As Michigan's Recreational Cannabis Market Develops, State Pushes Back Against Unlicensed Operators

As Michigan’s budding recreational cannabis market develops, efforts are underway to quash competing illicit sales, according to the state’s top marijuana regulator. 

Michigan voters approved a ballot question on Nov. 6, 2018 that legalized adult use cannabis, and the Marijuana Regulatory Agency issued emergency rules July 3 of this year for the rollout of the recreational market. Sales of recreational cannabis began Dec. 1.

More than $3 million in marijuana was sold at recreational retailers in the first two weeks of December, generating $515,051 in tax revenue, according to the state. 

The state is focusing on the illicit market, Andrew Brisbo, the Marijuana Regulatory Agency’s executive director, said Wednesday in remarks at Benzinga headquarters. 

That doesn’t mean a crackdown on low-level weed dealers, but rather on operations such as brick-and-mortar facilities operating as regulated businesses, he said. 

“I think we’re going to start to see more action taking place in that area as well.”

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Brisbo: Halting Ads From Unlicensed Businesses ‘Critical’

An audience member at the Benzinga event asked Brisbo whether advertising by illicit cannabis businesses on Weedmaps would be curtailed. 

“I can give you assurance that they’ve given me assurance,” he said of the online cannabis platform.

When unlicensed businesses are allowed to advertise, “then you’re relying on the consumer to know the difference,” Brisbo said.

Weedmaps has told the state it will not engage with unlicensed businesses as of Jan. 1, he said.

“That is a critical component in tamping down the illicit market.”

The company said in an August press release it’s restricting the use of its point-of-sale, online orders, delivery logistics and wholesale exchange SaaS platforms “to licensed operators exclusively.”

A Weedmaps spokesman confirmed to Benzinga Thursday that the company will stop accepting ads from unlicensed cannabis businesses at the turn of the year. 

Michigan To Merge Medical, Recreational Cannabis Rules

The emergency recreational rules issued July 3 are good for six months, and a Marijuana Regulatory Agency spokesman said the agency expects to extend them once for another six months as the state finalizes merged rules for both the medical and recreational markets. 

A public hearing on the proposed rules is expected to take place in early 2020.

The aim is to have “consistent standards regardless of which market you’re operating in,” Brisbo said.

The Marijuana Regulatory Agency is encouraging feedback and is open to amending regulations based on comments it receives, he said.

The draft rules include requirements for vertically integrated businesses to sell marijuana to independent businesses.

“They do not create their own supply,” Brisbo said of independent cannabis businesses. “Their success is entirely dependent on those operators.”

An audience member asked Brisbo about a Detroit Free Press opinion column by Brian Calley, the president of the Small Business Association of Michigan, that calls a proposed rule requiring marijuana license applicants to sign labor peace agreements with unions a “racket.” 

Businesses would be required to sign agreements with unions that preclude picketing, work stoppages, boycotts and strikes that interfere with businesses.

Brisbo pointed to labor disputes with marijuana businesses that are occurring in states like Illinois.

“If that were to happen, that could be disruptive to the point of affecting the market as a whole in the state.”

Andrew Brisbo, executive director of Michigan's Marijuana Regulatory Agency, speaks Wednesday at Benzinga headquarters in Detroit. Photo by Dustin Blitchok.