, you would be able to file an appeal in Michigan circuit court. Putting the appeal process aside, the most important thing to keep in mind throughout the process is to fully disclose everything, and fully comply with requests from the Bureau of Medical Marihuana Regulation (BMMR). The most common reason that MMFLA applications are currently being denied is the failure to disclose material information on your MMFLA application—usually criminal charges from years or even decades ago. Even if you hire an MMFLA application expert, if you fail to provide them all material information requested as part of the application, the Licensing Board could deny your application for your failure to disclose all information on your MMFLA application. https://www.oak-law.com/blog/can-more-debilitating-conditions-help-medical-marijuana-survive-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1bdfe33e-444e-4845-94db-6d130d03892d/unsplash-image-bAj8Whkl3nI.jpg Blog - Can More Debilitating Conditions Help Medical Marijuana Survive in Michigan? - Can Debilitating Conditions Help Medical Marijuana Survive? Michigan’s Department of Licensing and Regulatory Affairs officially added eleven new conditions to the list of debilitating medical conditions that qualify for medical marijuana treatment in Michigan. These new additions come nearly a decade after the Michigan Medical Marihuana Act was enacted. This announcement reiterates the state’s commitment to its Medical Marihuana program, which could be put in flux by the recreational legalization ballot measure this fall. While the process for obtaining an MMMP card, or medical marijuana patient card, remains unchanged, it likely just got a lot easier for potential patients to qualify for the program. In order for a patient to obtain a medical marihuana registry identification card, the patient must have written certification by a physician that outlines three things: (1) the patient’s debilitating conditions, (2) a full assessment by the physician of the patient’s medical history, current medical condition, in-person medical evaluation, and (3) the physician’s professional opinion concluding that the patient is likely to benefit from medical marijuana. Only patients with qualifying debilitating conditions are able to obtain a registry identification card. The Qualifying Debilitating Conditions Recently, the Director of The Department of Licensing and Regulatory Affairs (LARA), Shelly Edgerton, approved eleven new debilitating conditions for Michigan medical marihuana patients. Edgerton acknowledged the advancements that have been made in marihuana research and found that the potential benefit that medical marihuana could have on patients suffering from the newly added conditions made it imperative to reconsider the list of debilitating conditions. The new conditions are as follows: Arthritis Autism Chronic Pain Colitis Inflammatory Bowel Disease Obsessive Compulsive Disorder Parkinson’s Rheumatoid Arthritis Spinal Cord Injury Tourette’s Syndrome Ulcerative Colitis One item that patients may be familiar with is chronic pain. Previously, the MMMA listed “severe and chronic pain” as a qualifying debilitating condition. Patients now only only to demonstrate chronic pain, as opposed to severe and chronic pain, in order to qualify. This change opens up the MMMA program to patients that might otherwise be unable to demonstrate that their pain was sufficiently severe and could provide additional treatment options for patients who might otherwise be prescribed opioid treatments. With some studies suggesting the availability of medical marijuana significantly decreases the number of such overdoses, marijuana could start replacing some prescription pain treatments. Although LARA did approve eleven conditions, several conditions didn’t make the cut, including several mental disorders such as anxiety, depression, panic attacks and social anxiety disorder. Another significant condition that did not make the cut was non-severe and non-chronic pain. If this condition was approved, medical marijuana would be able to be used for short-term pain management. This list contains several very commonly known diseases. A third of Michigan residents have Arthritis. Over 50,000 Michigan residents suffer from Inflammatory Bowel Disease and another 50,000 are living with Autism. This expansion means that medical fast becoming a medically accepted treatment for several serious conditions, pushing it to the mainstream of medicine and giving patients suffering from these diseases more options for treatment. As the list continues to expand, medical marihuana usage will likely become more and more normalized. The normalization of medical marihuana is a positive thing for both medical marihuana business owners and patients alike. The reduction of the stigma associated with medical usage will go a long way to further legitimize the medical marihuana industry in the public eye. Reviving the Medical Marijuana Facilities Licensing Act? The addition of these conditions could greatly impact Michiganders access to medical marijuana, though it is unclear how viable the state’s medical marijuana program will be if the voters pass the recreational legalization bill this fall. It may not make sense for patients to go through the hassle and cost of obtaining a medical marijuana certification and visiting a doctor if they can simply buy recreational marijuana without the cost of the certification or the hassle of getting it. In other words, it may make more sense for patients to simply “self-prescribe” medical cannabis rather than get an actual “prescription” from a doctor for medical marijuana. Michigan’s Medical Marijuana program does have a few key features that will help differentiate it from the RMLA MiLegalize ballot proposal. The first feature is that those 18 and older but under the age of 21 would have access to the medical market but not the recreational market. The second feature is that the excise tax for medical marijuana is only 3%, which is much smaller than the 10% tax applicable to recreational marijuana. A third and perhaps the most significant feature is that the actual cost of products may end up being less for marijuana produced under the MMFLA compared to marijuana produced under the RMLA / MiLegalize ballot initiative, at least in the short term. The reasons for this are several fold. First, the medical marijuana market will be pretty close to fully developed by the time recreational marijuana facilities start applying for licenses. With several mega-facilities planned, and the number of patients relatively smaller, at least compared to the recreational market, there will be much more supply and much less demand, meaning a much cheaper price. Moreover, the grower license types for recreational marijuana could be subject to different regulations compared to the MMFLA. LARA allowed multiple, “stacked” Class C grow licenses under the MMFLA, which almost certainly will contribute to a lower overall wholesale price for medical marijuana. The RMLA ballot language is silent on this issue, which means that the decision of whether to allow stacked Class C recreational licenses is within the hands of LARA. Depending on who is in charge, LARA may attempt to undermine the recreational market to the extent it is able to (I’m looking at you Bill Schuette), and that would be one way to do it. In sum, the addition of eleven conditions could help breath new life into the MMFLA, which could eventually be displaced by the recreational marijuana law if it passes. Whether this is enough to sustain the medical marijuana program if and when the state legalizes recreational marijuana is still up in the air. Scott F. Roberts Law is a marijuana business law firm specializing in representing medical marijuana and CBD businesses in Michigan. The firm also writes extensively on the recreational marijuana ballot proposal and is helping cannabis companies prepare for the potential legalization of recreational marijuana in the state of Michigan. https://www.oak-law.com/blog/who-enforces-marijuana-laws-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/66ee05e9-162b-4f9e-840c-88513a852726/unsplash-image-6sl88x150Xs.jpg Blog - Who Enforces Marijuana Laws in Michigan? - Who Enforces Marijuana Laws in Michigan? With all the buzz around Medical Marijuana (MMJ), many wonder how these laws actually work in practice and who enforces them. In 2008, Michigan began passing a series of laws making it possible to sell and use marijuana for medical purposes. But once these laws passed, many questions surfaced about how these laws were going to affect Michigan residents and how they would be enforced. It is easier to understand how the laws are enforced if their function and impact on Michigan residents is understood. What is the MMMA? The Michigan Medical Marihuana Act (MMMA), passed in 2008 by voter referendum, established protections for medical marihuana users and caregivers. It shields them from the arrest, prosecution and penalties associated with the possession and use of marihuana. However, these protections are not without specifications. Each qualifying registered patient can only have 2.5 ounces of usable marihuana or its usable equivalents. For qualifying patients that have properly specified a primary caregiver, that caregiver will be allowed to cultivate no more than 12 plants for that patient, and those plants must be kept in enclosed, locked facilities. As long as the patient has a valid registry identification card, does not give marihuana products to another individual, and complies with the specifications, they are immune from any criminal consequences that are typically associated with the possession of marihuana. Sales under the MMMA are mostly unregulated. There are no taxes applied, no reporting requirements, and enforcement of sales to patients not registered to the specific caregiver, while technically illegal, are rarely enforced. Due to the unregulated, “wild-west” nature of caregiving under the MMMA, the state sought to establish a regulatory structure for the growing, processing, transporting and selling of medical marijuana. This structure, which was enacted into law as the Medical Marihuana Facilities Licensing Act, or simply the “MMFLA”, does exactly that. What is the MMFLA? Established in 2016, the Medical Marihuana Facilities Licensing Act (MMFLA) sets guidelines for people and entities engaged in all phases of the medical marihuana business. Similar to the MMMA, it provides additional explicit protections from prosecution if certain requirements are met. For example, people who own or lease property that has been licensed as a marihuana facility, are protected in certain requirements are met from criminal and civil penalties, sanctions, searches and prosecutions for marihuana related offences. The MMFLA takes great care to outline the activities that are associated with the medical marihuana business. These activities include growing, transporting, purchasing, receiving, testing and altering marihuana. Unlike the MMMA, with its legal grey areas, this act draws a very clear line between legal and illegal activity, and clearly distinguishes medical marihuana business owners from simple drug dealers. It allows business owners to do what is necessary to ensure that qualifying patients have access to the products they need, without fear of criminal prosecution due to the schedule one status of marihuana. Without proper registration and licensing, patients and business owners could be subject to the criminal statutes that govern marihuana. Law and Order Now that we have addressed the two statutes currently on the books that allows for Marijuana use, we turn to the statutes that criminalize its sale and use. Michigan has several criminal statutes that deal with the illegal use, sale, and possession of marihuana. Marihuana is a schedule one substance and those substances normally carry jail time. The illegal possession of marihuana is a misdemeanor with a $2,000.00 fine and up to 1-year imprisonment. The illegal use of marihuana has an $100 fine and the potential for up to 90 days in jail. The serious nature of the penalties associated with this crime make it essential for patients and business owners to ensure that they remain in compliance with MMMA and MMFLA. The Department of Licensing and regulatory Affairs (LARA) plays an important role in the enforcement of MMJ laws. What Does LARA and the Licensing Board Do? The Department of Licensing and Regulatory Affairs (LARA) is responsible for the licensing of businesses and most skilled professions in the state of Michigan. LARA oversees the licensing and regulation of 1.2 million individuals and entities on an annual basis. To obtain a license under MMFLA, LARA facilitates a detailed two-tier qualification process which includes a pre-qualification and a licensing qualification. In the pre-qualification phase, applicants must undergo a background check, disclose criminal violations, financial records and other information and pay a $6,000 application fee. The licensing qualification phase dives deeper into the physical location and administrative qualifications under the statute. During this time, the applicant will be subject to a pre-license investigation. An applicant with then either be approved or denied. If denied, the applicant can appeal the licensing board’s decision. Once approved the applicant will need to undergo a second phase where the applicant’s operations are inspected and approved. Once the applicant passes this second step, they pay a regulatory assessment fee which is determined by the statute, at which time they are given a commercial medical marijuana license. It could be as low as $10,000 or as high as $57,000. In 2018, the assessments were set at $48,000.00 for most license types, the exception being the Class A 500 Plant Grow, which was only $10,000.00, and safety testing, which was $0. After the license is granted, compliance is monitored by the Bureau of Medical Marihuana Regulation (BMMR). LARA also requires annual renewals to ensure compliance. Although LARA does assist in the vetting of companies and individuals seeking Michigan medical marijuana licenses, the ultimate decision to approve or deny an Michigan MMFLA application lies with the Licensing Board, which is made up of five political appointees. In this capacity, LARA acts as the Licensing Board’s eyes and ears, helping the board vet applicants before they come before the board. State and Local Law Enforcement The state police are instrumental in the enforcement of MMJ laws. Michigan uses excess revenue from medical marihuana patient and caregiver fees to boost enforcement efforts. They work closely with LARA to ensure compliance on all fronts. During the application process, the state police perform background checks on applicants. On a criminal level, their focus is to stop drug trafficking as well as illegal operations that falsely function under the umbrella of MMMA (and soon the MMFLA as well). This can mean cracking down on sales to non-patients, sales above 2.5 OZ of Marijuana, and other violations. In extreme situations, the state police will work with local police departments to execute raids on facilities that are operating criminally. While the state police generally focuses in higher level drug charges, they will enforce criminal laws during traffic stops, including possession of Marijuana or a driving offense similar to a DUI. In other words, if you are caught speeding, and state police notice the smell of Marijuana from your car and you do not have a patient card, your vehicle could be searched and you could be charged with a marijuana criminal offense. In addition to state laws, municipalities also have their own laws prohibiting or restricting Marijuana that are enforced by the local police. These laws vary widely from city to city in terms of strictness as well as enforcement. On the one hand, some cities have completely decriminalized marijuana. Other cities, especially those in more rural areas, will still lock up any non-medical user found in possession of cannabis. In Ann Arbor, Michigan, for example, the fines for non-medical usage are capped at $100 with no jail time, and the penalty for first time usage is a civil infraction which is a $25 fine. The city of Detroit has also taken steps to decriminalize marihuana usage. What the future holds In November, Michigan voters will decide whether marihuana will be legalized for recreational purposes. Recreational legalization will be a significant change, but it will not be the free for all some envision it to be. There will still be restrictions and laws making certain sales and possession about a certain amount illegal. The ballot initiative will limit usage to people over the age of 21. In addition to the age regulation, limitations on individual cultivation and a 10% excise tax will be placed on marihuana products (the MMFLA only provides for a 3% excise tax). Revenue from this tax will be redirected into education and maintaining the state’s roads. If this legislation passes, several considerations will need to be made concerning those who are imprisoned for those marihuana related offenses. The legalization of marihuana for recreational usage would create two markets. This creates a need for a new department separate from the Bureau of Medical Marihuana Regulation to regulate recreational usage. Alternatively, the state legislature could pass new legislation to meld the two regulatory schemes together, as we suggested in this article. Although marihuana would be legal in Michigan, it would still be considered illegal federally. There are currently certain protections contained in the Rohrabacher-Blumenauer amendment that protection state-compliant medical marijuana programs and businesses. However, these protections currently only apply to state medical marijuana programs and the individuals that work in the medical marijuana market. They would not apply to Michigan’s recreational cannabis ballot proposal. Understanding how MMJ laws are enforced is crucial for people currently in the medical marihuana industry, and people who may be looking to get involved in the near future. Because this is only a brief overview of MMJ laws and the roles of those who enforce these laws, we recommend that you consult with an MMJ attorney to answer questions concerning compliance and to ensure that all areas of your business are operating flawlessly and legally under the MMFLA. https://www.oak-law.com/blog/michigan-medical-marihuana-licensing-board-update monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/aa47ad82-c1c1-489f-8454-8af0d3291f21/unsplash-image-cxoR55-bels.jpg Blog - Michigan Medical Marihuana Licensing Board Update - Licensing Board Update The Bureau of Medical Marihuana Regulation Licensing Board (BMMR) met on July 12, 2018 to discuss the prequalification applications of 19 commercial medical marijuana applicants. During the meeting the, the Licensing Board also issued the first MMFLA commercial licenses and reviewed the overall status of medical marijuana business applications received by the Department of Licensing and Regulatory Affairs (LARA). In attendance were all 5 Board members, as well as LARA Director Brisbo and a LARA staff attorney. The July meeting follows last month’s scheduled meeting that was cancelled due to undisclosed board member scheduling conflicts. As a result, the Licensing Board reviewed more applications than in previous board