Michigan Marihuana Act:
Growing Marijuana legally in Michigan is probably not as difficult as you think. There are two laws that allow for the small and large scale legal growing of Medical Marijuana, as well as a third law that allows for the growing of recreational Marijuana likely to pass at the end of 2018. This article will examine the legal requirements for growing under all three Michigan marijuana laws, the predicted effect of each law on Michigan’s marijuana market, as well as the economics of growing Marijuana in Michigan under each law.
Michigan Medical Marihuana Act (“MMMA”)
The MMMA was passed by Michigan voted in 2008. The MMMA allows registered caregivers to grow up to 12 plants for themselves as well as another 12 plants each for up to 5 registered patients. A registered caregiver with 5 patients who is also a patient themselves can therefore grow up to 72 plants at one time. Under the MMMA, you can grow virtually anywhere you want unless specifically prohibited by municipal statute, subject to certain restrictions. For this reason, MMMA grows are often hidden in plain sight. Many are simply in the caregiver’s basement, a fenced in field, or in another house rented or purchased for this purpose.
The MMMA has been the main driver for the state’s decreasing cost of Marijuana over the last ten years. The state’s lax enforcement of the MMMA has allowed much of the “medicinally grown” marijuana to make its way into the recreational market. The MMMA has also historically supplied medical marijuana to the state’s quasi-legal dispensaries, despite the fact that these dispensaries technically cannot legally buy from other caregivers. The MMMA only allows transfers from registered caregivers to their registered patients. Nonetheless, “caregiver to caregiver” transfers are prevalent and are the lifeblood of the state’s quasi-legal medicinal market and indirectly help supply the state’s illegal recreational market.
The MMMA also has a provision that arguably prevents a caregiver from making money from their caregiving activities. Because this provision is vague and hardly if ever enforced, caregiving as a career has taken off in the State of Michigan, but that may not last much longer. If the State of Michigan were to strictly enforce the statute, the economics and legality of caregiving would be increasingly marginal. As I sometimes tell clients: “Under the MMMA, you have two choices. You can operate 100% legally, or you can make money, but you can’t do both.”
It is likely that the state’s new law, the Medical Marihuana Facilities Licensing Act, or “MMFLA”, as well as the petition to legalize recreational marijuana in November 2018, will render caregiving as a career no long viable in the State of Michigan. Smaller caregiver operations will be displaced by larger commercial medical marijuana facilities, who are able to operate at a much bigger scale than caregivers and who are also better able to sell directly to consumers.
Medical Marihuana Facilities Licensing Act (“MMFLA”)
The aim of the MMFLA was to bring a formal licensing process to the State’s Marijuana growing laws and to weed out the criminal elements from the medical Cannabis industry. The MMFLA allows growers to grow an unlimited number of plants, subject to licensing costs imposed by the state. There is a $6,000.00 application fee per entity, as well as license assessments ranging from $10,000.00 per year for a “Class A” 500 plant grow to $48,000.00 per year for a “Class C” 1500 plant grow. The MMFLA allows you to obtain multiple Class C licenses to grow Marijuana at the same facility. For this reason, there are several grow projects in the State of Michigan that are projected to have 10,000 plants or more growing in a single facility.
The process for licensing under the MMFLA is intense. Applicants must submit monthly bank records for the last three years, tax returns, undergo an intense criminal background check, among other requirements. The applicant’s bank records and taxes will be examined, in part, to ensure that the applicant paid taxes and reported their income from their past caregiving activity. The Licensing Board—the ultimate entity that grants or denies licenses under the MMFLA—will also look at the applicant’s criminal history and their general character and fitness. For example, the Licensing Board would likely deny an applicant that has been convicted of a felony drug conviction, which it recently did to an applicant who had run a large scale illegal grow a decade earlier. However, one minor misdemeanor-e.g. a Marijuana possession charge several decades ago—would likely not cause the Licensing Board to deny someone’s licensing application.
