State: More licenses, fewer financial hurdles in new recreational pot market

Beth LeBlanc
The Detroit News
The state of Michigan released Wednesday new rules for the recreational marijuana market. They are less strict than those formerly applied to the medical marijuana market.

Lansing — Prospective marijuana businesses and the communities where they might work have four months to review new rules for recreational marijuana to decide whether they’d like to participate in the nascent market.

The Marijuana Regulatory Agency will begin taking applications for adult use commercial facilities Nov. 1 and could issue the first license that same month, said agency Executive Director Andrew Brisbo.

Released Wednesday, the new emergency rules will have no capitalization requirements, fewer required financial documents, a broader home delivery audience and new license types — marked departures from the more stringent framework surrounding medical marijuana businesses.   

The changes were welcomed by the Michigan Cannabis Industry Association, which was in the midst of reviewing the rules Wednesday morning.

"At first glance we believe these rules are well thought out and forward-thinking," spokesman Josh Hovey said. "We particularly like that there are no capitalization requirements, which should help make licenses more accessible to small business owners."

The rules are nothing more than a "Pure Michigan Big Marijuana giveaway" that will lead to a failure to fulfill promises made on the campaign trail in November, said Kevin Sabet, president of Healthy and Productive Michigan, which opposed the last year's ballot measure. 

“What is even more concerning is the fact that these rather lax regulations are only the starting point," Sabet said in a statement. "As we have seen in states like Colorado, as the industry becomes more entrenched and accepted, they slowly begin making political contributions and lobbying to roll back regulations."

The emergency rules are the first step to implementing a voter-approved initiative that legalized adult-use marijuana and authorized the state to create a framework for the commercial sale of recreational products.

While Michigan residents have been able to consume recreational marijuana since Dec. 6, the regulations issued Wednesday give various pot entrepreneurs — from growers to provisioning centers — a regulated arena in which to establish a business.

The emergency rules will be in place for six months and could be extended to a full year while the Marijuana Regulatory Agency works to implement permanent rules for the industry.

The Nov. 1 start to application processing will give communities time to review the rules to decide whether they’d like to “opt out” of the market or essentially ban marijuana businesses from their jurisdiction. More than 500 communities have already informed the state they won’t be allowing marijuana businesses.

New license types

While the rules have many similarities to those that currently govern the medical marijuana market, the differences include new licensing types for marijuana event organizers, a temporary marijuana event, microbusinesses and designated consumption facilities, a bar- or coffee shop-like establishment where adults can consume, but not sell or distribute pot.

Retailers and microbusinesses seeking a designated consumption license “would be eligible for that license as a layer on to their existing license,” Brisbo said. But the rules prevent against other products, such as food or drinks, at the pot consumption facility.

Another rule would create “excess grow” licenses, which would allow licensees to grow more than the 10,000 plants allowed by the November recreational pot law that caps Class C grower licenses at five — so long as whatever the licensee grows above the 10,000-plant cap is matched with similar plant quantities on the medical side.

“This was a measure to try and allow for the market to be served but tying it back to the medical market to ensure that we have adequate supply on that side as well,” Brisbo said.

Other functions not explicitly covered under the medical marijuana rules will be allowed in the recreational market, such as the ability to participate in research and development and the freedom to provide internal product samples to employees and other licensed businesses for trade and testing purposes.

The interplay of medical, recreational

The existing licenses in the medical marijuana market — grower, processor, provisioning center, secure transporter and safety compliance facility — will be duplicated in the recreational market, but provisioning center licenses will be called retailer licenses.

Any licensee who holds equivalent licenses in both the recreational and medical markets will be able to operate both sides of the business from the same facility, but retailers must clearly locate, mark and ring up medical marijuana products separate from adult use.

As the recreational market ramps up, the Marijuana Regulatory Agency could allow some medical marijuana product to be transferred to some adult use license holders, including the product itself, seeds, tissue cultures and clones.

The allowance could help to sidestep any potential shortages in the recreational market, an issue that plagued the licensed medical marijuana market as it struggled to get off the ground and forced the state to allow for some caregiver and unlicensed pot sales from licensed facilities.

“We have not created any defined periods in which we would allow that (transfer) at this point,” Brisbo said, but the agency may have a better idea of the need for as much closer to its issuance of the first recreational licenses.

Health and Productive Michigan criticized the Marijuana Regulatory Agency for allowing "consumption clubs" and failing to set THC potency limits, a threshold that Brisbo said would likely be addressed in a future advisory bulletin. The limit for medical currently is 50 milligrams. 

"Permitting public use of today’s super-strength marijuana can only logically lead to further increases in drugged driving and exposure of the drug to minors," Sabet said. 

Old and new application requirements

The rules would require all adult-use applicants to create a social equity plan that would promote participation from people disproportionately impacted by past marijuana laws, arrests and penalties. The state’s own social equity program, separate from that required of the licensees, will be outlined later this summer.

Though promises of social justice were made on the campaign trail, the sole reference to social equity measures in the 64-page set of rules amounts to a "social injustice," Healthy and Productive Michigan's Sabet said. 

The social equity piece, the end of capitalization requirements, and a tiered fee structure based on the size of a business will attempt to address several of the obstacles that many medical marijuana license applicants said were keeping them out of the business.

Under the medical marijuana licensing structure, all licenses carry a $66,000 regulatory assessment and require proof that the licensee possesses $150,000 to $500,000 in capital.

“The statute obviously has some allowances for some additional small businesses and we wanted to be aware of that and set standards that were reasonable for all types of businesses and all sizes,” Brisbo said of the decreased financial benchmarks.

Like the medical pot application process, license applicants can make use of a two-step application process for pre-qualification and then the actual license, but the voter-approved law requires the Marijuana Regulatory Agency to make a decision within 90 days of receiving the second step application.

Current medical marijuana licensees will be the only ones able to apply for a recreational license for at least a year. Their recreational license applications likely will be expedited, in part because much of the background investigation of the applicant has already been completed, Brisbo said.

“They’ve also been subject to oversight on an ongoing basis as well,” he said.

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