meetings. The Board approved pre-qualification status for 15 out of 19 Michigan Medical Marihuana Facility Licensing applications in the first portion of this session, including several unanimous approvals without any comment or discussion. This represented an overall increase from May’s 63% approval rate, 76% of the applications received were approval at July’s meeting. As has been the case, the Board did not state which type of MMFLA license each applicant was seeking in most cases. In addition to the 15 “Part 1” approval, 4 out of 6 applicants were awarded commercial medical marijuana licenses at the second portion of the meeting, with two applicants being denied or tabled for future deliberations. Throughout the discussions, several board members went back and forth with each other on whether to consider certain information provided by State Police and LARA’s investigation and what conclusions they would be permitted to draw based on those investigations. It appeared that certain members of the Board were focusing on examining only the materials provided to them and not speculating as to “what if” and what “may happen in the future”. In contrast, one member in particular—Donald Bailey—openly discussed all of the “what if” scenarios and assumptions that could be drawn from the facts. Mr. Bailey took issue with one dispensary’s website, which included language about “medical and recreational” marijuana even though the dispensary only accepted medical card holders. He also speculated that participation at a Cannabis Cup event—which was only open to medical marijuana card holders—was participating in the “recreational market”. While Mr. Bailey and Board Chair Rick Johnson voted against this applicant, the company was nonetheless pre-approved on a 3-2 vote. On a few occasions, other board members sought to reign in Mr. Bailey, warning that the decisions needed to be based on the facts in front of them and not “what if” scenarios that may or may not come to pass. Pushing back against such warnings, Mr. Bailey stated he had special information from state police not contained in the packet and pushed back against other members warnings to stick to the application. He stated he was put on the board to use his experience in law enforcement. What Mr. Bailey didn’t seem to grasp was that the other members were seeking to protect him, and the licensing board in general, from future court challenges and appeals. While there was disagreement among members on a couple issues, there was one message all board members could agree on, and was harped on throughout the meeting: it is better to over-disclose than to under-disclose. To illustrate this, the Board briefly appeared to consider an unreported traffic violation as a “failure to disclose” violation at one point before being reigned in by the LARA staff attorney, who noted that the violation was not required to be reported and therefore could not form the basis for a “failure to disclose” denial. What Can We Learn From the Denials: Disclosure and Integrity Issues Similar to the last couple meetings, there were multiple applications denied for non-disclosure issues (predominately relating to criminal history). This meeting also saw use of the provision regarding the applicant’s integrity, moral character and reputation to deny applications. This provision was basically used as a catch-all reason for denial by the board whenever there was criminal, tax or other “integrity” issues. Below are some highlights from the meeting. Turning to the board’s decisions, one applicant was denied for both failure to disclose and character and integrity issues. The Board took issue with the fact that the applicant failed to disclose a number of traffic-related misdemeanors, such as open intoxicants and open alcohol in a vehicle. When LARA inquired as to this incident, the applicant said she thought it was traffic related and did not believe that they were misdemeanors, therefore she did not disclose them. Board Member David LaMontaigne stated that even if an applicant doesn’t think it is necessary to disclose certain issues, they consider it a “red flag” if you fail to report any criminal incident. This same applicant showed significant electric bills for large grow operations, as well as large cash deposits that they claim are not related to marijuana. Another applicant claimed income that put him under the poverty line, but asserted that he invested $20,000.00 into this business venture, which made the Board question the applicant’s integrity. In reviewing one application, the Board noted that one of the applicants was a caregiver who in the last 3 years has acted as consultant for other caregivers. From this business practice, his financial records show income in the amount of approximately $1.5M in last 3 years, $90,000.00 of which is from 2018. Board Member Donald Bailey thought that this was wildly beyond scope of MMMA, which he stated was not designed to make a significant profit for any caregiver. He did not give any rationale as to how such consulting activities actually violated the MMMA, instead appearing to rely on his previously stated position that the MMMA prohibits caregivers from making money off caregiver. In past meetings, LARA’s staff attorney had pushed back against his position that the MMMA absolutely prohibited caregivers from making money. The Board also took issue with the fact that the applicant’s reported income was almost $100,000.00 less than the deposits into his bank accounts, which indicated possible tax evasion. There was no discussion on the possibility of any legal reasons for this discrepancy—e.g. sub-contractor or other business expenses—so we are left to wonder whether this was real or simply imagined tax evasion. Nonetheless, the Board’s position was that this applicant’s integrity was questionable based on how they performed business under the MMMA, since non-compliance with the MMMA would suggest a strong possibility of non-compliance with the MMFLA. In reviewing whether to award prequalification status and a license to one entity, the Board stated that they had issues with the currently operating provisioning center hosting a doctor who performs medical exams at the facility, in violation of the MMFLA. Board Member Donald Bailey noted that the applicant’s website shows advertising for “medicinal and recreational cannabis”. The Board was concerned that by promoting recreational cannabis, which is not allowed under the current law, that the applicant would not follow the MMFLA regulations once licensed. One of the applications had a notable discussion regarding a supplemental applicant’s failure to disclose a possession of marijuana charge (which was dismissed without conviction) from 1969. Despite the fact that this incident occurred over 48 years ago, the statute clearly states that an individual must disclose ANY arrest, charge, indictment, and conviction, regardless of whether it was dismissed or expunged. The Board did recognize the length of time that had passed since the charge, and noted that the statute only gives a basis for denial if the Board finds the omission to be intentional. Based on these facts, the Board did approve the application, but cautioned applicants to be stringent in the review of their supplemental applicant/s criminal background checks. Other Issues The Board also noted that they have received a number of CPA attested statements that were “questionable”, and reiterated that it is important that CPAs review all financial records carefully and do their due diligence before attesting to an applicant’s financial condition. They indicated that they wanted more comprehensive CPA attested financial statements. LARA also stated that when an applicant is going through their pre-licensure inspection, they suggest that the applicant schedule their inspection for a time when the applicant feels prepared. Previous LARA inspections were mostly unannounced. LARA had stated that they had experienced issues with timing and overall delay in processing the applications because some businesses needed several inspections before they received approval. To remedy this situation, LARA suggested that providing notice to the dispensary may help speed up the inspection process by giving provisioning centers time to prepare and fix any issues before LARA inspectors become involved. Just a few days after the meeting, we received multiple emails from LARA asking whether our facilities were ready for inspection. The Bottom Line With nearly 600 medical marijuana facility prequalification applications pending with LARA, the BMMR’s hard line approach on addressing failure to disclose issues, and their detailed analysis of financial records and inspection of the integrity of the applications, it is clear that the marijuana business licensing process is slow and gritty. We have emphasized this before, but it is absolutely imperative that your MMFLA commercial marijuana application be accurate, complete and forthcoming. If you have questions or concerns regarding the MMFLA licensing process for your Michigan medical marijuana business, we recommend you contact a Michigan marijuana business attorney today to discuss the specifics of your situation and how to ensure your application moves smoothly through this difficult process. https://www.oak-law.com/blog/how-to-increase-profits-at-a-marijuana-dispensary-280e-considerations monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/fe13a0cf-5474-45dd-ae65-4fe4ba5e52c4/unsplash-image-lCPhGxs7pww.jpg Blog - How to Increase Profits at a Marijuana Dispensary: 280E Considerations - How to Increase Profits With the Michigan medical marijuana industry set to take off over the next few years, most Michigan marijuana entrepreneurs are focused on making sure that their state MMFLA license application was properly submitted and approved. In our conversations with clients and prospective entrepreneurs alike, we’ve noticed that a lot of business owners seem so enamored by massive growth potential in the Michigan marijuana market they overlook some of the pitfalls associated with operating a cannabis company. Talking to some prospective clients, their eyes light up when discussing the profit potential of Marijuana facilities. Sometimes, I swear I can literally see dollar signs in their eyes. They want to dive in with a huge operation (whether it be a multiple Class C grow facility, a mega-provisioning center, or a large processing center) and are expecting massive profits, just by way of getting into the industry early. As a Michigan marijuana business attorneys, our job is not only to help our clients compile a solid application packet for LARA’s review, but also to advise them on investment opportunities, obtaining municipal approval, and ongoing business decisions. While a lot of the legal work on the front-end is related to the MMFLA application, we also advise clients on issues such as how to set up their business to maximize profitability. As business lawyers, much of our advice goes beyond strict legal interpretations of statutes and regulations. It also oftentimes touches upon business operations, strategy, and general discussions on how to best position the client’s company for success in the Michigan medical and soon-to-be legal recreational marijuana markets. One key aspect of planning for profitability is creating a strong business plan, even if you do not need investors for your business. We’ve written about the importance of getting the right location for your provisioning center, and we cannot stress that enough. A good location can make or break your provisioning center, but there are other considerations that a business owner needs to consider early in their business planning stages in order to maximize profitability. Such considerations include the size of the dispensary they wish to run, how many people need to be employed, and estimating overall operating costs for running the store. While some who are just entering the market may consider these suggestions to be overkill in the initial brainstorming sessions, spending time mapping out your expected profits and expenses now will pay dividends in the future. Now let’s assume you’ve put together a business plan and have run some projected numbers showing you will make boatloads of money. While this is a great first step, prospective dispensary owners need to be aware that provisioning center numbers often look great when done on the back of an envelope. However, this does not mean that dispensary owners won’t face significant hurdles in maintaining profitability. You may be asking yourself: I am projecting massive profits, why are you telling me to be cautious? The answer: IRS-imposed limitations on the deductions a marijuana business can claim under IRC Section 280(E). Usually just referred to in the industry as “280E”, this provision of the tax code states that an entity cannot claim any deduction or credit on their taxes if they engage in trafficking controlled substances (such as marijuana)…with one big exception. This has huge ramifications for medical marijuana provisioning centers, as it is a common business strategy to deduct as many business expenses as possible to decrease your overall federal tax liability. Effectively, Section 280(e) means that unlike businesses in other industries, a marijuana dispensary cannot claim its normal operating expenses as a business deduction. The one exception to 280(e) available to those in the marijuana industry is Cost of Goods Sold. Claiming the Cost of Goods Sold means that a marijuana provisioning center can claim the purchase price of their inventory as a deduction for their taxes. While this is a small benefit for dispensaries, it is much more beneficial for grow operations, where the company can deduct the costs for cultivation (such as electricity, labor costs, fertilizer costs, water costs, etc.) as part of their Cost of Goods Sold. Marijuana dispensaries, on the other hand, can only claim the wholesale costs of the product purchased by the dispensary for sale to the consumer under the Cost of Goods Sold exception. To illustrate this concept, let’s assume a dispensary takes in $1,000,000.00 in revenue on Marijuana it bought for $250,000.00 wholesale. Now lets assume that between rent, labor, utilities, insurance, license fees, and other costs, the dispensary incurred another $500,000.00 in costs, leaving $250,000.00 left over for the owners. Under 280E, you pay income taxes based on the revenue minus cost of goods—or $750,000.00. That means that if you pay a rate of 33%, the dispensary would make any money since you would be paying $250,000.00 tax bill. The compounding effects of this onerous tax structure cuts into the net profitability of a dispensary quickly. As a result, all potential dispensary owners need to have a frank conversation about 280E before planning a dispensary’s operations and projecting future profitability. So how does a dispensary plan for profitability in the face of a higher tax liability? Here are three suggestions. First, you need to keep a tight control on your non-Cost of Goods expenses. This means you may want to consider a smaller location for your dispensary or find a way to apportion part of your space to another related business, such as a “head shop”. Since you can’t claim your operating expenses as a deduction, it doesn’t make sense for you to have high operating costs since this would quickly eat up your net profits. A smaller retail space generally means lower monthly rent or mortgage payments, smaller utility bills, and fewer employees needed to run the retail operations. If you market your business effectively, site your retail space in an area with heavier traffic/pedestrians, and keep your expenses reasonable, you could end up having higher net profits than the bigger players at the end of the year. Related to this, just as you can “apportion” part of your rented dispensary space to another business, you can also apportion the time and cost of your employees to the other business. By apportioning employment and other costs to a second business that can take normal business deductions, you can realize substantial savings on your tax bill. The key here is to keep your costs tightly controlled, and to the extent possible, share operating costs with a second business that can take normal business tax deductions. While many potential dispensary owners dream of opening up a huge retailer outlet—a proverbial Walmart of Weed—this is usually a bad idea. Such a store could very well be extremely profitable, but maintaining solid profitably with high operating costs is like walking a tightrope without a net. It can be done, but it is best left to experienced players who are able to bear the risk of loss. Second, you may want to consider “vertically integrating” your dispensary with a commercial grow. As mentioned above, growers (and processors) are given much more favorable treatments under 280E. They are able to include many costs in their Cost of Goods number—e.g. utilities, rent, employment costs—that dispensaries simply cannot. By integrating your dispensary with a low cost grower you can realize significant tax savings by taking your profits on the “grow entity” instead of the dispensary. For smaller provisioning centers, an inexpensive Class A license will supply more than enough Marijuana to your dispensary while also allowing you to realize substantial tax savings. Third, consider getting a good bookkeeper and CPA firm that is familiar with cannabis businesses and Section 280(e). This point can’t be stressed enough, especially if you are considering apportioning costs to other businesses since this involves complex calculations and considerations. The IRS is paying special attention to medical marijuana businesses. Many are surprised to hear that the IRS can use Michigan’s MMFLA licensing system as a literal directory of businesses to be audited, which it has done in other states. The IRS also has a special division with experience in 280E issues to conduct these audits of marijuana businesses, so having an equally experienced CPA is vital. Given the scrutiny the IRS is paying to cannabis businesses, especially stated licensed ones, a good cannabis CPA can not only save you money on taxes but also to keep you from being subject to an IRS criminal fraud action. While an industry-specific CPA is important, if not crucial, to your success—and we work with several—having a bookkeeper with industry knowledge and experience is also important. Not only will a bookkeeper be able to help you stay on track with your expenses and keep a pulse on your profitability, but they can also assist the state if your business is audited and provide your CPA with all the necessary documentation when it comes time to file taxes. Because this industry is so heavily regulated, maintaining accurate books and financial records is essential. While some may think that a bookkeeper and a CPA sound like overlapping job functions, it is important to remember that a bookkeeper can do many of the lower-level functions a CPA performs for a fraction of the cost. This saves you money in the long run by not having your CPA go through receipts or do monthly accountings, instead focusing on higher level issues like effective 280E tax planning. While we recommend your CPA do your initial tax planning, it is often much more cost effective to have a bookkeeper do the day-to-day accounting. Ideally, your CPA and bookkeeper can work together to