While the MMFLA is much more restrictive than the MMMA, and requires between $10,000 and $48,000 in licensing fees to obtain a single license, MMFLA grows will nonetheless likely start putting MMMA caregivers out of business. While there is currently no licensed grow at the time of this article, a flood of Marijuana is expected as the State licenses commercial growers, with several commercial growers planning 10,000 to 20,000 plant grows. Given this level of scale, caregivers will likely struggle to compete on cost with these massive grows, as both compete to service the medical market (as well as indirectly service the recreational market until the ballot initiative is implemented).
Another significant advantage for MMFLA licensed grows is that only they will be able to sell to dispensaries (a/k/a/ “provisioning centers”), which is where an increasing amount of Michigan’s medical marijuana patients procure their cannabis. With the caregivers essentially shut out of the medical market, and unable to legally sell to the recreational market or compete with the scale of many of the licensed grows, it is likely that a career in caregiving will become increasingly harder to sustain. There is a glimmer of hope however—the new recreational legalization ballot initiative to be voted on in November. This law provides a path for smaller scale growers to re-enter Michigan’s commercial cannabis market under a new license type created by the law—a “microbusiness.”
Michigan Regulation and Taxation of Marihuana Act
The Michigan Regulation and Taxation of Marihuana Act, also sometimes referred to as the Initiative to Regulate Marijuana Like Alcohol (“RMLA”), will be on the Michigan state ballot in November, 2018, and will by all accounts pass easily. This law legalizes recreational cannabis in Michigan, as well as allows for several new ways to grow Marijuana in Michigan. For the first 24 months after passage, only licensees under the MMFLA will be able to obtain licenses under this Act, except for two license types—Class A grows (which under the ballot initiative only allows 100 plants) and microbusinesses.
Caregivers displaced by the state’s growing commercial cannabis industry will be able to obtain a Class A license to grow up to 100 plants, which can then be sold to licensed dispensaries. In addition, the ballot initiative will create an exciting new class of commercial Marijuana growers and processors—Marijuana Microbusinesses. This license allows the licensee to grow up to 150 plants and sell them directly to consumers and provides the perfect avenue for caregivers to transition into the legal recreation market in Michigan. A microbusiness license would be perfect for smaller scale Cannabis businesses, such as local delivery, novel marijuana products, and boutique edibles.
In addition to the Class A and microbusiness licenses, the RMLA permits the recreational growing of up to 12 plants by Michigan residents. With Michigan residents able to legally grow up to 12 marijuana plants without a license, there will likely spurn an entire cottage industry of hobbyist similar to the craft beer industry. This would provide experienced growers and marijuana businesses with novel market opportunities, such as putting grower classes, niche blogging, custom buildouts and setups for hobbyists, and more.
The State of Michigan’s legal cannabis industry is in flux, as the State works to implement its medical marijuana licensing law while also preparing for the expected legalization of Marijuana and a whole new licensing law later in the year. Given the fact that the ballot initiative would create two separate licensing structures, it is possible, if not likely, that additional legislative action will be taken to merge the two licensing processes together, or at least provide a more streamlined process for the two regulatory frameworks.
While much is uncertain, what is certain is that the laws, as well as the economics, of growing in Michigan, are rapidly changing. Tens of thousands of caregivers registered in the State of Michigan to grow marijuana under the MMMA will need to adapt to the changing regulatory landscape or become mere hobbyists. Experienced caregivers will likely have no shortage of market opportunities and job offers from licensees looking to hire knowledgeable and skilled growers for their facility. If a caregiver wants to remain independent, however, they will need to quickly adapt to these new laws or risk gradually being relegated to the sidelines of the legal commercial marijuana business.
Scott F. Roberts is the managing attorney of Scott F. Roberts Law, a boutique business law firm representing dozens of commercial marijuana growers, processors, dispensary owners and transporters in the State of Michigan.