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A Michigan State Police unit created to crack down on unlicensed medical marijuana activities is finally preparing to target pot's black market.

The Marihuana and Tobacco Investigation Section spent roughly its first full year of existence enforcing the tobacco tax and conducting background checks on applicants applying for a state medical marijuana facility license.

Now the 40 detectives and civilian analysts across the state will begin addressing illegal marijuana operations while continuing to aid the Marijuana Regulatory Agency in the licensing process.

The promised enforcement comes none too soon for licensed marijuana businesses, which have complained about facing unfair, illegal competition. Since the state legalized recreational marijuana in November, several unlicensed facilities have sprouted up without even trying to get licensed, said Detective 1st Lt. Chris Hawkins, commander for the section.

Unlicensed facilities and others that have operated temporarily during the transition to a licensed market have caused headaches for legitimate businesses such as Green Peak Industries, one of the state’s largest licensed medical marijuana businesses.

“It’s unclear where the black market ends and where the licensed industry begins at this point,” said Joe Neller, a spokesman for Green Peak. “The state should do everything to help law enforcement understand who’s legal and licensed and who’s not.”

From unlicensed facilities to “gifted” marijuana to unsanctioned home deliveries, the State Police has its work cut out for it as the growing regulated market gains firmer footing in the shifting industry.

“It’s a little more sophisticated black market now that holds itself out as legitimate business,” Hawkins said.

The tasks ahead

The Marihuana and Tobacco Investigation Section already is working with some local prosecutors to investigate illegal operators, which Hawkins sees as an impediment to the regulated market. The group has yet to charge any individuals in large part because there wasn’t a regulated standard to which the state could hold facilities.

With more than 150 licensed medical marijuana facilities and the last of the state’s temporary facilities expected to be largely resolved by June, the section finally is delving into black market enforcement.

The section also is examining ways to stop marijuana gifting, a way to purchase recreational pot before the rules are complete for adult use and the licensed recreational market is running.

“We see businesses out there that are selling a $10 box of chocolates for $50 and with that you’re getting 2 to 3 grams of marijuana,” Hawkins said. “To say that these businesses are exploiting a loophole is giving them a little more credit than they deserve.”

Unlicensed home delivery is another problem.

The state allows licensed provisioning centers to obtain permissions to make home deliveries. But the process is highly regulated, and the first provisioning center received permission last week to do deliveries. 

Still, a week ago, Weedmaps included 205 marijuana delivery options available to Michiganians, said Stu Carter, owner and CEO for Utopia Gardens in Detroit. Utopia Gardens was one of the first to obtain home delivery approvals, a service Carter hopes will help with flagging business at the provisioning center.

“They’re stealing business that we’ve paid big annual licensing fees for,” Carter said. “This is a big deal.”

Carter wants Michigan to examine a law similar to one under consideration in California that would penalize sites like Weedmaps for advertising the illicit business.

Challenges to prosecution

Although the Michigan State Police section is more than willing to tackle the issues, Hawkins admitted that, in some cases, officers face an uphill climb in getting cooperation from prosecutors. Higher courts consistently challenged or overturned prosecutorial efforts related to marijuana after medical pot was legalized in 2008. 

“We have to limit our efforts to where we know we can get prosecution,” Hawkins said, but noted those efforts are needed to ensure a successful industry in Michigan.

“Its hard to imagine this system succeeding if these black market operators are allowed to continue operations,” he said.

Muskegon County Prosecutor D.J. Hilson admitted some hesitance, especially when it comes to remaining gray areas in the law, but said there are some prosecutors willing to test the waters.

“There are areas even within the current recreational law that provide a lot of different loopholes,” said Hilson, who is president of the Prosecuting Attorneys Association of Michigan. “I think there are some of us willing to run tough cases that bring these issues to light and let the courts interpret it.”

Michigan Attorney General Dana Nessel announced the formation of a marijuana legal work group this past week that will make recommendations to ensure Michigan’s marijuana laws are implemented as intended, through administrative rules or legislation. The group will ensure the state avoids the “years of uncertainty” after voters approved legalization of medical marijuana at the ballot box in 2008.

Nessel has supported expanded expungement for people with marijuana convictions balanced with enforcement priorities that focus on “truly bad actors.”

“We are fully committed to eliminating any black market operations of legal, regulated substances — whether it is cigarettes, alcohol or marijuana,” Nessel’s spokeswoman Kelly Rossman-McKinney said.

The efforts come as welcome news to licensed operators who have tried to bide their time and resources while waiting for illegal operators to get swept out of the market.

Will black market shrink?

Licensed businesses have had a tough time competing with unlicensed operators, who can sell their product at a lower cost because they don’t pay the taxes, regulatory fees or testing costs that licensed facilities do.

Nearly 50 temporary medical marijuana facilities have been saved from closure by Michigan Court of Claims Judge Stephen Borrello, who has kept them open pending licensing decisions by the state. The facilities had submitted license applications to the state by Feb. 15, 2018, but have still been waiting on approvals or rejections and possible appeals.

Once the unlicensed businesses are resolved by June 1, the black market is expected to shrink.

That’s the hope at least of Marijuana Regulatory Agency Director Andrew Brisbo, who told a Senate Advice and Consent Committee this month he envisions licensed marijuana will eventually cost less than black market pot. A successful regulated market, Brisbo said, will lead to the shriveling of illegal operators.

“If we set up a normalized regulated market where there are recognized products that consumers can rely on as being safe and consistent," he said, "I think that will draw people into that market.”

But legal operators like Carter don't expect much relief unless the state sets and enforces solid rules for cracking down on shady businesses. 

“Greed works every time unless you put some laws in place,” Carter said. “I’m not asking the police to do any storm trooper breaking down the doors. I’m looking at an administrative law that would just put pressure” on bad actors.

eleblanc@detroitnews.com

(517) 371-3661

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