provide your business the best possible tax treatment. You can think of a CPA and bookkeeper like a physician and a nurse. The physician sets the course of treatment and periodically reviews your charts to make sure your treatment is on track, whereas the nurse handles creates and maintains your medical records and handles your day-to-day treatment regimens. It is important to remember that running a marijuana business takes a team of professionals, not just good business sense. As marijuana business attorneys, we work with individuals in many different practice areas, including cannabis CPA firms, cannabis bookkeepers, cannabis consulting companies, and more. If you are interested in learning more about how a marijuana business attorney and our network of cannabis professionals can help your dispensary maximize profitability, https://www.oak-law.com/blog/choosing-the-right-municipal-opportunities-medical-marijuana-investment monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/1efacf09-d8d5-4c36-8dcd-fb8ffe385504/unsplash-image-p50L8cR4xf8.jpg Blog - Choosing the Right Municipal Opportunities: Medical Marijuana Investment - Choosing the Right Municipal Almost every single day we either hear about a new municipal opportunities for businesses looking to site medical marijuana provisioning centers, growing facilities, or processing centers, or we are asked some version of the question “which municipality is best for me MMFLA facility?” While many have attempted to keep track of “who’s in” and “who’s out”—including LARA itself even the easiest to read maps and lists can quickly become overwhelming in the context of choosing the “best” property and location for your medical marijuana business. As more municipalities opt-in to the MMFLA, marijuana companies have more and more properties and municipalities to choose from, which makes identifying the best property for your marijuana business more and more difficult. Complicating this decision even more is that fact that there is no cookie cutter approach to finding the right municipality. What might be “right” for one company, or one license type, might not be “right” for other companies or license types. For instance, while a rural municipality may seem attractive to growers due to relatively cheap land costs, there may be hidden factors that can effect whether the municipality is the right place for your company. The best example of this is the availability of electricity and utilities. Many rural areas do not have the electrical infrastructure to support a large, Class C grow, but might have more than enough for a smaller Class A and may even be the ideal option for an outdoor grow. Even though there is not one “right” approach to selecting a municipality to site your marijuana facility, we have used several strategies to help clients select the right property in the right municipality. We like to group these approaches into one of two categories—proactive approaches and reactive approaches. Proactive approaches involve working with the municipality before it decides to opt in, whereas reactive approaches involve identifying municipalities that have already opted in or on taking advantage of public information and rumors to best position your business before a municipality officially votes to opt-in. Each approach has its advantages and disadvantages. The advantage of being proactive is that you can get “first pick” of the properties in a City, and you can help shape the ordinance to ensure that your properties will be zoned in. The disadvantage to this approach is that it can be costly in terms of money and time. I know clients that have spent dozens of hours talking to cities and townships, only to have most of them be dead-ends. We have also helped clients lobby municipalities, and while the thousands of dollars in costs may be well worth it to certain clients, it may not be a cost effective for many smaller marijuana companies. The Proactive Approach The proactive approach involves lobbying the municipality directly in order to persuade the city council or city commission to “opt in” to allowing MMFLA licensed facilities. It can also involve lobbying the municipality to shape that the municipal zoning ordinance applicable to ensure property would be able to be used for the type of Marijuana business you are planning. For example, we helped a large grow facility persuade a sizeable Western Michigan city to opt-in to the MMFLA by working closely with a local economic development corporation, who helped us lobby individual city commissioners. We also sent out targeted mailings to the city commission illustrating the jobs we planned to create and the investment the area would see as a result and called select commissioners we thought could be “champions” of the project. Whether it was the mailings, lobbying, or the City was just plain ready to opt-in with or without us, the end result was that the client was able to select the perfect facility first and then get the municipality to pass an ordinance allowing the client’s facility after the property was put under contract. While it can be effective for bigger municipalities, this approach is best used for smaller municipalities with more to gain from siting medical marijuana facilities. The way the MMFLA is set up is that municipalities that allow medical marijuana facilities get a cut of the tax revenue, with their cut being in proportion to how many facilities they allow. For large cities like Detroit or Lansing, this may not be a big factor in deciding whether and how to opt in as the revenue sharing would represent a tiny fraction of their budget. For smaller cities in need of revenue, just a few medical marijuana facilities can result in substantial positive changes to the city’s budget. By stressing the economic impact of opting-in, as opposed to moral or ethical arguments–we have successfully helped and are helping clients lobby these small cities. We find that once we are able to get these smaller (and often more conservative) municipalities to get past their own ethical views on Marijuana, and view opting in from a city budget and jobs perspective, it is an easy sell. Choosing the right way to lobby cities can result in a big difference not only in terms of outcomes but also in terms of what you must pay. There are a few well-known lobbying groups in Michigan that work on medical marijuana issues. However, these groups tend to be incredibly expensive—often charging tens of thousands of dollars—and many times do not have any special connections to the city. Other consultants may charge less but their influence may be limited to certain geographic areas or members of only one political party. For example, we utilize a municipal consultant who is highly effective in lobbying cities in Southeastern Michigan, and has strong ties to the City of Lansing, but whose effectiveness drops drastically outside these two areas. While some business owners may benefit from hiring a professional lobbyist or consultant to attend the meetings with public officials or council meetings, others are more than capable of effectively doing this themselves. Many lobbyists and consultants will try to persuade business owners that only they can lobby municipalities, or that only they know the “secret sauce” that will persuade city officials to come around. This is total and utter crap. The key is simply finding a message or idea that will resonate with the officials and the community as a whole. In our experience, rural or conservative areas tend to respond best to economic arguments—i.e. how opting in to the MMFLA will bring jobs, revenue and investment to the municipality. Officials in larger, liberal areas are harder to pigeonhole. In Detroit, for example, certain members of the city council are very receptive to the idea that opting in will bring investment and jobs to the city. Other members, on the other hand, are more responsive to what pastors and church leaders will say and will go along with opting in as long as they have their blessing. If the business owner is able to communicate clearly and effectively, we have found that some of the most effective lobbying is actually lobbying done by business owner themselves since they are in the best position to discuss their company and what they can do for the municipality. These business owners may still need help crafting arguments and lobbying materials to use at the meeting or getting introductions with the right city officials. But with just a little help, business owners can be just as effective if not more effective than the professional lobbyists who charge tens of thousands of dollars. The Reactive Approach Not every business owner has the time, money or inclination to directly lobby cities to opt-in to the MMFLA. Certain cities, Detroit being the best example, are simply too large to lobby effectively, or at least cost effectively. While that may mean the best properties have already been spoken for, it doesn’t mean that you can’t find a good property for your medical marijuana facility. In addition, unless you are going after a highly sought-after provisioning center license, finding a municipality is not as difficult as it seems. Many if not most cities do not limit the amount of growers, processors, secure transporters or safety testing facilities that they allow. Small-scale growers and processors therefore have plenty of opportunities to choose from and plenty more coming online in the near future. Larger growers may have a more difficult time but there are still plenty of options available in many municipalities. One approach is to simply coast off the lobbying efforts of others. Pontiac, Grand Rapids, and Detroit have all recently announced they are considering municipal ordinances to allow Medical Marijuana facilities. Cities like Detroit and Grand Rapids are simply too big for any one person to have to control the process. While cities the size of Pontiac are small enough that one determined, well-connected person can drive the process, they are still too big for that person to keep it too much of a secret. In these situations, business owners are much better off using that time and effort to locate and secure the best property and put together the best municipal application to give their marijuana business the best chance to secure a license. Another similar approach is to try to be “in the know”, or at the very least hire people who are. We have clients retain us for this very reason—we hear a lot of rumors about who is going to opt-in before the information makes it into the papers. But just because you know that a municipality will opt-in doesn’t mean you will be able to be ahead of the curve on the specifics needed to best take advantage of the situation. Warren, for example, was long-rumored to be on the verge of opting in. I remember first hearing the rumor myself early last fall. If medical marijuana company jumped on the rumor when it first came out in order to secure the best property, you would have been forced to sit on that property for over 6 months while the city council and mayor went back and forth before finally opting in last month. Knowing when to pull the trigger, and when to hold off until there is more certainty, is not always an easy or clear-cut decision, and different business owners often have different risk tolerances when it comes to these decisions. One key is knowing how to best tie up the property, while still having an out if the municipality doesn’t act as predicted. Here, having a skilled real-estate broker and an attorney with a strong real-estate background can save you from going down in flames before you even start. Another is to not put all of your eggs in one basket, as we recommended in our previous article on siting medical marijuana dispensaries in Michigan. The final approach we will discuss is to simply buy an existing facility where the municipal licensing has already been secured or is all but certain to be obtained. Examples of such opportunities include Harvest Park outside of Lansing, Cannabis Park, as well as individual opportunities from specialized Cannabis Brokers. We have a couple clients that actually do this as a business—buy properties, secure licensing, then sell to another marijuana group looking to avoid the hassle of securing the property. The benefits of this approach are obvious—all the work has already been done. The main drawback of this approach is cost. The original buyer needs to make a profit not just off the cost of the real estate but also all the work put into securing the municipal license. That means the costs will be significantly more than if you were to do the work yourself with the assistance of a cost-effective marijuana attorney. Scott F. Roberts Law, PLC is a Michigan Medical Marijuana Business Law Firm representing commercial cannabis companies throughout the state of Michigan. The Firm primarily represents state-law compliant medical marijuana businesses, as well as Hemp and CBD companies, real estate investors, and ancillary and professional service companies. https://www.oak-law.com/blog/is-it-too-late-to-get-a-michigan-marijuana-business-license monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/e93b637f-94d9-4109-a855-84856a8bf9b7/unsplash-image-sf6tMkg84-U.jpg Blog - Is it too Late to Get a Michigan Marijuana Business License? - Is it too Late? The Department of Licensing and Regulatory Affairs, also known as “LARA”, first released the state MMFLA application in early December and started accepting applications within a couple weeks of its release. Since this time, LARA has been swamped with hundreds upon hundreds of commercial medical marijuana license applications. Many potential clients ask us whether it is simply too late to get a Michigan cannabis business license. This concern is especially prevalent among dispensary—i.e. “provisioning center”—clients. This is likely due to the fact that since the enactment of the Medical Marihuana Facilities Licensing Act (MMFLA) and the Emergency Rules, there have been many hyped up “deadlines” that have come and passed. Not only that, but many cities (e.g. Lansing) had their own application deadlines for provisioning center applications. With all of these state and municipal deadlines, it can seem like the clock always seems to be ticking down to a deadline. Before answering whether its “too late” to get into the Michigan Cannabis industry, let’s first consider who is impacted by these deadlines. MMFLA applicants who were operating a marijuana business were required to turn in their state application by February 15th, 2018. These applicants had faced a drop-dead date of June 15, 2018 to either receive a state license or shut down their operations. Failure to do either would risk any continued activity being considered an increased chance to be denied licensure by the Medical Marihuana Licensing Board (MMLB). To help ensure the continued protection of medical marijuana patients, under the new rules, proposed medical marijuana facilities that would otherwise require a state operating license under the MMFLA may continue to operate until September 15, 2018 without impacting the applicant’s eligibility for licensure. In other words, the February 15th, June 15th, and now the September 15th, 2018 deadline either are or were wholly irrelevant for new MMFLA applicants, as were most of the “deadlines” that had scared many of our marijuana business clients. In fact, we believe that now is the best time to break into Michigan’s marijuana industry, as entering the medical industry this year will allow marijuana business owners to “cut the line” when it comes to entering Michigan’s soon-to-be recreational marijuana market. However, as we explain in more detail below, this window will not stay open forever. We do recommend to business owners looking to enter the Michigan marijuana market should that they should do so sooner rather than later. Get a Headstart on the Recreational Marijuana Business Industry With the MiLegalize ballot initiative set for the November 2018 election, and polls indicating that it has a strong likelihood of passing, it looks almost certain that recreational marijuana is coming to Michigan. Smart cannabis companies are therefore looking beyond the MMFLA and Michigan’s medical marijuana market to the state’s expected legalization of recreational marijuana. The MiLegalize initiative, also known as the Regulate Marijuana Like Alcohol initiative (RMLA) sets forth approximately four pages of requirements and new application procedures for operating a Michigan recreational marijuana business. With similar state marijuana statutes, such as the MMFLA, being almost ten times longer, LARA will still need to promulgate additional rules to guide the application process. We expect that many people will be looking to obtain a recreational marijuana business license upon passage of the Act, and applicants will benefit greatly from having an MMFLA license as part of their application package. The license types under the RMLA closely mirror the MMFLA (with the addition of the new Microbusiness license ), and through the process for transitioning from a licensed MMFLA business to a recreational marijuana business is not yet clear. One rule that was not left to LARA, however, was that only MMFLA licensees can apply for Michigan recreational commercial licenses for all license types except 100 plant grows and Marijuana microbusinesses for the first two years. By giving a preference to businesses that have obtained a medical marijuana business license, the state ensures that these licensees meet stricter requirements and that the licensees have paid for not only the MMFLA application fee/regulatory assessments, but also the recreational marijuana application fee. The practical implications of this are huge. To enter Michigan’s recreational market, you need to first enter the state’s medical marijuana market since only MMFLA licensees can apply for all but two of the new recreational marijuana licenses created by the RMLA. Not only that, but with LARA already overwhelmed with applications, there are rumors that there could be a moratorium on new applications by the end of the year. It is no surprise that the Board is political , and many expect that the Board will choose to slow down the number of applications it considers so as to limit the number of marijuana businesses in the industry. This could mean that if you do not apply this year, or at least before any possible mortarium, you could be shut out of Michigan cannabis market until 2020 or beyond. Although the September 15, 2018 MMFLA deadline doesn’t apply to any new MMFLA application, many may mistakenly believe that this cutoff date somehow applies to all MMFLA application and that it is therefore too late for them to submit their own MMFLA application. This is not true. Although there is a possibility of a hard deadline for all applicants sometime in the future, there are no such deadlines currently in place. Accordingly, getting started now will provide significant advantages for obtaining a recreational marijuana business in the coming months. With LARA and the Licensing Board needing an estimated six months to process an MMFLA commercial application, applying now would allow you to obtain a commercial license right around the time that the new recreational framework is being put into place. This brings us to our next topic—why now is a great time to start the long and intensive MMFLA application process, and why