Michigan’s Marijuana Regulatory Agency (MRA) issued its emergency administrative rules earlier this month, providing a framework for the state’s adult-use cannabis industry and detailing the license application process. The MRA stated in their July 3 press release that they plan to start accepting business applications on November 1.
Perhaps the most important rule that entrepreneurs should know: the MRA will only accept applications from businesses already licensed under Michigan’s medical cannabis laws for the first two years. This limitation was included in the ballot initiative that voters approved in November of 2018. So if one isn’t already licensed by the MRA, they may want to begin the application to become a licensed medical facility first. One can buy a preexisting licensed medical facility as well, though they will still have to obtain MRA approval for the purchase. The medical rules initially required that applicants be residents of Michigan, but this has since expired and applicants can now be out-of-state.
The MRA will accept applications for 12 different types of licenses under the adult-use rules, including retailers, secure transporters, safety compliance facilities, microbusinesses and growers. Grower licenses divided into Class A (up to 100 plants), Class B (up to 500 plants) and Class C (up to 2,000 plants).
The Application Process
The non-refundable application fee is $6,000. If a business isn’t already a licensee under the medical cannabis laws, they would have to complete that application process first, which would involve a separate $6,000 fee in addition to the adult-use application fee. The two are separate processes, but the new adult-use rules largely mirror the medical rules. Applicants should expect the application and approval processes to be very similar. Licensees will also have to pay annual licensure fees that are substantial compared to other states. The annual fees are separated into three tiers depending on the volume of a license’s sales compared to the market, so better performing businesses will pay higher fees than others will. Annual fees for retailers will range between $20,000 and $30,000. Annual feels for Class C growers will range between $30,000 and $50,000.
The application process is divided into two stages: pre-qualification and the license application. Pre-qualification includes criminal and financial background checks as well as an examination on the applicant’s feasibility. In order to proceed to the second stage, the applicant will need a compliant location and to provide the local ordinance of the municipality showing that cannabis businesses are allowed there. So applicants can begin the application process before they have found a location, but they will need a compliant location in order to obtain approval. If an applicant already has a location, they can begin both stages simultaneously, or nearly so.
One interesting facet of the rules is the requirement for businesses to detail plans to “promote and encourage participation in the marihuana industry by people from communities that have been disproportionately impacted by marihuana prohibition and enforcement and to positively impact those communities.”
The rules don’t go into further detail as to what a social-equity plan would look like. Social justice issues have often been included as reasons for legalizing cannabis, though actual measures have varied to encourage participation by “communities that have been disproportionately impacted by marihuana prohibition,” (which is essentially a careful approach to saying communities of color). Washington state has done very little, while cities like Oakland and Los Angeles have dedicated programs, though whether such programs have been a success remains unclear.
One roadblock that has already been removed for these communities is that the capitalization requirement for new applications have been removed. Medical cannabis applicants had to provide they had adequate capitalization (meaning, funding) to open their businesses, leaving many without access to capital out of the regulated industry. The new adult-use rules do away with this.
The MRA has provided a number of resources for license applicants. Businesses looking to apply for a Michigan medical cannabis license can apply here, though one may want to consult an attorney experienced in the space. The MRA has also provided an application instruction booklet.