Michigan pot industry faces legal obstacles
Detroit — Confusion between federal and local laws, obtaining a state license and overcoming a stigma against marijuana are some of the challenges Michigan's upstart cannabis industry faces.
More than 50 people came to the Cobo Center on Thursday to get their legal questions answered about starting in marijuana cultivation, procurement and retail. The seminar, the 10th held by Royal Oak's Cannabis Legal Group and Colorado-based Vincente Sederberg, two cannabis licensing and business law firms, came less than a month before the Nov. 6 election when Michigan voters will decide whether to legalize recreational marijuana use, which would create more business opportunities and rules.
"We hope our attendees will be able to progress further than without the seminar in achieving their goal to establish their cannabis-related business," said Barton Morris, an attorney for Cannabis Legal Group. "This is new to Michigan. That whole cloud over it, the potential to be arrested and prosecuted and jailed, that's another issue that doesn't exist in any other legal industry like alcohol."
Under federal jurisdiction, marijuana is illegal because it is a Schedule 1 controlled substance, a category the government deems as having a high potential for abuse and no accepted medical use. This complicates paying taxes and makes most banks less willing to work with marijuana companies, creating a mostly cash business, Morris said.
With statutes and rules in states and municipalities differing and undergoing many changes in recent years, regulations from insurance requirements to limited zoning ordinances can be difficult for businesses to navigate.
"It's not easy, even for being a lawyer," said Todd Winters, 45, of Detroit, who is interested in legal consulting and marijuana retail. "So much is in flux."
Tina Collinsworth, 51, of Niles said she hopes to open a dispensary, but is doing her research before attempting to open shop.
"I've seen others in the city be denied," Collinsworth said. "I know they can be really particular on the wording and kind of picky, so I'm hoping this will help me get a sense of what is expected."
Andrew Brisbo, the director of the state Bureau of Medical Marijuana Registration, gave advice to the industry newcomers on preparing their licensing applications. After Oct. 31, Michigan is requiring pot shops to have an operating license. Those who continue to operate without a license, Brisbo said, "risk getting their license." So far, the state has approved 19 licenses for provisioning centers and 18 others for marijuana growers, processors, secure transporters and safety compliance facilities.
Hundreds more are waiting to be processed and for the Michigan Medical Marijuana Licensing Board to make its decision. Applicants undergo an extensive evaluation and background check. Brisbo said almost always, the bureau needs to request more information or documentation from applicants, and depending on how long that may take, it can make the approval process drag onward. The board meets twice more before the end of the month.
Brisbo emphasized on Thursday that applicants should provide as much information as possible on their pre-qualification applications. He said the top reasons people do not receive license approval are because of an owner's or investor's character and reputation, and because they did not disclose some pertinent information such as an arrest or criminal charge.
"We’ll find everything," Brisbo said. "It’s in your best interest to divulge anything you think we might uncover. We have yet to deny someone for an issue that they disclosed, even if when they disclosed it, we didn’t find it."
Just getting to that application point, however, can be a challenge. Ashley Bowen, 34, and Chad Redman, 39, of Onsted are a sister and brother teaming up to start Superior Stealth Transport. They have been exploring starting a secure transport business for moving product for the past eight months, and so far have raised half the capital they need to obtain their license.
The application fee is $6,000, and those who receive approval must pay between $10,000 and $66,000 for a regulatory assessment. Municipalities also may charge their own fees up to $5,000.
Redman said there is a lot of speculating and competition in the industry.
"It can be frustrating to find an ambassador," Bowen said, "especially since if you invest in the transportation, you can't invest in the other four licenses."
Beyond the red tape, cannabis businesses also face challenges with public perception. Mort Meisner began Grow Cannabis Marketing after being approached by members in the cannabis industry, while he was working in talent and public relations. He asked his landlord if he could put up a sign for his new company; the answer was no. Meisner moved to Royal Oak instead.
"There's an image issue," Meisner said. "We need to put a better face on the marketing. People don't know what they don't know. Some want this below the radar, but it can't be below the radar. I say show your pride."