this process could benefit those looking to enter the recreational market. Getting Started Early The MMFLA application is a fairly complex application process, requiring not only a 40+ page application, but years of additional financial statements attested statements from a CPA as to your financial condition, background checks, and other documents. Compiling all of these documents usually takes a lot more time than many people plan for or may realize initially. Our clients generally spend weeks or months pulling together all of the necessary documents before they can successfully submit an application. Just getting the third year of financial institution statements can takes weeks to obtain from some banks and credit unions. While this can be quite the hurdle to jump over, one person’s “hurdle” is another person’s barrier to entry. The thoroughness and tediousness of the MMFLA application process is likely partly responsible for the lack of large out-of-state players positioning themselves for what is set to be one of the biggest recreational states in the country. For fellow Michigan residents, or even smaller out of state players, this is welcome news. Application Preparation and Review Will Take Time As there are many moving parts to this application process, we suggest allowing 1-2 months for a full and complete MMFLA license application to be submitted to the state. By getting a jumpstart on the process now, you can ensure that you will be considered for licensure faster by the MMLB. The state’s application review process is fairly intensive. First the application is reviewed by the Department of Licensing and Regulatory Affairs, which vets the applicants and usually asks for additional information prior to sending the application to the MMLB. The MMLB is a 5-person panel that meets once per month to vote on whether to approve or deny licenses for selected applicants. This monthly meeting may consider any number of applications, however the most they have considered in one meeting has been 19. As of the May 2018 BMMR meeting, there were almost 600 applications submitted, waiting to be reviewed by the Board and no licenses have been awarded. Since no meeting has been held since May, it is a safe assumption that this 600 number has grown significantly over the span of several weeks. Putting it All Together If you are looking to enter the Michigan marijuana industry in the near future, we strongly advise you to start the medical marijuana commercial licensing process right away. The MMFLA application process can take a while to get through. While LARA initially said about four months, we are currently advising clients that they should prepare for it to possibly take several months longer than this given the current application backlog. Even if you don’t have a property picked out, now is still the best time the MMFLA Part 1 process. You will have plenty of time to locate and tie up the right property while LARA and the licensing board review your Part 1 application. Accordingly, we recommend that potential business owners and groups looking to enter Michigan’s recreational marijuana market act now to enter the state’s medical marijuana market. Failing to do so could shut you out of the market for years to come. If you should have any questions or concerns about getting started on your application, contact a Medical Marijuana Business Attorney today! Even a short consultation can pay dividends if you come prepared with a list of questions and can provide any details about your proposed marijuana business. Our office works closely with other professionals in the marijuana industry, such as CPAs and political consultants, to help our clients identify any potential issues and navigate the application process efficiently. These resources and expertise can help ensure that once all the documents have been provided, the rest of the application process moves smoothly. https://www.oak-law.com/blog/looking-to-the-future-of-the-michigan-marijuana-industry-five-predictions monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/3c805269-2db4-49f9-8e8a-bae47ca2ca32/unsplash-image-sT4NIS34OUE.jpg Blog - Looking to the Future of the Michigan Marijuana Industry: Five Predictions - Five Predictions While the future of the Michigan cannabis industry is bright, a lot of uncertainty remains in the commercial market. From news reports that the legislature may amend the ballot initiative, to the fact that the rules applicable to Medical Marijuana facilities and the MMFLA application seem to be in constant flux, it can be hard for a prospective Medical Marijuana business owner to look much pass the state and municipal licensing approval process, let alone try to predict the future of the Michigan cannabis industry. As a Michigan Marijuana Business lawyer, I have a unique perspective on the industry. My job requires me to talk to dozens of medical marijuana business groups, investors looking at the Michigan marijuana market space, cannabis accountants, political consultants, and other Marijuana lawyers, many of whom are happy to speculate about the future of Michigan’s marijuana industry. This article attempts to translate my knowledge and perspective into 5 predictions about the future of the Michigan cannabis industry. 1. Michigan will “Regulate Marijuana Like Alcohol” Perhaps our easiest prediction to make is that Michigan will allow the recreational sale, use and possession of Marijuana by the end of next year. How can we be so confident? Well, there’s a ballot initiative that would legalize Marijuana and current polling indicates that it will pass by a wide margin. Sometimes called the MiLegalize ballot petition, or the RMLA, the ballot initiative would legalize possession of marijuana by those over the age of 21, among other items. While the Michigan legislature did attempt to pass an amended version of it earlier this year, it was unable to do so. Now that the deadline for amending the ballot initiative by a simple majority has come and passed, voters will get the chance to enact the ballot in its original form. The initiative allows the state licensing agency one year to create an application system and begin issuing licenses for commercial recreational cannabis licenses. We can therefore somewhat easily predict that by the end of next year, Michigan will allow the sale of recreational Marijuana to persons over the age of 21, or at the very least, start accepting business licenses for the sale of recreational Marijuana by then. Quite literally, Marijuana will be regulated like alcohol, with the added benefit that you would also be able to grow up to 12 plants in your personal residence. 2. Most Big Out-of-State Players Will Continue the “Wait and See” Approach While there are companies from Colorado, California, Oregon and Arizona applying for Michigan Medical Marijuana licenses, there has not been a rush of big players jumping into the Michigan market. The Michigan marijuana industry, like the Michigan craft beer industry, is quite Michigan-centric. This contrasts with the experience of some of the West Coast states such as California and Oregon, where many of the companies that operate there have a national or even international footprint. If you ask most people why this is, they will probably point to the “ban” on non-Michigan resident applications prior to June 30th, 2018 contained in the MMFLA, or the “ban” on applications from businesses that do not have an MMFLA license from applying for most recreational cannabis license types, but this only explains part of it. The ban on non-Michigan resident applications could easily be gotten around by including a 1% Michigan resident on the application. In addition, if LARA’s position on this provision is to be believed, all a non-resident group would have to do is create a Michigan LLC and not be subject to the ban (it is unclear if the Licensing Board shares this view). If this isn’t the reason why, then why on earth would larger companies stay away from what is the second largest medical marijuana state in the country and likely to be one of the five largest recreational states in the country over the next several years? Especially given that if you don’t already have an MMFLA facility license, you won’t be able to apply for most recreational marijuana licenses for another two years after LARA starts accepting license applications, meaning if you don’t get in now you could be shut out for several years to come. After posing this question to a couple larger out of state Marijuana companies looking at the Michigan Medical Marijuana market, the answer I got was somewhat unexpected but not unsurprising. The reason? The new Microbusiness license that is part of the ballot initiative, which allows the licensee to grow up to 150 plants, process them, and then sell directly to the consumer and also restricts who can own a microbusiness, meaning larger businesses can’t gobble up all of the smaller players or consolidate the space. While receiving very little attention at most conferences and even in many legal circles, the threat of the microbusiness license seems to have prevented many of the big players from diving head first into the Michigan Cannabis industry, choosing instead to take a wait-and-see approach to Michigan’s marijuana market. State legislators, in an attempt to help their donors, could try to eliminate this license class since the microbusiness will undercut the business of many licensed growers, processors and provisioning centers. With the capitalization requirements being what they are, only high net-worth individuals and their partners are able to go after these licenses. These same high net-worth individuals have an outsized influence on our political process, so it is entirely possible that the legislators will try to undercut the will of the people and eliminate this license class to protect the investment of the other licensees. More on this below. 3. Goodbye Caregivers, Hello Microbusinesses As noted in prediction 2 above, the microbusiness license has the potential to disrupt the state’s new recreational marijuana industry . If this happens, Michigan’s cannabis industry as a whole will likely bifurcate once again, this time along different but eerily similar lines. Already, we have seen the split between MMMA businesses and MMFLA businesses. These businesses are drastically different from one another not only in how they are legislated but also in how they are run. MMMA caregivers operate small grows, oftentimes in residential neighborhoods, that sell direct to the consumer or to other caregivers who sell direct to the consumer. They currently dominate both the legal and illegal Michigan medical marijuana market, but this is because the MMMA has been very loosely enforced and there was no viable alternative to the MMMA regulatory structure. With the MMFLA supplying a viable alternative, and with the state wanting stricter enforcement to drive the market towards the new regulatory scheme so it can receive the resulting taxes and license fees, it is likely that the MMMA will no longer be so loosely enforced. And if the MMMA is strictly enforced, caregiving as a business will suffer. As I sometimes tell potential caregiver clients, you can either follow the MMMA to the letter of the law, or you can make money, but you can’t do both. That means the court decisions prohibiting “caregiver to caregiver” transactions—which is the lifeblood of almost any caregiving business—will start being enforced since the state can now track where every gram of Marijuana from a dispensary came from. With the only other option being selling to patients not registered to the caregiver, or directly to non-patients—essentially illegal drug dealing—caregiving as a business is living on borrowed time. The drafters of the ballot initiative likely anticipated this, which is why they came up with the new microbusiness license type. This license gives caregivers who are currently being forced out of the industry a chance to remain in the game. The potential for this license type is seemingly limitless—from edibles, to oils, to simply growing and selling craft strains of Cannabis. The Michigan microbusiness license could also allow for a number of currently prohibited Marijuana businesses, such as a true Amsterdam-style coffee shop or a Marijuana delivery service. 4. More Legislation is Coming The MMFLA and the RMLA create two parallel licensing and regulatory structures, with different taxes applied to recreational Marijuana (10%) and Medical Marijuana (3%). From an implementation, enforcement, and plain practical standpoint, this doesn’t make a lot of sense. A bill to “fix” the two structures by creating one, unified structure makes a lot of sense, at least on paper. Whether this translates into real legislation is unknown at this point. Even if the legislature fails to pass a true “fix” to the problem of two regulatory schemes, there is a good possibility that a second “add-on” law will be passed that will supplement, but not amend, the RMLA ballot initiative. A similar law was passed in January 2018 to codify some of LARA’s emergency rules and to clarify some of the vague provisions in the MMFLA, which is a 25 page statute. The RMLA, in contrast, is a 4 page statute, so there will likely be the desire for more legislation to better clarify some of the statute’s inevitable ambiguities. A bill to “fix” the RMLA—i.e. make it more favourable to larger investors and groups—is also possible. The one saving grace to this is that once the MiLegalize ballot initiative is passed by the voters, it will require ¾ legislative approval to amend the initiative, meaning any “fix” will have to be bipartisan. This makes it less likely that the bill will be amended to take out or make it more difficult for small growers or microbusinesses, but certainly not impossible. 5. The Wholesale Price is Going A Lot Lower My final prediction is that the wholesale price of Marijuana in Michigan is going lower…a lot lower. I actually expect the price to drop quite a bit, which will put the squeeze on poorly run large to mid-size grows as well as smaller growers unable to compete on quality. There are two simple reasons why I believe this will come true. First, just look to other states. The wholesale price in Oregon for outdoor is threatening to break below $100 a pound, and the wholesale price in states like Washington are hitting new lows. The reasons for the drop in price are easily predictable, at least to anyone who has taken a macroeconomics class or is familiar with the concept of supply and demand. Too much supply will cause the price of a good to drop, and legalization allows for large suppliers to enter a market they previously were not able to enter into. With at least three large, “mega-facilities” planned in Michigan, including one each in Battle Creek and Pinconning, Michigan will experience Marijuana production on a scale never before seen in the State. This brings us to our second reason. With several mega-facilities with multiple Class C licenses and plant counts expected to range between 10,000 to 15,000 plants planned or being built in Michigan, the question is not whether the price will fall but when. To better illustrate this point, let’s do some back-of-the-envelope math. In this example let’s assume that there will be three mega projects in Michigan, one that grows 10,000 plants, one that grows 12,000 plans, and one that grows 15,000 plants, for a total of 37,000 plants. If one plant produces roughly 5 pounds per year, then these three facilities alone would produce about 185,000 pounds of Marijuana, which currently can only be sold in Michigan and only to Michigan medical marijuana patients. There are currently about 270,000 patients in the state of Michigan. That means that these three facilities can supply roughly 11 ounces of Marijuana per year to every registered patient in the State of Michigan. While these three facilities would not be enough to supply the entire Michigan market, you can quickly see how just a few large “mega facilities” can disrupt the economics of growing in Michigan. Just how low the wholesale price go will in the near-term will depend on just how many Michigan medical marijuana licenses the Licensing Board approves. With well over 600 commercial cannabis applications, many of which are for Class C grow licenses, there could be enough large licensed grows to drive down the wholesale price to the levels seen in Oregon. If, on the other hand, the Licensing Board starts “cracking down” on the license applications , then the wholesale price will not drop close to “Oregon” levels in the next year or so. Even if the Licensing Board limits the amount of Michigan medical marijuana grower licenses it gives out, I do expect the wholesale price to drop significantly over the next several years. The recreational bill takes the licensing process out of the hands of the Licensing Board and makes it a straightforward, black-and-white process administered by LARA. This process would allow for many more grows to be licensed starting towards the end of 2019 since the ballot initiative wouldn’t limit how many recreational licenses LARA can give out, which would further drive down the wholesale price of Marijuana over the next several years. https://www.oak-law.com/blog/6-tips-for-siting-your-michigan-medical-marijuana-dispensary monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/e445d13e-0a42-45ea-8460-aec8e034f5cb/unsplash-image-Ua-agENjmI4.jpg Blog - 6 Tips for Setting Up your Michigan Medical Marijuana Dispensary - Setting Yourself Up For Success Setting yourself up for a successful medical marijuana business requires more than just savvy business sense and knowledge of the Michigan marijuana industry. As with many retail stores, even well-run marijuana provisioning centers won’t be able to survive without a good location. Based on our experience with helping clients find locations for their Michigan dispensaries, these are our top 6 tips for siting your Michigan Medical Marijuana Dispensary. HAVE A GOOD BROKER AND LAWYER While it seem like an easy task, finding a good medical marijuana broker and attorney is not quite as easy as it may seem. With each municipality having its own ordinance, restrictions and requirements, it is imperative that you find a broker who will work with you to find the perfect location for your medical marijuana dispensary. Likewise, working with a medical marijuana business attorney during this process will pay dividends, as they can help you with the real estate transaction and ensure that the municipal application process runs smoothly. The last thing you want is to invest thousands of dollars into your new retail space, only to have the municipality deny your license application! As a word of caution, many Michigan medical marijuana attorneys do not have a strong background in business or transactional law, as they are generally criminal attorneys by trade. When deciding which attorney to hire, do not be afraid to vet them and ask about their business law experience and familiarity with real estate transactions. Asking these two small questions first can help prevent you from hiring the wrong attorney for your medical marijuana business. BE AHEAD OF THE GAME Although it can be time-intensive to lobby a municipality for a medical marijuana ordinance, our firm has helped multiple cannabis businesses enter their ideal prospective market just by being proactive with municipalities. Municipal