Officials from Michigan’s Department of Licensing and Regulatory Affairs last Thursday shuttered 40 cannabis dispensaries and said hundreds more will be closed in coming weeks.
Department spokesperson David Harns told the Detroit Free Press, “Any business that didn’t apply for a license by Feb. 15 isn’t in compliance with the emergency rules that were set up. We did forty today all throughout the state and there will be hundreds more.”
Officials didn’t specify what kind of businesses would be targeted, but cease and desist letters are expected to go out to dispensaries that have not applied for licenses under new regulations and are non-compliant.
“What you’re seeing in Michigan right now are unfortunate growing pains, as we transition from a largely unregulated, cooperative model, to a state-licensed and state-regulated model, and this is the first step,” said Kris Krane, president and co-founder of 4Front Advisors, a U.S. cannabis industry investment firm. “Unfortunately these unregulated [dispensaries] may get shut down, particularly in jurisdiction that weren’t as friendly to them in the first place.”
Krane, a longtime cannabis policy reform advocate, said the situation in Michigan mirrors what happened in other states that had established “grey markets,” prior to establishing infrastructure for licensing regulations and other standard practices. States like Washington, Oregon, and Montana–and, soon, California. For many unlicensed operators, the clock is officially ticking.
“It’s gonna take a little while because a lot of municipalities in California have not gotten around to doing their own licensing, so, the state’s being more understanding with some of these unlicensed businesses, particularly in jurisdictions that haven’t figured out their licensing yet,” Krane said. “I would be surprised if a crackdown doesn’t come–and I don’t know exactly what form that’s going to take.”
Licensed operators, once regulations are implemented, aren’t likely to have much love for unlicensed competition, Krane said, and the grey market will turn black, though some unlicensed operators will continue to do business under threat of being prosecuted.
“Once the licensed markets get fully established, they often help self-police,” Krane explained. “If you’re a licensed operator and you’ve had to spend a considerable amount of money… All the regulations that businesses go through, most of which cost money–and somebody just throws open a store just down the block? And didn’t have to jump through hoops or pay that extra money, and can sell their product at a lower price because of it? You’re going to be the first one calling the state regulator, saying, ‘Get these people out.’”
Michigan voters approved legal medical marijuana use in 2008 and, since then, numerous home growers, caregivers, and dispensaries have existed in a “grey market.” Last November, the Michigan Legislature approved regulations for medical marijuana businesses, in an effort to tax and regulate medical marijuana sales, as well as address the issue of non-compliant cannabis businesses. More than 277,000 patients are registered for medical cards in the state.
Cannabis businesses that are required to be licensed under Michigan regulations include growers, processors, testing facilities, secure transporters and dispensaries.
Michigan legislators are also considering the issue of legalizing recreational marijuana sales for the state. In a January poll, 57 percent of voters surveyed said they favored legalization for recreational use. The issue may appear on the ballot by November 2018. Pro-cannabis advocates collected enough signatures to put an initiative on the ballot.
Democrat Pat Miles, in the running for Michigan attorney general, earlier this month took a “stronger stance” on the proposed initiative to legalize recreational marijuana in Michigan.
“After careful consideration, and dialogue with activists and voters across the state, I’ve decided to take a stronger stance on marijuana legalization. While I’ve said so far that this issue is up to the voters of Michigan, which it most certainly is, I’ve reviewed the language of the ballot initiative to regulate marijuana like alcohol, and find it to be very thoughtful and well-written, and I support it,” Miles said.
