In October, Michigan's state cannabis authority took action against several businesses involved in the recreational and medical marijuana industry, as detailed in the latest enforcement report by the Cannabis Regulatory Agency (CRA).
The report for October, released by the CRA, documents 28 instances of regulatory issues involving various companies. This includes several formal complaints which were later withdrawn by the regulatory body.
The documented violations cover a spectrum of regulatory breaches, from lapses in security measures to inadequacies in financial documentation.
A notable case involves Aim High Meds, a retailer based in Coldwater. The business faced a $7,000 penalty for not maintaining the mandatory 30-day video surveillance archive.
In another instance, Exclusive, a Kalamazoo retailer, was fined $3,000 for the sale of expired marijuana gummies.
Additionally, RC Labs, located in Kalamazoo, was cited for failing to submit their financial statement for the year 2021.
Several businesses were flagged for multiple regulatory breaches. One such entity cited in the October report faced disciplinary action for several issues, including noncompliant sales, failure to adhere to Metrc seed-to-sale tracking requirements, and neglecting annual financial reporting obligations. Another was reprimanded for similar sales and surveillance noncompliance, along with Metrc tracking issues.
This action follows earlier concerns raised by Michigan's Office of the Auditor General regarding the CRA's delay in imposing disciplinary actions on cannabis businesses that fail to comply with regulations.
Muha Meds, a well-known name in the sector, faced a recall advisory due to critical lapses in compliance with the state's "seed to sale tracking system," known as Metrc. This incident has heightened concerns regarding the oversight and management of cannabis products in the state.
The recall advisory against Muha Meds was primarily issued due to the company's failure to properly track products in the Metrc system. This lapse in compliance led to the use of unknown cannabis oil in their products, posing potential risks to consumers. The inability to track the origin and journey of cannabis products from seed to sale is a significant violation of Michigan's stringent regulatory framework, designed to ensure product safety and integrity.
Failure in Metrc Compliance: Muha Meds' inability to accurately track its products in the Metrc system was a critical factor leading to the recall. This failure compromised the traceability of their products, a fundamental requirement for ensuring quality control and public safety in the cannabis industry.
Usage of Unknown Cannabis Oil: As a result of the tracking lapse, the company allegedly used cannabis oil of unknown origin in their products. This raises serious concerns about the safety and quality of the products being sold to consumers, as the lack of traceability means that standard safety and quality checks may have been bypassed.
The Cannabis Regulatory Agency (CRA) of Michigan has issued formal complaints (AU & Med) against Michigan Investments 10 Inc., aka "Muha Meds", citing a series of alleged violations that raise serious concerns about the company's adherence to state regulations governing marijuana processing and handling. This development marks a significant turn in the CRA's ongoing efforts to ensure compliance and maintain high standards within Michigan's burgeoning cannabis industry.
The formal complaint, resulting from a thorough investigation, outlines a range of infractions, prominently focusing on areas such as surveillance and security, waste product management, and compliance with the statewide monitoring system, Metrc.
Surveillance and Security Lapses: The investigation revealed substantial shortcomings in the company's video surveillance system. During inspections, several camera feeds were found to be non-functional, and the company failed to retain video footage as required by state regulations. Notably, critical areas, including where marijuana destruction occurs, were inadequately covered by cameras, raising questions about the security protocols in place.
Waste Product Management Concerns: Michigan Investments 10 Inc. reportedly mishandled marijuana waste products. Inspectors found untagged marijuana products and discovered that the company lacked a standard operating procedure for the management of cannabis waste. The report also highlighted discrepancies in the reporting of waste products in the state-monitored Metrc system.
Inconsistencies with Statewide Monitoring System: The use of the Metrc system by Michigan Investments 10 Inc. showed numerous inconsistencies. The company struggled with accurate package tagging and recording transactions in the system. Inspectors noted discrepancies in product weights and quantities, indicating a failure in accurately tracking marijuana products, with numerous instances of untagged products and unaccounted-for inventory.
