Asked and Answered . . .

Alex Leonowicz on the Complex and Ever-Changing Cannabis Industry in Michigan

By Steve Thorpe

Federal health officials say marijuana is the most commonly used illegal drug in the U.S., tallying more than 37 million users in the past year alone. A lot has been happening recently in Michigan marijuana law with a cannabis ballot initiative being approved for the fall ballot and the progress of the Michigan Medical Marihuana Facilities Licensing Act. Alex Leonowicz is co-leader of the Cannabis Industry Group at Howard & Howard in Royal Oak. He represents entrepreneurs and business entities in the complex and ever-changing cannabis industry. Leonowicz clerked at the Michigan Oakland County Circuit Court for Judge Shalina Kumar. He is also the President and Founder of the Orchard Lake St. Mary's Bar Association.

Thorpe: First off, Michigan laws on the subject insist on spelling it “marihuana.” What’s up with that? And while we’re parsing language, what’s with the requirement to call pot shops “provisioning centers?”

We really should be calling it “cannabis.” After all, that is the correct medical terminology and we are still “medical only” here in Michigan (even if recreational usage is just around the corner). In 1937, the United States enacted the Marihuana Tax Act of 1937 which taxed individuals that grew or distributed hemp or other cannabis products. Some argue that the Act was aimed at the hemp market, which competed with the timber industry to supply paper for the newspapers. Michigan adopted the Act as well as the spelling of “marihuana” with an “h.” The state has elected to keep the current spelling.
The Michigan Health Code provides that certain requirements must be met before one can refer to themselves as a “dispensary,” “apothecary,” “drug store,” or “pharmacy.” The State of Michigan does not believe that “pot shops” meet those requirements. Therefore, we are stuck with the term “Medical Marihuana Provisioning Center.”

Thorpe: In April the State Board of Canvassers ruled that a group pushing a proposal to legalize marijuana for recreational use had enough signatures to qualify for the Nov. 6 ballot. If it’s approved by voters what happens next?

The state will need to implement a regulatory framework for adult usage. That will take some time. It’s been more than six months since the state began accepting applications under the Medical Marihuana Facilities Licensing Act and we still don’t have any fully licensed medical cannabis companies yet. I wouldn’t expect to see a fully operational adult usage market until Q3 of 2019 – if not later.

Thorpe: Medical marijuana dispensaries seem to pop up like weeds (sorry) in some communities, but many seem to also vanish just as quickly. What legal factors are in play in that process?

Believe it or not, the Medical Marihuana Act of 2008 – the framework in which we currently operate under – does not allow for dispensaries. Yet, dispensaries still exist! All medical marijuana card holders should be purchasing their product from a licensed caregiver and NOT from a dispensary. The Michigan Supreme Court and Michigan’s Attorney General have weighed in on this issue and agree – no dispensaries.
Cities like Detroit, which at one time had more than 200-plus dispensaries, have enacted or modified zoning regulations in an effort to limit or reduce the number of dispensaries. This is why you are seeing dispensaries open and then quickly shut down.

Thorpe: The elephant in the room … although a number of states are busy decriminalizing marijuana, the federal government — especially the current U.S. Attorney General — show no inclination to follow suit. Coupled with the number of municipalities creating their own ordinances, it amounts to a real legal swamp. How do people navigate that?

You need a good attorney. It’s a minefield out there and having a legal professional who understands the current landscape could help you avoid serious criminal and financial pitfalls. Yes, it’s true that Attorney General Jeff Sessions is not a fan of cannabis. Yet, despite Mr. Sessions’ “bark” about cannabis facilities and those states that permit them, we really have not seen much of a “bite.” There are no signs that the federal government is preparing for a crackdown on marijuana facilities. In fact, it almost appears to be the opposite. President Trump has recently stated that he will allow the states to dictate how they wish to deal with marijuana and has made no showing that the federal government will be inserting itself into this industry.

On a more microeconomic level, the differing local ordinances have proven to be another challenge for individuals applying for commercial medical marijuana licenses. Each Michigan municipality is permitted to enact their own ordinance. Some cities like Hazel Park have 8-page ordinances while cities like Lansing’s are 38-pages long.

Thorpe: Colorado legalized pot in 2012. The Colorado Department of Revenue showed totals from marijuana revenues increasing from $67.6 million in 2014 to $247 million in 2017. In the end are economics going to drive this process?

Economics and the state’s ability to implement a regulatory framework. Michigan has almost twice the population as that of Colorado. It could also be the only state in the Midwest with an adult-use cannabis market making it one of the largest marijuana marketplaces in the country. However, if the state cannot get a regulatory framework in place or the framework operates like the current MMFLA, we could see the state miss out on millions of much needed tax dollars.

Thorpe: What do you see on the horizon for Michigan marijuana law?

Michigan is uniquely positioned to be a marijuana powerhouse. Its 300,000-plus medical cardholders makes it the second largest medical marketplace in the country – second only to California. The state has a population of almost 10 million people and could be one of the first in the Midwest to permit adult-use cannabis. Land is cheap. The state is chock-full of vacant industrial buildings that could be retrofitted for grow and processing facilities. There are also thousands of acres that could be utilized for industrial hemp. If the state can get its regulatory affairs in order, you could see one of the largest cannabis marketplaces in the country.

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