officials are generally looking for insight on the industry, and they appreciate it when a prospective business owner attends local city council meetings, or is willing to talk with municipal officials about the effect marijuana dispensaries can have on a community. By establishing a relationship with the municipality and engaging in a dialogue about the medical marijuana industry before they even have an ordinance in place, you will be setting yourself up for municipal approval in your perfect business location. REMEMBER YOU ARE STILL A RETAILER You might have found a couple of potential locations for your dispensary that meet the local ordinance, but its imperative that you remember to think like a retailer. Yes, the municipal ordinances applicable to medical marijuana business locations are more restrictive compared to most other retailers, but don’t let fewer options drive you to a poor location. As a medical marijuana retailer, you need to take into consideration the demographics of the area, the foot traffic walking past the storefront, the flow of street traffic, and other factors that may impact sales, such as availability of parking. Consider checking the Annual Average Daily Traffic Maps on Michigan’s Department of Transportation website to see if the location has a significant number of people traveling in the area on a daily basis. If your location doesn’t generally have people walking by or is located near a busy road, you will likely need to engage in substantial marketing to draw patients to your location. SIZE MATTERS When it comes to picking a medical marijuana retail space, bigger isn’t always better. Large wide-open sales floors seem great for most retailers, but it can cause major issues for medical marijuana businesses who cannot deduct rent expenses from their taxes. IRS Section 280(E) prohibits a medical marijuana dispensary from deducting rent, utilities, and costs of repairs and maintenance from taxes, as the business is considered to be “trafficking” a controlled substance under federal law. With so few deductions, a smart businessperson needs to consider how to reduce the overall cost of running their business to maintain profitability without the use of business deductions. You don’t need the best commercial spot in the city if you have good branding and an attractive store layout. You may be better off with a reasonably priced dispensary in a good traffic location that yields stronger net profits, than a large, expensive high traffic store that has high business expenses yielding a lower net profit. DON’T FOCUS ON ONE PROPERTY If it is financially feasible, try to take multiple medical marijuana dispensary sites off the market when you first enter the market. This not only makes business sense if you want to open multiple dispensaries, but it also takes locations off the market for competitors. Many municipalities are limiting their municipal licenses not by quota, but by zoning. For instance, instead of saying “we will only give out 5 dispensary licenses”, many municipalities are saying “we will give a municipal license only to businesses in a location that meets these criteria: x, y, z.” By setting strong restrictions in their ordinance, they will effectively limit how many licenses they can give out because eventually all possible zoning-compliant locations will be gone. In locking down multiple locations early, you can ensure that your presence in the local market is stronger and limit the number of other competitors entering your target market. HAVE AN OUT If you do find the perfect location for your medical marijuana provisioning center, make sure that you are giving yourself an exit strategy. Plan for contingencies, such as not being given a municipal license or being denied state pre-qualification, even if it seems like you are a lock. If you are signing a lease prior to being awarded a municipal license, try to negotiate for a favorable lease termination clause. The last thing any business owner wants is to be stuck with a piece of real estate for a business venture that can’t get off the ground. While no entrepreneur wants to think about their business venture failing, it is necessary to consider your exit strategies before you commit to a retail space. Similarly, if you are looking to purchase a building, a well-crafted due diligence period into your purchase agreement can be worth its weight in gold. You can either do a time-based period that extends beyond any potential chokepoint—e.g. municipal licensing—or a zoning or municipal approval contingency to ensure you aren’t denied and left holding the bag. Of course, many landlords will not want to lock up their property without getting something in return. You may need to give a little to get the due diligence terms you like, including sacrificing part of the deposit, increasing the deposit, or even paying a reduced rent during the due diligence period. Reviewing a commercial lease or purchase agreement for these small details can make or break your business plan, and again, that’s where a medical marijuana business attorney can help ensure you have a way out before you even dive in. For more information on siting your Michigan dispensary, contact the attorneys at Scott F. Roberts Law. https://www.oak-law.com/blog/a-comprehensive-overview-of-the-michigan-regulation-and-taxation-of-marihuana-act monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/4140a853-fb75-4a3a-8014-306468e4b8af/unsplash-image-xoU52jUVUXA.jpg Blog - A Comprehensive Overview of the Michigan Regulation and Taxation of Marihuana Act - Overview of the Michigan Regulation and Taxation of Marihuana Act Marijuana is coming to the Michigan electoral ballot this November, and we have been getting questions daily from medical marijuana clients and prospective marijuana business owners about what the ballot initiate says, what makes it different than the current law, and how they can prepare their business for the law’s eventual passage. With the ballot expected to pass by a wide margin, it is important for Michigan business owners to know what the ballot initiative says and how it will affect the state’s Marijuana industry. The ballot initiative, officially called the Michigan Regulation and Taxation of Marihuana Act, was written by the Coalition to Regulate Marijuana Like Alcohol, which is why it is also sometimes referred to as the “RMLA.” On the macro level, the RMLA has 4 main objectives: it allows the personal possession and use of marijuana by anyone 21 years of age or older; provides for the lawful cultivation and sale of marijuana and industrial hemp by anyone 21 years of age or older; permits the taxation of revenue from running a commercial marijuana business; and outlines certain penalties for violations of the Act. The RMLA does not replace the state’s medical marijuana laws but instead provides a second regulatory structure for recreational Marijuana. For example, a person between the ages of 18 and 20 could possess medical marijuana with a valid medical card; but that same person could not possess recreational marijuana until they turn 21. In addition, different tax rates apply depending on whether its medicinal—in which case there is a 3% excise tax—or if its recreational—in which case there is a 10% excise tax. Much like the end of Prohibition and legalization of alcohol, the Act seeks to eliminate criminal penalties for the personal possession and cultivation of marijuana by adults; removes the distribution of marijuana from the criminal market; prevents marijuana revenue from going to criminal enterprises or gangs; seeks to prevent the distribution of marijuana to anyone under 21 years of age; ensures the safety of marijuana and marijuana-infused products; and ensures security of marihuana establishments. Eliminates Criminal Penalties for Cultivation and Possession of Marijuana and Hemp The RMLA specifically states that certain actions regarding marijuana “are not an offense, are no longer grounds for seizing or forfeiting property, are not grounds for arrest, prosecution, or penalty in any manner, are not grounds for search or inspection, and are not grounds to deny any other right or privilege.” The Act goes on to effectively eliminate the penalties for anyone who possesses, uses, purchases, transports, or processes 2.5 ounces or less of marijuana, or up to 15 grams of marijuana concentrate. The Act does expand this limit to possession of no more than 10 ounces of marijuana within a residence, and authorizes the cultivation of no more than 12 plants per household. The Act also states that the possession, use, or sale of marijuana shall not affect an individual’s custody or visitation rights with their minor children unless that behavior creates an unreasonable danger to the child that can be substantiated. In addition to legalizing Marijuana, the Act also legalizes the cultivation, possession, processing and transportation of industrial hemp and gives LARA the authority to issue rules for the regulation of commercial hemp. Presently, hemp can only be grown in Michigan for research purposes with a special license issued by LARA. At the time this article was written, no entity has ever been issued a hemp license by LARA but this is expected to change with the passage of the Act. Allows for Commercial Marijuana Businesses Much like the current Medical Marihuana Facilities Licensing Act (MMFLA), a municipality does have the option to completely prohibit or limit the number of marihuana establishments within its boundaries under the RMLA. If a municipality does allow marijuana commercial businesses within their municipal limits, they do have certain powers and restrictions given to them under the Act. A municipality may establish reasonable restrictions on public signs related to marijuana establishments. A municipality also has the power to regulate the time, place, and manner of operation of marijuana establishments and of the production, manufacture, sale, or display of marihuana accessories. A municipality may also enact ordinances that authorize the sale of marijuana for consumption in designated areas that are not accessible to anyone under 21 years of age (like a marijuana bar), or at special events in limited areas and for a limited time (such as a wedding). A municipality may also impose penalties for violations of these possible ordinances, however, the Act limits such penalties to only a civil infraction, subject to a civil fine of not more than $500. In order to provide a financial incentive to municipalities who allow such facilities, the RMLA allows each municipality to charge an annual fee of up to $5,000 per marijuana business to subsidize the administrative and enforcement costs associated with the operation of marijuana establishments in their town. Types of Businesses Allowed In a similar manner as the MMFLA, the RMLA allows for the same five license types – grower, processor, provisioning center/dispensary, secured transporter and safety compliance center – and adds a sixth type, called a microbusiness. We’ve discussed the five license types in prior posts, and medical marijuana attorneys anticipate that the RMLA’s treatment of these license types will be identical or substantially similar to the current structure under the MMFLA In regards to notable changes under the RMLA, the Act does modify the number of plants each subcategory of grower can cultivate. Under the RMLA, a Class A marijuana grower may cultivate no more than 100 marijuana plants; Class B marihuana growers no more than 500 marihuana plants; and Class C marijuana growers are expanded to 2,000 marihuana plants. Another major change with the RMLA is the addition of microbusinesses, which we’ve talked in detail about in our prior posts . This business license type allows for an individual to grow, process, and sell marijuana under one license. The addition of this license type provides an avenue for caregivers and smaller-scale operations to break into the recreational marijuana industry. This license type would also the small-scale cultivation and selling of unique craft strains of marijuana and processed goods direct to the consumer. The Department of Licensing and Regulatory Affairs (LARA) will be charged with creating rules and procedures governing the application process, fees, and requirements for holding a license. As LARA currently has a process in place for medical marijuana facilities under the MMLFA, it is expected that many of these rules and procedures will be very similar to the current structure. The Act states that LARA shall approve a state license application and issue a state license if: (a) the applicant has submitted an application, is in compliance with the rules promulgated by the department, and has paid the required fee; (b) the proposed municipality does not notify LARA that the proposed marijuana business is not in compliance with an ordinance in effect at the time of application; (c) the property where the proposed marijuana business is to be located is not within an area zoned exclusively for residential use and is not within 1,000 feet of a pre-existing public or private school providing education in kindergarten or any of grades 1 through 12, unless a municipality adopts an ordinance that reduces this distance requirement; (d) no person who holds an ownership interest or “true party of interest” in the marijuana establishment applicant: (1) will hold an ownership interest in both a marihuana safety compliance facility or in a marihuana secure transporter and in a marihuana grower, a marihuana processor, a marihuana retailer, or a marihuana microbusiness; (2) will hold an ownership interest in both a marihuana microbusiness and in a marihuana grower, a marihuana processor, a marihuana retailer, a marihuana safety compliance facility, or a marihuana secure transporter; and (3) will hold an ownership interest in more than 5 marihuana growers or in more than 1 marihuana microbusiness, unless LARA promulgates a new rule stating otherwise after 2023. Similar to the MMFLA, all state licenses are effective for only 1 year, and all renewals require a complete application and a renewal fee. The marijuana business must be in good standing to renew its license. Taxing Marijuana In addition to all other taxes that may be added to the marijuana industry, the RMLA specifically imposes a 10% excise tax on each marijuana retailer and each marijuana microbusiness. This tax is imposed on the sale of marijuana to anyone other than another marijuana business. This tax will be put into a state fund, which will first be used for the implementation, administration, and enforcement of the Act, and for at least two years, to also provide $20 million annually to one or more clinical trials researching the efficacy of marijuana in treating the medical conditions of armed services veterans and preventing veteran suicide. Upon state congressional appropriation, all remaining balances must be allocated as follows: (a) 15% to municipalities in which a marijuana retail store or a marijuana microbusiness is located; (b) 15% to counties in which a marijuana retail store or a marijuana microbusiness is located; (c) 35% to the school aid fund to be used for K-12 education; and (d) 35% to the Michigan transportation fund to be used for the repair and maintenance of roads and bridges. Violations of the RMLA The RMLA does prescribe certain sentencing guidelines for violations of the Act. Generally, if an individual violates the Act and cultivates more plants or has more marijuana in their possession than allowed by the Act, they will be subject to a civil infraction, fines of up to $500.00, community service, forfeiture of the marijuana and attendance at drug education or rehabilitation programs. Further, if the violation is due to having more than twice the legal limit, the violation could be charged as a criminal misdemeanour. In an effort to decrease the number of non-violent offenders in the prison system, the RMLA does state that a misdemeanor sentence shall not include imprisonment unless the violation was “habitual, willful, and for a commercial purpose or the violation involved violence.” So what doesn’t the RMLA cover? The RMLA does not authorize driving, operating, navigating, or being in physical control of any motor vehicle, aircraft, snowmobile, off-road recreational vehicle, or motorboat while under the influence of marijuana. Further, it does not allow the sale of marihuana or marihuana accessories to a person under the age of 21, or allow any person under the age of 21 to possess, consume, purchase or otherwise obtain, cultivate, process, transport, or sell marihuana. The RMLA also does not allow the cultivation of marijuana plants if the plants are visible from a public place, or if the marijuana plants are outside of an enclosed and secured area, equipped with locks or other functioning security devices that restrict access to the area. Much like alcohol, the RMLA prohibits possessing marihuana accessories or possessing or consuming marihuana on the grounds of a public or private school where children attend classes in preschool programs, kindergarten programs, or grades 1 through 12, in a school bus, or on the grounds of any correctional facility. Additionally, the Act does not require an employer to permit the possession, cultivation or use of marijuana in any workplace or on the employer’s property. The RMLA does not prohibit an employer from disciplining an employee for violation of a workplace drug policy or for working while under the influence of marijuana, and does not prevent an employer from refusing to hire, discharging, disciplining, or otherwise taking an adverse employment action against a person with respect to hire, tenure, terms, conditions, or privileges of employment because of that person’s violation of a workplace drug policy or because that person was working while under the influence of marijuana. The RMLA is a comprehensive piece of legislation that ends the prohibition on marijuana use and possession and provides a myriad of opportunities for entrepreneurs to enter this booming industry. If you are thinking about starting a Michigan marijuana business or have questions about the RMLA, we suggest you contact a Michigan medical marijuana attorney to get a head start on this process before the ballot initiative passes. https://www.oak-law.com/blog/michigan-lara-dispensary-inspections-and-processor-compliance monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/6514f660-ae7a-4cc1-b770-a82d265a1297/unsplash-image-YivPucCR1OQ.jpg Blog - Michigan LARA Dispensary Inspections and Processor Compliance: - An Overview and Summary of Common Compliance Issues After witnessing a LARA provisioning center inspection firsthand, I thought it would be good idea to provide an overview to dispensary owners and processors of what constitutes compliant products and packaging for processed Marijuana products and what LARA inspectors are looking for when they conduct a provisioning center inspection. There has not been much written on the subject, and as a result, non-compliant packaging is rampant throughout Michigan dispensaries. Processed Marijuana goods with non-compliant packaging will need to be taken off the shelves and either re-packaged, thrown away, or returned to the processor. It is therefore important that both processors and dispensary owners understand what constitutes compliant packaging and products and what does not. One piece of information that many dispensary owners