Safety Testing Non-Compliance: The company also faced issues regarding compliance with safety testing procedures. There were instances where products that failed chemical residue testing were still utilized or processed. Discrepancies were noted in the testing results for products derived from the same originating batch, casting doubt on the reliability of the company's safety compliance testing.
The CRA's formal complaint against Michigan Investments 10 Inc. is not only a reflection of the specific issues at this company but also serves as a reminder of the stringent regulatory environment that governs Michigan's marijuana industry. The agency has indicated its intent to impose sanctions that could range from fines to more severe measures, such as suspension, revocation, restriction, or refusal to renew the company's license.
As the regulatory body responsible for maintaining standards in the industry, the CRA's action underscores its commitment to ensuring that all participants in Michigan's marijuana market operate in full compliance with state laws and regulations.
The case against Muha Meds is still developing, and it remains to be seen how the company will respond to these allegations. This situation highlights the ongoing challenges in regulating the evolving cannabis industry and the importance of rigorous compliance to ensure the safety, security, and integrity of marijuana products in Michigan.
The Cannabis Regulatory Agency (CRA) of Michigan has recently announced the introduction of two new programs focused on supporting veterans in the state: Task Force 1620 and the Veteran Recognition Program. These initiatives are designed to aid Michigan's veteran community in accessing cannabis and to highlight veteran-owned cannabis businesses within the state.
Task Force 1620 is a program that acknowledges CRA licensees who have established programs to offer safe and affordable cannabis access for veterans. This initiative is designed to connect Michigan's veterans with cannabis retailers who are willing and able to assist. Retailers participating in Task Force 1620 have the autonomy to set the specifics of their veteran access program. This includes determining the maximum amount of cannabis donated or discounted per veteran, establishing eligibility criteria based on the percentage of disability, deciding on the frequency and quantity of donations, and setting the number of veterans included in the program.
Licensees who implement a veteran access program that offers cannabis to veterans at a discounted rate of 75-100% are eligible for Task Force 1620. Approved participants in this program will have their business information and details of their veteran access program published on the CRA's webpage. Additionally, they will receive a seal that they can display at their facility, signifying their involvement and commitment to veteran support.
This program is available to all businesses licensed under both the Medical Marijuana Facility Licensing Act (MMFLA) and the Michigan Regulation and Taxation of Marijuana Act (MRTMA). Importantly, to participate in Task Force 1620, a business does not need to be majority-owned by a veteran. Businesses interested in joining Task Force 1620 are encouraged to apply through the CRA website and can direct their questions to [email protected].
The Veteran Recognition Program (VRP) is another initiative by the CRA, focusing on recognizing those CRA-licensed businesses that are majority-owned by veterans of the US armed forces. Upon approval to be part of the VRP, businesses will receive a recognition letter and a seal from the CRA. The program uses the ownership structure provided during the licensing application or amendment process to determine the percentage of veteran ownership. Businesses that meet the criteria and are approved will have their name and license number listed on the CRA website.
The VRP is open to businesses licensed under both the MMFLA and the MRTMA. To apply, businesses should visit the CRA website. Inquiries regarding the Veteran Recognition Program can be directed to [email protected].
Brian Hanna, the CRA Executive Director and a former captain in the US Army Reserve, shared his personal connection to these initiatives. Hanna, who served from 2006 to 2012 and was awarded the Bronze Star Medal and the Combat Action Badge during his 2010-2011 deployment to Afghanistan, emphasized his understanding of the challenges faced by veterans returning to civilian life. He noted that cannabis has been beneficial for many veterans in managing PTSD symptoms and reducing reliance on potent, addictive painkillers.
Echoing this sentiment, Anton Harb Jr., a disabled Iraq combat veteran and founder of the Veteran Access Program in Michigan, commended the CRA for its commitment. He highlighted that support for veterans was a central element of the ballot proposal when Michigan voters legalized cannabis in 2018. Harb expressed pride in Michigan's leadership in providing these supportive programs for veterans.
