This story was republished with permission from Crain’s Detroit and written by Dustin Walsh. 

Michigan lawmakers are seeking to simplify Michigan’s marijuana regulations.

State Reps. Graham Filler, a Republican from St. Johns, and Jimmie Wilson Jr., a Democrat from Ypsilanti, introduced legislation to merge the state’s existing medical marijuana and recreational marijuana frameworks into one set of rules.

The move is largely welcomed by the industry, as it would reduce their licensure burden. Operators currently have to hold both a medical license under the the Medical Marihuana Facilities Licenses Act and a recreational license under the Michigan Regulation and Taxation of Marihuana Act to sell both, even though growers are allowed to move product between the two license types.

The merger also largely ends the state’s diminishing medical marijuana sector, at least for businesses. Medical marijuana sales have plummeted in recent years thanks to very low recreational marijuana prices. Through June, medical marijuana sales in Michigan this year have totaled just $11.7 million, or about 0.7% of total regulated-market marijuana sales. In 2021, medical marijuana sales were more than 27% of the total market.

But the legislation has a tough row to hoe and there are potential consequences to the enactment of House Bills 5884 and 5885. Municipalities that only allow medical marijuana sales will have to take action to opt out of allowing recreational sales, for instance.

To better understand the legislation’s impact, Crain’s spoke with two of the bills’ authors: Benjamin Sobczak, partner at Detroit law firm Dickinson Wright and former counsel of cannabis operator Pleasantrees, and Doug Mains, a partner at Detroit law firm Honigman LLP and co-writer of the original adult-use recreation ballot language.

Below are Sobczak’s and Mains’ joint written responses to Crain’s questions to serve as a guide for marijuana businesses, local municipalities and industry watchers to better understand the legislation.

Why combine the two regulations? 

To promote efficiency and remove an unnecessary layer of regulation. Practically speaking, the medical and adult-use systems have already been consolidated, with marijuana product largely allowed to move interchangeably between the two. However, businesses are still required to hold two sets of licenses and abide by two separate sets of regulations, which are largely identical, but have several major differences. By consolidating the two regulatory systems, the legislation will save businesses money on licensing fees and enhance compliance by simplifying regulatory requirements, while also retaining the Michigan Cannabis Regulatory Agency’s ability to regulate the cannabis industry.

What would the merger mean for businesses with a medical license? 

After the transition occurs, all medical growers, processors, safety compliance facilities, and secure transporters will automatically become licensed under the new, unified system. The same is generally true for (medical marijuana) provisioning centers, although the bill gives a municipality the ability to adopt an ordinance which would keep those businesses as strictly medical, meaning a given provisioning center would not commence adult-use operations upon the automatic transition.

For most medical licensees, this means that they will continue with business as usual, although with fewer hurdles and reduced fees. In that regard, the bill has been drafted to require very little of transitioning medical operators. There is no need to apply for or obtain new licenses, or manually transition inventory, etc.  All of this will happen seamlessly and automatically, thereby giving former medical operators increased access to the larger adult-use market, unless they are a provisioning center in a municipality which formally decides that the provisioning center will remain a medical-only facility.

What does this mean for recreational business license holders? 

Very little. Currently, most recreational retailers provide medical card holding patients a 10% discount, as a matter of business policy, in order to entice such card holders to purchase recreational products without being subjected to the 10% excise tax which does not apply to medical sales. This bill formally indoctrinates that policy, meaning medical card holding patients would be formally exempted from the excise tax when making recreational purchases under the new rules. For that and many other reasons, recreational operators will no longer feel compelled to maintain duplicative medical licenses, or offer medical discounts, in order to continue serving Michigan’s medical patient community.

So this doesn’t impact medical patient card holders?

Medical marijuana patients should not see any real changes if the legislation passes. The primary goal in drafting the legislation was to combine the two acts while maintaining the status quo as much as possible, making substantive changes only where there was a conflict between the MMFLA and MRTMA. As mentioned above, currently, medical patients have to pay sales tax on their purchases at provisioning centers, but do not have to pay the 10% excise tax on those purchases. For a number of reasons, most adult-use retailers already offer patients a 10% discount on their purchases to offset that tax. Under the legislation, once the conversion occurs, patients will be able to make purchases at any retail store and be exempt from the excise tax providing them with additional convenience and choice in a setting where medical provisioning centers are already dwindling.

If passed, when would the merger occur? Is there a lead time? 

The bill is drafted so that the combination of the acts and the repeal of the MMFLA would occur one year after the new law becomes effective. For example, assuming the legislation is enacted during the Legislature’s lame duck session and is not given immediate effect, the new law would become effective in approximately March 2025. At that point, the combination of the acts would occur in March 2026. This gives the state, municipalities, and licensees sufficient time to plan and prepare for the transition.

What does this mean for communities that currently only allow medical marijuana sales?

For consumer-level sales, these communities can continue to allow medical marijuana sales under the legislation, as long as they adopt an ordinance declaring such in the one-year timeframe between the date the legislation is signed into law and the date the new law takes effect. If they do so, their stores will remain provisioning centers who are only able to sell to medical marijuana patients and caregivers (although regulated under the MRTMA, as opposed to the MMFLA). All other medical license types will automatically transition to recreational operations with the understanding that such a transition will be generally acceptable given the nature of those businesses currently.

Does limiting the license to one save money for cultivators, etc? How much?

It should, yes, but the amount remains to be seen. Most businesses will likely save money by not having to have maintain licenses under both the MMFLA and MRTMA. Moreover, growers, in particular, should save money on license fees, since the number of plants they can grow under each license type is changing. Currently, under the MMFLA, Class A growers can grow up to 500 plants, Class B growers can grow up to 1,000 plants, and Class C growers can grow up to 1,500 plants. Under MRTMA, those numbers are 100, 500, and 2,000, respectively. Under the unified act, the numbers would be 500, 1,000, and 2,000 respectively, meaning that growers should largely require fewer licenses for their establishments.

Any changes to the recreational law require a three-quarters vote by legislature, right?

Yes. By consolidating the acts into MRTMA, any future changes will require a ¾ vote, giving the industry more protection and predictability from a legal standpoint.

Are there any concerns the legislation could not pass?

The legislative process is always unpredictable, specifically during the lame duck time frame, and particularly in what is shaping up to be a chaotic election season. That said, this is a bipartisan legislative package that was drafted by a workgroup made up of key stakeholders and which sought input from a number of interested groups. A number of concerns were raised during the drafting process, and those concerns have largely been addressed. As of now, no real opposition has arisen, and, if it does, the workgroup looks forward to addressing any concerns that might be raised by stakeholders and looks forward to working through the legislative process when the legislature returns in the fall.