do not understand is that most issues uncovered during the first LARA inspection will not count against a dispensary owner, except for serious and flagrant violations such as selling to non-card holders. That means that a dispensary owner has time and opportunity to correct any violations before a second, follow up inspection. The key for LARA, and for the report LARA presents to the Licensing Board with respect to your inspection, is that the issues identified in the first inspection were fixed before the second inspection. Below are several common issues that many medical marijuana dispensaries and processors have faced during their inspections. Hopefully by reading this article, your company will not be tripped up by these issues like other processors and Michigan dispensaries that have already undergone their LARA inspections. Cannot be Marketed to Kids This is the biggest and also most subjective requirement that processors and dispensary owners must address. The rule states that “No edible marihuana product can be associated with or have cartoons, caricatures, toys, colors, designs, shapes, labels, or package that would appeal to minors”. During the inspection, I had a conversation with one of the license inspectors, and we discussed what could be considered to be marketed towards children. The LARA inspectors acknowledged that it is not always clear what is considered to be marketed to kids, and that these determinations do involve a fair amount of discretion by LARA. This means that you need to stay on top of LARA guidance to ensure that you are up to date on the latest guidance with respect to packaging and product compliance. One of the main takeaways is that anything that resembles children’s candy must be taken off the shelves. For example, if you wanted to sell gummies, you need to be careful about both the product and the packaging. The gummies cannot be animal shaped as that could confuse children. They also cannot have a name that would appeal to children—e.g. gummy bears. However, a gummy product with a neutral name that is not animal shaped would be acceptable. The Emergency Rules also provide that cartoons—all cartoons—must be eliminated from the packaging. This was clearly laid out in Rule 33 of the Emergency Rules. I was told that this applies not only to cartoons aimed at or associated with kids but all cartoons in general, even “adult” cartoons. This also applies to brightly colored edibles, especially those with clear packaging making the “colorful” product observable to the public. Here, it is important to know that while some cases are clearcut, some are not. When inspecting my clients’ products, there are often obvious violations, as well as very subjective determinations about what products and packaging would be considered to appeal to kids. As an example, there are several edibles that are covered in very colorful nerds candy. In this situation, whether LARA considers the item to be marketed to kids could depend as much on a product’s packaging as the actual product itself. It is therefore important to not have clear or see through packaging and to be extremely careful about what graphics are used on the packaging. Products Must be Michigan Made If you are selling marijuana products, LARA will want to see that the products all came from Michigan. Any marijuana product that did not come from Michigan will need to be taken off the shelves immediately. This applies not only for THC-products but for CBD products as well. LARA has power over enforcement with respect to licensing. While this means LARA can’t do much with respect to a health store or website selling CBD in Michigan, they do have authority over an MMFLA licensee and can restrict a licensed marijuana facility from selling non-compliant CBD products in Michigan. That means they have the power to require current dispensary owners to get rid of any non-Michigan CBD products. Currently, this means LARA will inspect all the processed marijuana products in a dispensary and pull any product that is identified as being made outside of Michigan. In the future, this will likely become stricter once LARA starts licensing Michigan processors and starts strictly enforcing the Emergency Rules labeling requirements. Shelf Stable Products I’ve seen a lot of medical marijuana products in my career as a Michigan marijuana business lawyer. Not all will comply with LARA’s new rules and inspection guidelines. One group of items that will not comply are ice cream, frozen treats, or any other product that are not “shelf stable”—i.e. it requires refrigeration to store for an extended period of time. Ice cream would be the best example of this, but this would also include any drink that must be refrigerated to be stored in the long-term. Just because a product can be refrigerated doesn’t mean it must be. Beverages that can be stored at room temperature can also be sold refrigerated to customers. The key is that the beverage or marijuana product must be able to be stored at room temperature, not that it actually is stored at room temperature. Product Placement is Key While your shelf may only be stocked with 100% compliant items, your dispensary may still not be in compliance due to the placement of the individual products. Many dispensaries have edibles and other Marijuana processed products on shelves that customers can walk up to and inspect. While this is OK for other industries, the Michigan Medical Marijuana industry is different. You cannot have any Marijuana products within reach of patients or customers. This does not mean that patients are unable to inspect the products though. Budtenders are able to take products off shelves or take out products from behind the counter for the customer to inspect. The main takeaway is that a patient cannot come in and grab a product or products while a budtender isn’t looking. In other words, Marijuana products cannot be touched by a patient without help from a budtender. You are Responsible for your Patients on the Premises Just like a liquor store is responsible for anyone drinking alcohol on the premises, a dispensary is responsible for any Marijuana consumption on the premises. That means if you give away free samples, and your patients consume those samples on your premises, you will be written up by LARA if discovered. You, therefore, have to be careful with what you decide to give free samples of at your store, as well as what you decide to sell. Anything that can be easily consumed on the premises, over a long enough time period, will be consumed on the premises. The best way to prevent this is to train your staff to monitor for this behavior, to kick out any patient who consumes or attempts to consumes marijuana on the premises, and to be cognizant of the types of products you are selling and their potential for in-store consumption. Serving Size and Total THC Content The Emergency Rules set forth maximum THC Levels for Marihuana-Infused Products. LARA allows for a variance of + or – 10% for these amounts. Topical formulation (examples – lotions, balms, rubs, etc.): 6% by volume Tincture: 1,000mg per container Beverage: 50mg per serving, 500mg per container Edible Substance: 50mg per serving, 500mg per contained Other similar high-potency infused product (examples – capsules, suppositories, transdermal patches, etc.): 1,000mg per item Conclusion While this article was not meant to cover all potential issues a dispensary may run into during an inspection, it does highlight many of the reoccurring issues that LARA often faces. A more comprehensive checklist put out by LARA is available for dispensary owners here. If you have any questions regarding LARA inspections or dispensary compliance in general, it is recommended you contact a dispensary lawyer or Michigan marijuana business lawyer to discuss compliance for your medical marijuana dispensary. https://www.oak-law.com/blog/what-if-my-mmfla-commercial-marijuana-application-is-denied monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/5736066b-2564-440b-98c4-a12518b81dfd/unsplash-image-dGk-qYBk4OA.jpg Blog - What if my MMFLA Commercial Marijuana Application is Denied? - Marijuana Application is Denied? It’s happening more often that you’d think – LARA and the Bureau of Medical Marihuana Regulation (BMMR) are denying Part 1 prequalification applications at pretty much every licensing board meeting. These reasons have varied from the failure to provide all requested material to issues with the applicant’s “character” and integrity. So what happens if your application has been denied for a Michigan medical marijuana business license? This article will discuss the MMFLA appeals process and what to do if you MMFLA commercial license application is denied by the Medical Marihuana Licensing Board. LARA has provided some guidance on this topic in Emergency Rule 46, which governs the appeal process. As LARA is a public agency, any rejected applicant is entitled to an appeal before an Administrative Law Judge (ALJ) if they meet certain requirements. However, the appeals process for the denial of an MMFLA license is actually much more convoluted than a simple appeal to an ALJ. First, the regulations require an applicant to request a public investigative hearing within 21 days of service of the notice. This requires the applicants to act quickly, as their window of opportunity is only 3 weeks from the date the rejection letter is mailed. Prior to the public investigative hearing, an applicant should prepare all the evidence and testimony they need to show their eligibility and suitability for licensure. The agency or ALJ might send out subpoenas requesting additional documentation from you to support their case, which you would have to provide them with prior to the hearing. As it is a public hearing, not only will an ALJ and representatives from LARA be present, but also members of the general public. Much like a civil court trial, the applicant will have the opportunity to present their argument, question witnesses, cross-examine opposing witnesses, provide supporting exhibits, and answer questions from the ALJ. The ALJ will then be able to make a recommendation as to whether the Board’s decision should be affirmed, reversed, or modified. The ALJ makes its recommendations to the Licensing Board, which then reconsiders its decision in light of the facts and recommendations made by the ALJ and has final say over whether the decision to deny the application was proper. In this way, the Licensing Board actually acts as its own appeals board. Assuming the Licensing Board does not change its mind, you would then be able to file suit in state circuit court challenging the Licensing Board’s decision. Except in extreme circumstances, this would likely only be advisable where the Licensing Board’s decision contradicts the ALJ’s recommendations. It is important to note that the applicant needs to establish, by clear and convincing evidence, that it is eligible and suitable for licensure. This is a very high threshold for applicants, and should not be taken lightly. This appeal process is rigorous and will require a vast amount of time and work in order to prepare a winning strategy for your appeal. There will be a significant amount of time between when your application is denied by the Licensing Board and when you have the ability to go before an impartial decision maker in state court. This was likely by design. By making denied applicants go through a literal “run around”, these applicants will be much less likely to challenge the Licensing Board’s decisions in state court. There is one simple alternative to this process…reapply. There is nothing stopping you from reapplying using the exact same application, though this would not be recommended. Depending on the issues that tripped up your original application, a few changes or small tweaks may be all that is needed to turn your denial into an approval. As an example, there has been applications denied for the failure to provide adequate explanations to LARA deficiency letter issues. A good lawyer may be able to craft an explanation that satisfies the Licensing Board’s concerns. In addition, it is possible that the application was denied because of background issues of one single partner. That partner could then be bought out and the other partners reapply without the issues related to their previous partner that weighed down their previous application. In sum, if you have recently been denied in the Part 1 application process, we recommend contacting a Michigan medical marijuana business attorney to discuss your options. It is possible that an appeal, though time consuming and expensive may be your best option. It is also possible that you would be better off simply reapplying with counsel familiar with the process and knowledgeable about how to fix the issues that caused your original application to be denied. https://www.oak-law.com/blog/mmfla-licensing-is-getting-tougher-a-recap-of-the-may-31-2018-bmmr-meeting monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/fce8fe1d-30b0-4f58-ae7a-bcc6e8dfc4a6/unsplash-image-kGpOdvkvCzY.jpg Blog - MMFLA Licensing is Getting Tougher - A Recap of the May 31, 2018 BMMR Meeting The Bureau of Medical Marihuana Regulation (BMMR) met this past week to discuss the prequalification applications of 19 commercial medical marijuana applicants, as well as the overall status of medical marijuana business applications received by the Department of Licensing and Regulatory Affairs (LARA). In attendance were all 5 Board members, as well as LARA Director Brisbo and a LARA staff attorney. Prequalification Decisions: The Board approved 12 out of 19 Michigan Medical Marihuana Facility Licensing applications in this session but did not state which type of MMFLA license each applicant was seeking. Even with 63% of the applications receiving prequalification approval, there was one recurring theme throughout the public meeting – the licensing process evaluations appear to be getting tougher. Failure to Disclose There were multiple applications denied for the failure to disclose prior criminal history. While this is certainly not a new issue, there was one application that was denied for failure to disclose 2 arrests from 1981. The staff attorney from LARA did clarify that the statute allows the Board to deny prequalification if the applicant “knowingly submitted false information” on their application. Therefore, the Board must determine if there was intent to deceive by failing to provide information. If the Board determines that an individual did intentionally leave certain information off of the application, the rejected applicant may appeal the decision before an Administrative Law Judge for reconsideration. Integrity, Moral Character and Reputation of the Applicant Another recurring issue that the Board discussed in the meeting was the integrity, moral character and reputation of the applicants. This was the first meeting where “character” issues played a significant role in the Licensing Board’s review of MMFLA applicants. For example, one applicant had two members – a 70% owner/Michigan resident and a 30% owner/New York resident. The application was denied prequalification because the Michigan-based member was dropped from the application the day after he was charged with possession of marijuana, and the New York member was proceeding alone on the application. The members did complete all necessary documents to show that the Michigan resident would not be involved in the business. The Board determined that as the New York member did not reside in Michigan, he would likely rely on the Michigan individual to assist in running the business despite their assertions to the contrary. One of the more difficult applications before the Board was an applicant who had been convicted of operating a 4,000 plant grow in Minnesota and served 3 years in federal prison. While the applicant did properly disclose this conviction, the Board noted that he continued to operate in the illegal medical marijuana business after his release from prison. The Board did state that upon inspection, he was growing 72 plants pursuant to the MMMA. However, the applicant did say he was making money from this caregiving business, which Mr. Bailey stated is not allowed by statute (though this was somewhat contradicted by the LARA staff attorney). Further, the Board did mention that as this industry is “ripe for abuse”, they need to carefully consider whether applicants are likely to violate the regulations set forth in the MMFLA. Given all of these factors, the Board denied the prequalification 3-2. Another application was denied based on the applicant’s lack of explanation for large deposits in their financial records. The Board determined that the responses received from the applicant were inadequate – for example, a $2,800.00 deposit was simply explained as being “cash or check” and did not fully explain where the money came from. The Board decided that the failure to provide an adequate explanation speaks to integrity and honesty of the explanation. New Statistics: 546 prequalification applications have been submitted New Applications Since Last Meeting: Grow Class A: 10 Grow Class B: 3 Grow Class C: 79 Processor: 29 Provisioning Center: 81 Secured Transporter: 6 Safety Compliance: 5 96 municipalities have opted in to the MMFLA The Bottom Line: With so many medical marijuana facility prequalification applications pending with LARA, and the BMMR’s hard line stance on failure to disclose and their analysis of the over in all integrity of the applications, it is clear that the marijuana business licensing process in Michigan is getting much harder. It is imperative that your MMFLA application be accurate, comprehensive and clear to the BMMR upon their review. If you have questions or concerns regarding the MMFLA licensing process for your Michigan medical marijuana business, we recommend you contact a Michigan marijuana business attorney today to discuss the specifics of your situation and how to ensure your application moves smoothly through this difficult process. https://www.oak-law.com/blog/is-cbd-legal-in-michigan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/f968dc8c-88c5-4a5c-9718-ca55c25f9afc/unsplash-image-pbQ3brdhugQ.jpg Blog - Is CBD Legal in Michigan? - Legal in Michigan? Due to legal and regulatory changes in the industry, including the 2018 Farm Bill and recent changes in the implementation of Michigan’s 2014 Industrial Hemp Research Act, the information contained in this Article may no longer be accurate. Please contact an attorney before relying on any information contained in this Article. For more information on cultivating hemp, or the Hemp Pilot Program in Michigan, check out our recent article. As we discussed in our last article, CBD: One Step Forward, Two Steps Back, LARA, the state’s licensing agency, has announced that it considers CBD to be subject to the same regulations as other Marijuana derived products. During a recent LARA Live webcast featuring Andrew Brisbo, the LARA Director of Bureau of Medical Marijuana Regulation, Mr. Brisbo danced around the questions of whether all CBD products are now regulated the same as other marijuana derivatives, like distillate. The first question asked to Mr. Brisbo was essentially “what gives you the right to do this without any legislation?” His response was that CBD is a derivative of the cannabis sativa plant, and that CBD would now be included in this definition, even if produced