In summary, these new programs by the CRA are a significant step towards supporting Michigan's armed services veterans, offering both improved access to cannabis and recognition of veteran-owned businesses in the cannabis industry. Through Task Force 1620 and the Veteran Recognition Program, the CRA aims to make a meaningful difference in the lives of veterans in Michigan, acknowledging their service and addressing their specific needs in accessing cannabis.
The potential reclassification of marijuana from Schedule 1 to Schedule 3 in the Controlled Substances Act could significantly enhance access and diversify the range of products available for medical marijuana patients. However, this change is not expected to directly influence the functioning of state-regulated medical marijuana (MMJ) dispensaries.
Amy Rubenstein, a partner at the international law firm Dentons, emphasizes that shifting cannabis to Schedule 3 would primarily open up avenues for its inclusion in the marketplace through FDA-approved drug channels. This move would facilitate the development of cannabis-based pharmaceuticals and their subsequent approval by the U.S. Food and Drug Administration. Once these drugs receive FDA clearance, they could be dispensed via federally licensed pharmacies upon prescription.
However, Rubenstein points out that the process of drug development, including necessary studies and obtaining FDA approval, is a lengthy one. Consequently, it will be some time before marijuana-based drugs are available in pharmacies. In the meantime, medical marijuana patients can still procure regulated cannabis products from state-licensed dispensaries.
This rescheduling could also provide a layer of security for state-regulated recreational marijuana retailers, reducing the fear of federal intervention, as per industry observers.
"The state-legal markets are not going to disappear," asserts Rubenstein.
Echoing this sentiment, Justin Brandt, a partner at the Scottsdale, Arizona-based law firm Bianchi & Brandt, foresees the eventual availability of medical marijuana products in pharmacies. However, he cautions that attaining FDA approval under Schedule 3 status involves rigorous clinical trials and procedures akin to those undertaken by large pharmaceutical companies—a process both costly and time-consuming.
As for marijuana in its flower form, experts anticipate that the FDA is unlikely to approve combustible products. Vince Ning, CEO of California marijuana distributor Nabis, envisions a future where marijuana might be sold in pharmacies, but likely in non-combustible formats such as pills or medical-grade concentrates.
"I just don't see a pharmacy or a Kaiser Permanente selling cannabis flower," Ning remarks, adding that he hopes for the expansion of direct-to-consumer channels and greater access overall to combat the illicit market. Despite these potential changes, Ning believes dispensaries will continue to play a vital role.
In Michigan, recreational marijuana sales have surpassed those of beer, wine, and liquor, reflecting a significant shift in consumer preferences and market dynamics.
The latest report from the House Fiscal Agency, released last week, highlights this trend with striking numbers. In the 2023 fiscal year, which concluded on September 30th, Michigan's recreational marijuana excise tax revenue soared to $266.2 million. This marks a substantial 49.1% increase from the previous year and is notably 38% higher than the $192.6 million garnered from the sales of beer, wine, and liquor in the same period.
This widening gap underscores not only Michigan's robust consumer market for marijuana but also the differences in tax structures for these products. Recreational marijuana in Michigan is subject to a 10% excise tax at both the wholesale and consumer levels. In contrast, alcohol excise taxes are considerably lower, with beer wholesalers paying $6.30 per 31-gallon barrel and wine and champagne attracting a $0.51 per gallon tax. It's important to note that these figures do not include Michigan's 6% sales tax, which applies to all these consumables but is not reflected in the excise tax report.
Since the opening of recreational marijuana shops in December 2019, the industry has experienced explosive growth. In the fiscal year 2023, nearly $2.8 billion worth of recreational marijuana was sold in Michigan, peaking at $270.63 million in August alone.
This surge in marijuana sales is significantly benefiting communities that have opted to permit marijuana production and sales. From the fiscal year 2022 tax revenues, which included an additional $5.8 million from medical marijuana taxes, the state distributed $59.5 million to 224 municipalities and counties involved in marijuana sales.
Michigan law dictates that 30% of recreational marijuana tax revenue is shared between counties and municipalities, based on the number of marijuana businesses in each area. In this arrangement, each municipality hosting marijuana sales received $51,841.21 for every licensed retailer or microbusiness.
However, it's noteworthy that less than 15% of Michigan's 1,773 municipalities have chosen to participate in marijuana sales, leaving nearly 1,000 communities without this source of tax revenue.
Of the remaining 70% of marijuana tax revenue, half is allocated to the state's School Aid Fund for K-12 education, with the other half going to the state's transportation fund. Despite these contributions, recreational marijuana taxes constituted only 0.8% of Michigan's $33.8 billion total tax revenue for the fiscal year. Income and sales taxes remain the primary revenue sources for the state, with tobacco taxes—primarily from a $2 per pack cigarette tax—continuing to be a significant non-sales tax revenue stream, bringing in over $722.2 million in fiscal 2023.
Detroit's burgeoning recreational marijuana sector marked a significant milestone as the city's Office of Marijuana Ventures and Entrepreneurship announced a fresh wave of licenses, bringing new retail, microbusiness, and consumption lounge establishments to the forefront. This development underscores Detroit's continued commitment to fostering a diverse and equitable cannabis industry.
In a competitive application process, 37 out of 65 applicants were awarded licenses to commence operations in various facets of the marijuana business. Notably, the majority of these licenses were allocated for recreational marijuana dispensaries, demonstrating the growing demand and acceptance of cannabis in the city. Additionally, one applicant received the green light to open what could be Detroit's first-ever marijuana consumption lounge, a concept gaining traction in various parts of the country.
Kim James, the director of the Office of Marijuana Ventures and Entrepreneurship, applauded the recipients for their potential and dedication to uphold the city's core values concerning diversity and equity. In a significant nod to inclusivity, 13 of the licensed businesses are majority African American-owned, five are predominantly women-owned, and 21 have Detroit residents as majority owners.
This new wave of licensing follows almost a year after Detroit's initial announcement of 33 businesses receiving recreational marijuana licenses. This progress marks the culmination of a lengthy and complex effort by the city to distribute these coveted licenses. Detroit had to navigate numerous legal challenges as it sought to establish a fair licensing process, particularly emphasizing "equity applicants." These applicants typically represent individuals from communities historically affected by marijuana prohibition and enforcement, including those with certified Detroit Legacy status residing in Detroit or other similarly impacted areas.
Since recreational marijuana became available for purchase in Detroit in early January, the city now boasts 31 operational recreational marijuana retailers. The economic impact of this burgeoning industry is underscored by the imposition of a 10% state excise tax on recreational marijuana products. The Michigan Department of Treasury is expected to announce early next year the allocation of this tax revenue to Detroit, marking the city's first receipt of funds from the Marihuana Regulation Fund. During Michigan's 2023 fiscal year, marijuana tax revenue amounted to a substantial $266.2 million.
April 2022 marked the beginning of Detroit awarding unlimited licenses for activities such as cannabis cultivation and processing, further expanding the industry's scope. In this latest round of licensing, four applicants were granted provisional certificates to open consumption lounges, and two others for microbusinesses, contingent upon securing a property within 18 months—a process in which the city has pledged support.
Before commencing operations, these newly licensed businesses must obtain final approvals from the state of Michigan, a crucial step towards actualizing their business plans.
The announcement of these new licenses is a clear indication of Detroit's ongoing efforts to create a robust, diverse, and equitable recreational marijuana market, reflecting the city's broader goals of economic growth and inclusivity. As this industry continues to evolve, Detroit positions itself as a key player in the ever-expanding landscape of the legal cannabis market.
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