from a hemp plant with little to no THC. He said that the federal definition of Marijuana, which finds that cannabis sativa with less than 0.3% THC is not considered regulated Marijuana, is only incorporated into the Michigan’s hemp laws but not its marijuana laws. For its marijuana laws, there is no “THC qualifier”, so in Michigan, any derivative of the cannabis sativa plant other than from sterilized seeds, oil from seeds, and mature stalks is considered a controlled substance. Confused yet? Here is what he was really saying: CBD derived from cannabis sativa is regulated the same as Marijuana. What he didn’t mention, and what you needed to read between the lines to catch, is that under this definition, CBD derived from the mature stalks or sterilized seeds is legal in Michigan and not subject to the state’s Marijuana laws. This position is in line with the DEA’s position on CBD extracts. That begs the question—how is LARA going to enforce its interpretation of the state’s Medical Marijuana laws, especially when some CBD products are legal and other almost identical products are not? Unlike certain other departments, such as the Department of Natural Resources’ Conservation Officers, there is no “LARA police” to enforce the CBD ban. While LARA does have inspectors and examiners, as well as an enforcement division, this division is focused on investigating complaints on licensees and licensed establishments. LARA’s power in this way is limited. Similar to the Bureau of Medical Marijuana Regulation, there is a Liquor Control Commission within LARA that regulates the sale of alcohol. One of LARA’s primary enforcement tool for enforcing liquor laws is the revocation, suspension or of that person’s liquor license. However, the Liquor Control Commission relies on other law enforcement activities to prevent or control the sale of alcohol by unlicensed individuals. In other words, for activities that fall outside this focus, LARA requires the help and assistance of state or local law enforcement. The bottom line is that if you are a medical marijuana business licensee under LARA, LARA could use its power over licenses and licensees to enforce its CBD ban against you or your company. But this also means that if you do not hold any licenses regulated by LARA, there is currently not much LARA can do at this point. In his LARA live interview, Mr. Brisbo even said that “when it comes to enforcement of unlicensed activity, that’s really a law enforcement function.” Given that state and local police have yet to show any interest in going after CBD sellers or buyers, that CBD is by all accounts a very popular medicine and treatment, and that prosecutors would need to prove that the CBD was illegally derived in each case, a statewide crackdown is unlikely anytime soon. And a crackdown right before an important and contentious state election in 2018, at least on the state level, seems virtually impossible. So if this ban has little to no teeth, why did Mr. Brisbo even bother with it? I can see three reasons. First, a recent case governing the federal interpretation of the Controlled Substances Act found that CBD was covered by the Act. Mr. Brisbo is announcing to the public that he reads Michigan’s laws restricting Marijuana, as well as the state’s legal definition of marihuana in the Public Health Code, as including CBD. While he lacks the power and political will to enforce this position at the moment—or as his interviewer stated in LARA Live—“this isn’t the law enforcement ‘time’”—that will likely change unless action is taken to change Michigan’s current marijuana laws. Second, he is concerned with the unregulated nature of the CBD market and thinks state government should have the power to step in to protect consumers. He mentioned these concerns recently at the Cannacon conference in Detroit, and he may have a point. The final reason? To help MMFLA licensees! While the reaction from the Michigan Cannabis industry to the CBD ban was visceral, I actually see it at as Mr. Brisbo throwing Michigan MMJ companies a bone. Essentially, the ultimate effect of the ban will be to prevent stores and individuals not licensed under the MMFLA or MMMA from selling CBD. This means that, absent caregivers, dispensaries would be the only place to buy legal weed AND legal CBD. With the market for CBD growing in popularity seemingly by the month, this guidance could have a big effect on licensees down the road—for better or for worse. https://www.oak-law.com/blog/lara-extends-june-15th-temporary-authorization-deadline-for-dispensaries monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/f04cc550-6990-4560-8226-dd5874173ccc/unsplash-image-vnOAErpxhZ4.jpg Blog - LARA Extends June 15th Temporary Authorization Deadline for Dispensaries - Temporary Authorization Deadline for Dispensaries Yesterday, May 30th, 2018, the Michigan Department of Licensing and Regulatory Affairs (“LARA”) made the decision to extend the June 15th deadline requiring all provisioning centers to either have a license under the Medical Marihuana Facilities Licensing Act (“MMFLA”) or shut down. This decision does not come as a surprise to many as it appeared that LARA and the Licensing Board would not have been able to issue a single provisioning center operating license before June 15th, meaning all dispensaries would have needed to shut down. This extension applies only to applicants who turned in their application by the February 15th deadline and continue to make a good faith effort to be licensed and comply with Rule 19 of the emergency rules. The extension was announced as part of LARA’s re-issuing of the Emergency Rules originally published by LARA last year and were set to expire in early June. Other than extending the deadline, one change made by the new emergency rules is the addition of clarifying language regarding safety testing standards that LARA has previously released through technical advisories. LARA also issued an advisory document along with the new emergency rules. The document explained that the deadline was extended: To help ensure the continued protection of medical marihuana patients, under the new rules, proposed medical marihuana facilities that would otherwise require a state operating license under the MMFLA may continue to operate with local approval until September 15, 2018 without impacting the applicant’s eligibility for licensure. “Extending the deadline to September 15th will make sure that this law is implemented correctly and assure that potential licensees are thoroughly reviewed. It is important that we ensure that medical marihuana patients have continued access to their medicine,” said LARA Director Shelly Edgerton. Applicants who turned in their state application by the February 15th deadline – and are making a good-faith effort to become licensed – had faced a deadline of June 15, 2018 to shut down or risk continued activity being considered an impediment to licensure by the Medical Marihuana Licensing Board (MMLB). This 92-day extension will allow the bureau and the board enough time to investigate and authorize facility operator licenses in order to make sure that access to medical marihuana is maintained. It is important for applicants to remember that as any operation past September 15th without a MMFLA license will be considered unlicensed activity by LARA. Until a license is received from the state, the operation of a medical marihuana facility would be considered a business risk by the operator, and noncompliance will be grounds for referral to law enforcement for unlicensed activity by LARA. However, licensure decisions will be ultimately made by the members of the Licensing Board, who may choose to consider or ignore unlicensed activity as part of the licensing criteria when deliberating on the overall application. https://www.oak-law.com/blog/5-keys-for-michigan-companies-seeking-cannabis-investors monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/778245db-7184-4877-aa3c-cd6d7549692d/unsplash-image-MYbhN8KaaEc.jpg Blog - 5 Keys for Michigan Companies Seeking Cannabis Investors - 5 Keys for Michigan Companies Michigan medical marijuana companies seeking investors need to know that negotiating a successful pre-revenue investment will almost certainly be a “give and take” process. Because U.S.-based banks and credit unions refuse to lend to Michigan Marijuana growers, processors and provisioning centers, and traditional private equity has, for the most part, shied away from investing in the Michigan market, most Michigan cannabis companies in need of capital must look to private investors to fund their companies. This means two things: first, a successful business owner will need to spend a lot of time and thought into making their company and business plan as attractive as possible to potential investors. Second, because there is a limited amount of investors willing to invest in this space, it means that if you want to limit the amount of equity you give to an investor, you will need to give the investor something in return. There are certain attributes that make cannabis companies more attractive to investors, such as industry experience and a strong management team that is investing their own money in the venture. However, not every potential Marijuana grower or dispensary owner has tons of money to invest or the “right” experience that investors are looking for. That does not mean all is lost. You can still find medical marijuana investors to meet Michigan capitalization requirements and provide capital for your business. Here are five important tips that can increase your odds of getting investment. Perfect your business plan A partially finished business and operations plan tells investors that your marijuana business venture is not fully thought out. An incomplete business plan will be an immediate red flag to investors. It is crucial to make a good impression with a well thought out and thorough business plan or investor packet. This is especially important for Medical Marijuana companies without a previous operating history because investors will need to rely on the information in your business plan. In my opinion, one of the most important items that are often missing from many Michigan marijuana business plans I’ve seen is detailed operating pro-forma, return on investment calculations and start-up costs. It is not possible to make every number exact—no one knows the wholesale price of Marijuana in Michigan three years from now—but that doesn’t mean you can’t try to be as close as possible. This also means you need to provide some room for error. Be sure to allow for plenty of initial operating capital so a few cost overruns don’t bankrupt you before you even open. When putting together the start-up costs and a pro forma for your company, you should also be prepared to explain your numbers and go into detail. For example, your investor may have worked in the insurance industry or have specialized knowledge in Marijuana business insurance. So, if you allocate $8,000.00 to business insurance for your grow facility, and the investor knows that this number is not correct, they will likely want to know why. If you can’t give them a good explanation, then the investor will likely assume that all of your numbers are potentially incorrect. The best way to avoid this issue is to provide the calculations or quotes behind your pro forma and start-up numbers, or at least be prepared to explain why you can’t obtain exact figures. This can be as easy as finding a couple of vendors on the internet and then asking for quotes. Most places are eager to provide them. Not every number can be so easily obtained, however. One of the most important set of numbers in your business plan—revenue projections—is also one of the hardest numbers to accurately predict. It almost inevitably involves at least some guess work on your part. Nonetheless, it is still important to run projected revenue numbers, if only to see what revenue you need to break even and how much profit you would make at different revenue levels. Many sophisticated investors will want to see several different cash flow projections, including a break-even projection, a best guess using industry average numbers (e.g. average cost per visit, average visits per day), as well as a “blow the roof off” best case scenario projection. Pitch, pitch, pitch! You can’t get an investor to fund your medical marijuana company if you aren’t out looking for investors. Having a strong network helps, but absent that, having a well-connected accountant, consultant or attorney can help get your business plan in front of lots of potential investors. I’ve helped several companies find investors for their medical marijuana facilities. I can tell you that not all medical marijuana investors view a potential cannabis investment the same way, so getting in front of many investors will increase your odds of finding the right match. For example, I provided a business plan and investor packet to a medical marijuana investor group that absolutely tore the company apart when I presented it to them. Nearly every aspect of their investor packet was torn to shreds. That same company took the same investor packet to a corporate executive who was familiar with their work in the cannabis industry and wanted to invest immediately. The difference? Perspective—the second investor saw the value of the client’s cannabis industry expertise, the first could not get past the dollars and cents of the deal. One common mistake cannabis entrepreneurs make when pitching investors is that they drone on and on when pitching the investor. While each pitch situation is different, as a general rule, a good pitch should be between 15 to 25 minutes and have no more than 15-20 slides. Marijuana startups often feel the need to include all the operational details in their pitch, which can cause investors to lose focus and attention. A good pitch should focus on the investment highlights and high-level operations, leaving the details to the investor packet or for investor follow up questions. You can’t always get what you want The Michigan Marijuana market is unique. Investors know that capital sources are limited in the Cannabis space. Unlike other start-up businesses, Michigan marijuana businesses cannot get an SBA loan or obtain traditional bank financing, and many traditional investors balk at the extensive license application process and ensuing disclosure requirements. That means Marijuana start-ups, more so than other businesses, need to find ways to accommodate investors if they want to get funded. While there are certain points you should never concede on, such as control over your company, you may need to be flexible on others. I like to tell both medical marijuana investors and medical marijuana companies seeking an investment that a deal in this space only gets done if both sides give a little. If you are not willing to work with a cannabis investor to find a middle ground you are both comfortable with, you will be fighting an uphill battle. Investors Want Quick Payback Periods Given the legal uncertainty in Michigan marijuana laws, investors want to see their original investment returned as quickly as possible. While a select few investors have enough money that they do not need to see an immediate return on their capital, many investors prefer shorter payback periods as a way to minimize their risk. If you have ever watched Shark Tank, you have probably heard the sharks ask some version of “when am I going to get my money back” countless times. I similarly hear some version of this from nearly every investor who is looking to invest in the Michigan medical marijuana market. Depending on how your numbers shake out, you may need to get creative when structuring the deal terms. For example, part of the investment can be structured as a promissory note or debt, or investors can be given a separate class of shares with preferred distributions, liquidation preferences, or guaranteed returns on capital. This is where a good Medical Marijuana Business Attorney can be worth his or her weight in gold. Using Security to Ease Investor Concerns Even with quick payback periods, certain investors may still look to limit their risk due to perceived regulatory uncertainty or concerns about your company’s experience or amount of “skin in the game.” Without security, a promissory note is worthless if a company is losing money and can’t pay back the investor. The best way to ease these concerns is to allow investors to secure their investments with hard assets. Let’s say you are looking to open a co-located growing and processing facility with an attached provisioning center. In this hypothetical scenario, the total investment to buy and build out the building, purchase processing, and growing equipment, and obtain initial inventory is $1,000,000.00. In this scenario, there are many ways for Michigan marijuana companies to use “security” to ease investor concerns. For example, the company could allow the investor to purchase the property outright or offer the investor a mortgage or deed of trust on the property. The company could also allow the investor to obtain UCC financing statements over growing and processing equipment, which would allow the investor to essentially repossess the equipment if the underlying note isn’t paid. Here, again, a Michigan Medical Marijuana Business Lawyer will help you craft a deal that minimizes investor risk or addresses other investor concerns, while in turn maximizes the amount of equity you can keep. Be careful though—not all attorneys calling themselves “Marijuana Business Attorneys” have the knowledge and contacts needed to help your secure investment. An attorney with a strong business law background, as opposed to a criminal law background; plenty of Michigan medical marijuana industry contacts; and experience working with start-up companies, rather than on criminal matters, will help your marijuana company immensely. Luckily for you, you know of one already Scott F. Roberts. https://www.oak-law.com/blog/mmfla-part-2-applications-whats-a-facility-plan monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/46f50fef-ab3b-4960-b498-2c3bf47a3652/unsplash-image-qWwpHwip31M.jpg Blog - MMFLA Part 2 Applications – What’s a Facility Plan? - What’s a Facility Plan? One of the biggest components of the Medical Marihuana Facilities Licensing Act (MMFLA) Part 2 application is the “facility plan”. However, as the Part 2 application is a complete overview of your proposed marijuana business, you might be wondering what else could be involved in preparing a facility plan? The facility plan requirement is outlined in Rule 8 of the Emergency Rules created by the Michigan Department of Licensing and Regulatory Affairs (LARA). The rule states that a Michigan marijuana facility plan shall include the following: The type of proposed marijuana facility, location, and description of the municipality, If the applicant is seeking to stack MMFLA licenses, Proof of common ownership (such as a deed, lease, or purchase agreement), Diagrams of the facility showing the dimensions, exits, and main structures, Floor plans of the facility, Any construction details for new structures, and Building structure information and zoning classification. The rule also includes a requirement for a “proposed security plan that demonstrates the proposed marihuana facility must meet the security requirements under Rule 27”. This portion of the facility plan is one of the most important aspects of your application, as LARA wants to ensure that licensees are meeting the rigorous standards they have set for securing medical marijuana products and making the medical marijuana businesses less likely to be targeted for crime. The security measures require video surveillance, alarm systems, commercial grade locks, and enforcing limited access restrictions in the facility, but a good security plan will also detail the processes that the medical marijuana business will take to ensure that medical marijuana product is not obtained by non-patients. There are Marijuana companies that sell Michigan Marijuana Facility Plan templates online for several thousands of dollars. These companies should be avoided as the facility plan templates are often sold at exorbitant costs and are not tailored to the operations of your medical marijuana business. For the cost of one of these templates, you could likely have an experienced Marijuana business lawyer draft a fully compliant facility plan tailored to your operations. Regardless of the type of license, you are seeking, or whether you use a Part 2 facility plan template, it can be time-intensive to compile all of the information needed to draft a cohesive report for LARA’s consideration. If you are looking to start your MMFLA Part 2 application, we recommend speaking with an experienced medical marijuana business attorney who can help ensure that your application meets and exceeds LARA’s requirements, giving your marijuana business the best chance to get a license. https://www.oak-law.com/blog/5-license-types-under-the-mmfla monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/09392f9e-11af-4ad8-bfe0-4a1834df1a2f/unsplash-image-DVzt7cvRKRo.jpg Blog - 5 License Types Under The MMFLA - 5 License Types On May 17, 2018, the Department of Licensing and Regulatory Affairs (LARA) released inspection guides for all 5 license types under the MMFLA (i.e. provisioning centers, growers, secured transporters, processing centers, and safety compliance centers). These guides serve as the definitive checklist that all Michigan medical marijuana facilities must follow in order to be approved for a Michigan medical marijuana business license. Link to grower guide Link to processor guide Link to provisioning center guide Link to secured transporter guide Link to safety compliance center guide These guides are drafted to be specific to each type of business entity. For example, some of the important aspects of the provisioning center inspection guide include: The inspection process for dispensaries in Michigan; The process regarding if and when a dispensary has a duty to notify and report an issue to LARA; The regulations controlling the sale or transfer of marijuana product in dispensaries; The rules governing the operation of Growers, Processors, and Dispensaries in the same facility; Regulations regarding hiring and terminating employees and managers; and Specific provisions regarding the storage of medical marijuana product. These inspection guides include complex and detailed information which are vital to the success of your MMFLA application. If you are considering obtaining a medical marijuana facility license for a Michigan marijuana business, we recommend that you call an experienced Michigan medical marijuana attorney to go over the requirements in the inspection guide today. https://www.oak-law.com/blog/cbd-one-step-forward-two-steps-back monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/4cff1a2b-a6ed-4414-b57c-f136622d53de/unsplash-image-69RT5Nv9mhQ.jpg Blog - CBD – One Step Forward, Two Steps Back - One Step Forward, Two Steps Back Due to legal and regulatory changes in the industry, including the 2018 Farm Bill and recent changes in the implementation of Michigan’s 2014 Industrial Hemp Research Act, the information contained in this Article may no longer be accurate. Please contact an attorney before relying on any information contained in this Article. For more information on cultivating hemp, or the Hemp Pilot Program in Michigan, check out our recent article. Hemp products and cannabidiol (“CBD”) have taken a major hit in the last few weeks with both federal and state decisions declaring that CBD is considered a controlled substance. On April 30, 2018, the 9th Circuit Court sided with the Drug Enforcement Administration and affirmed the decision that cannabidiol (CBD) is a Schedule 1 controlled substance under the Controlled Substances Act – a major setback for the American hemp industry. In response to this new federal decision, the State of Michigan Department of Licensing and Regulatory Affairs (LARA) and Bureau of Medical Marijuana Regulation (BMMR) released an Advisory Bulletin on May 10, 2018, clarifying how CBD and industrial hemp are regulated in the state of Michigan. Based on the statutory definitions related to “marihuana” found in the Michigan Public Health Code, the Michigan Medical Marihuana Act, and the Medical Marihuana Facilities Licensing Act, any extracts of marihuana or extracts of the marihuana plant will continue to be treated as marihuana. That means that the possession, purchase, or sale of marihuana or any marihuana product – including CBD – must be done in compliance with the MMMA and MMFLA. Marihuana does not include industrial hemp grown or cultivated (or both) for research purposes under the industrial hemp research act. The Industrial Hemp Research Act limits industrial hemp to cultivation or research and does not authorize its sale or transfer. Accordingly, any possession or transfer of industrial hemp – or any product claimed to be “hemp”-related – must be done in compliance with Michigan’s Industrial Hemp Research Act. This broad regulation has raised many questions as to the scope of enforcement – should smoke shops dispose of their CBD products? Will this include hemp seeds in grocery stores, or hemp protein powder in health food stores? As Michigan prepares to vote on the legalization of recreational marijuana in November 2018 with the Regulate Marijuana Like Alcohol (RMLA) initiative, we expect CBD and hemp to become legalized as soon as 2019 under state law. However, until medical marijuana business attorneys have a clearer understanding of this new decision, we generally recommend pulling all CBD and hemp products from your shelves unless the sales are in compliance with the MMFLA or MMMA. If you are considering commercial hemp production or CBD extraction in Michigan and are in need of a Hemp Lawyer or CBD attorney or CBD lawyer, you should consult with an experienced marijuana business attorney familiar with issues surrounding the Controlled Substances Act, MMFLA and MMMA. The boutique business firm of Scott F. Roberts Law provides free, in-office consultations to Michigan Hemp, CBD and Marijuana businesses. https://www.oak-law.com/blog/mmfla-an-overview-of-the-part-2-application-process monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/971cbd84-5656-4716-8aed-b1f494c141a8/unsplash-image-OQMZwNd3ThU.jpg Blog - MMFLA: An Overview of the Part 2 Application Process - Part 2 Application Process Submitting a Part 1 application under the Medical Marihuana Facilities Licensing Act (MMFLA) can feel like a monumental task, but without proper assistance, the Part 2 application can be even more overwhelming. Do you copy a plan from the internet and hope for the best? Pay a company $5,000 to $10,000 for templates? With so little guidance out there, this can be a daunting and even scary process for medical marijuana companies. Taking a step back, the Part 2 application is designed to focus on your specific marijuana business facility. It is expected that you have found a municipality that has “opted in” to the MMFLA and has granted your company a business license. It is also expected that you have put a significant amount of consideration into how your medical marijuana business will operate, including: specific location, insurance, staffing, marketing, technology, recordkeeping, and security. For Part 2 applications, the focus of the application centers on business specifications. You will have to show extensive documentation. This documentation includes a lease or deed for the business property, employee information, and proof of financial responsibility – meaning that you can show enough money, either in cash, securities, insurance policies or bonds, to cover liability for bodily injury that may result from the manufacture, distribution, transportation or sale of adulterated marijuana products. Further, every applicant will have to prepare a series of “plans” to explain to the Department of Licensing and Regulatory Affairs (LARA) the specifics of how your business will operate. These plans include: a “facility plan” as per Emergency Rule 8(2)(a)-(i), including a “security plan” under Rule 27, construction details, zoning information, and more. a “technology plan” describing any third-party systems being used to interface with the State of Michigan medical marijuana tracking system a “marketing plan” that outlines the applicant’s advertising and marketing plans an “inventory and recordkeeping plan” that shows how the business will acquire, store, and transport medical marijuana products, and how inventory records will be maintained. a “staffing plan” that describes the job descriptions, hiring procedures, employee training, storage of employee records, and day to day operations. The level of detail required by the State of Michigan in drafting these Part 2 applications can make them extremely difficult for medical marijuana business owners. A medical marijuana business attorney who specializes in small businesses, rather than marijuana criminal law, would be a significant advantage to any applicant to help you navigate this process without jeopardizing your Part 1 prequalification approval. https://www.oak-law.com/blog/rmla-what-do-i-need-to-know monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/18b51984-7e5b-495a-9a29-b50478d9298d/unsplash-image-mfiaK7g-wrc.jpg Blog - RMLA – What Do I Need to Know? - What Do I Need to Know? A hot topic in the nightly news and the medical marijuana industry alike is the new ballot initiative for the 2018 November election, “Regulate Marijuana Like Alcohol” (RMLA). This initiative, which would essentially legalize the recreational sale and use of marijuana for individuals over the age of 21, is expected to be on the ballot in November, but could be passed beforehand by the Michigan State Legislature. Currently Michigan’s marijuana laws are governed by the Medical Marihuana Facilities Licensing Act (MMFLA), which dictates who can grow, sell, transport, test, and process marijuana and hemp products in the state of Michigan. The language of the RMLA initiative is substantially less restrictive on who can have a license to grow or sell marijuana compared to MMFLA. The RMLA makes it tougher for municipalities to limit the amount of facilities in their city or township, which has the overall effect of loosening up the State’s licensing laws. Similar to applying for a liquor license, the new RMLA framework would require an application process in order to operate a marijuana facility. Although the RMLA application will likely not be as intensive as the MMFLA application, medical marijuana attorneys believe that many of the requirements will carry over from the MMFLA into the RMLA. There are three significant differences between the MMFLA and the RMLA that any medical marijuana business owner should know about. First, under the RMLA there would be an additional license type, called a microbusiness. A microbusiness license allows an applicant to grow, process and sell marijuana. We like to equate this micro-business entity to a micro-brewery, where a business owner can create small batches of craft brew and distribute it to the public.This new license type is ideal for smaller businesses or caregivers looking to transition to the RMLA once the legislation passes and appears to be well-suited for Marijuana delivery services and edibles companies. The second key difference between MMFLA and the RMLA would be changes to the number of plants each class of growers can have. Under current Michigan marijuana laws, Class A growers can maintain 500 plants, Class B growers can maintain 1000 plants and Class C growers can maintain 1500 plants. Under the RMLA, the initiative allows Class A growers to cultivate 100 plants, Class B growers to have 500 plants, and Class C growers to cultivate up to 2000 plants. The third difference in the Michigan marijuana laws would be an additional excise tax on micro businesses, in addition to each marijuana dispensary. This tax would be imposed at the rate of 10% of the sales price for marijuana sold. As with all major ballot initiatives in Michigan, it is possible for the legislature to pass a revised version of the bill or to revise the initiative language in a lame duck session of the legislature. While the RMLA has not been adopted yet, medical marijuana business attorneys are staying updated on the most recent developments in proposed changes to the Act. If you are interested in starting a marijuana business and want more information before the passage of the RMLA, we recommend reaching out to a Michigan Marijuana Attorney now to help give you and your business the best advantage. https://www.oak-law.com/blog/the-politics-of-licensing-not-everyones-getting-a-michigan-medical-marijuana-license monthly 0.5 2025-02-25 https://images.squarespace-cdn.com/content/v1/60522c31ab93b050999b6cd0/5b2daf6c-a852-45f3-a2a1-224cbc6b2c17/unsplash-image-e2M6MJiS_Ds.jpg Blog - The Politics of Licensing - Not Everyone’s Getting a Michigan Medical Marijuana License The passage of the Medical Marihuana Facilities Licensing Act (MMFLA), which created a commercial licensing structure for Michigan Medical Marijuana businesses, required support from both Republicans and Democrats to pass. On the one side, Democrats favored a more open, less regulated market similar to Oregon’s medical marijuana law, which would allow all but the most unsavory characters to obtain a license. On the other side, Republicans wanted a highly regulated system with only a few large, licensed players—similar to the Ohio ballot initiative that was voted down in 2015. It is clear that political parties in each state see the problem of medical marijuana business licensing through very different and opposing lenses. Democrats want to open up the process to give as many people as possible a chance to fairly qualify for a license; while Republicans want an intensive application process that screened out all but the most upstanding (and politically well-connected) applicants, similar to the casino licensing process a couple decades ago. Republicans, both through their control of the state’s Department of Licensing and Regulatory Affairs (LARA) and the appointment of the Medical Marihuana Licensing Board members, have been able to set forth Michigan medical marijuana rules and regulations that restrict who can apply for a license. As an example, the Michigan medical marijuana regulations enacted by LARA require an applicant demonstrate between a capitalization of $150,000.00 and $500,000.00 in assets, depending on license type, to even be able to apply for a Michigan medical marijuana license. These sort of capitalization requirements are the exact type of obstacles republicans want in place to keep small/local entrepreneurs from entering this industry, instead attempting to preserve it for the high value multi-state operators able to pay these higher fees. In essence, the MMFLA is a compromise between these two competing viewpoints—there is an intensive background check and pre-qualification process—but there are no official limits on the number of medical marijuana licenses that are given out at the state level. Despite there being no state limits, however, doesn’t mean there are unlimited medical marijuana licenses. The Republicans built in an additional check on the licensing process that limits the amount of commercial cannabis licenses given out—the Medical Marihuana Licensing Board. The Licensing Board is made up of 5 political appointees chosen by the governor, who at the time of this article is a Republican. There is a requirement that no more than 3 appointees can be from the same party, but with only 3 votes needed to deny a license, there is the ability to shut off the licensing pipeline at any time. So what does this all mean? It means that not everyone is getting an MMFLA license. At the time of this article, there has only been a handful of denials—all for them for failure to disclose required items on the application, mainly leaving out criminal charges from the owner’s supplemental applications. However, as more and more licenses are given out, the process may become tougher and slower as the Republican-appointed board works to “unofficially” limit or restrict the number of licenses being given out. This also means that getting your license application in on time—and properly structured with the right supporting material—is more important than people realize. For instance, if a group has a partner with several issues in his or her background check, it may be best to take that partner off the application and instead have them hold the real estate or do an equipment lease-back to stay involved. This allows the partner to participate in some of the return without being involved in running the business and risk the business license. It may also be possible to provide the Licensing Board with additional explanations that lessen the effect of certain disclosures if there were mitigating circumstances. There is another option for prospective medical marijuana business owners as well—wait for the passage of the Michigan ballot initiative, or the RMLA (“Regulate Marijuana Like Alcohol”), which takes the decision-making power away from the Licensing Board and puts it back with LARA. Similar to the MMFLA, the RMLA does require a background check, but there are no disqualifying criminal convictions in the ballot language. The RMLA is almost certain to pass if allowed on the ballot, and it may even be passed beforehand by Republicans looking to lessen turnout among liberal voters and make legislative changes they could not if the initiative passes on a referendum. But Republicans also have the ability to change the provisions with certain legislative and judicial maneuvers. There is also the possibility that Democrats and Republicans work together to balance their two competing viewpoints and pass a law that melds the two regulatory structures together into one coherent law. While there is a lot of uncertainty in the current Michigan medical marijuana laws and regulations, what is clear is that this is a political as well as legal process, and knowing the underlying politics behind licensing, or having an attorney to consult with who does, can help position your Company to succeed in the Michigan Marijuana industry. Scott F. Roberts is a Detroit-based Marijuana business attorney. Cedric Jackson is the principal at Jackson Consulting Group, which works with Scott F. Roberts Law to help medical marijuana clients navigate the politics of state and municipal commercial cannabis licensing. If you are in need of a marijuana business lawyer or marijuana political consultant to help navigate the tangled web created by the MMMA, MMFLA and RMLA, give the commercial cannabis attorneys at Scott F. 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