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Michigan Cracks Down On ‘Gray Market’

Michigan cracks-down grey market Cannabis Now
Photo Gracie Malley for Cannabis Now


Michigan Cracks Down On ‘Gray Market’

Amid legal challenges and disputes over zoning in Detroit, Michigan’s long-awaited regulatory regime for cannabis dispensaries continues to face obstacles to implementation. This has left hundreds of dispensaries operating in a “gray market” — tolerated by the authorities on an unofficial basis while the mess is being worked out. But now state authorities have started to order these outlets closed, potentially leaving thousands of registered users without access to their medicine.

Some 40 medical marijuana dispensaries in Michigan were ordered to close last week, and state authorities said hundreds more would follow in the weeks to come. The dispensaries in question have been operating in what is widely called the “gray market” — falling through the gaping legal holes in Michigan’s troubled medical marijuana program, but tolerated by the authorities. Now, the state government appears to be saying they cannot operate until those legal gaps are closed.

“Personnel from the Bureau of Medical Marijuana Facilities Licensing Division Enforcement Section accompanied by Michigan State Police troopers have begun physically serving cease and desist letter to marijuana businesses that are not in compliance with Emergency Rule 19,” read a statement from David Harns, press representative for the Michigan Department of Licensing and Regulator Affairs, as reported by the Associated Press.

Any business that didn’t apply for a license by Feb. 15 isn’t in compliance with the emergency rules that were set up,” Harns added to the Detroit Free Press. “We did 40 today all throughout the state and there will be hundreds more.”

A part of the problem is that dispensaries need approval from both state and municipal authorities — and the local regulations in Detroit are being held up by litigation.

Detroit’s 62 medical marijuana dispensaries had been set to close on Feb. 15 amid a legal challenge to two measures passed by the city’s voters in November regarding the zoning of retail cannabis outlets. In January, the city announced a kind of reprieve, saying it would offer dispensary owners a chance to apply for permits anew by the February deadline. As the Free Press noted, however, the deferment was temporary and set to expire on June 15, if the legal challenge has not been resolved by by then.

This isn’t the first time we’ve seen such headlines from Michigan in recent months. Dispensaries were originally set to close statewide by Dec. 15, the day that applications for five categories of licenses (cultivation, processing, distribution, sales and safety compliance) became available. But medical marijuana cardholders — more than 272,000 statewide — feared being without access during the lapse between applications being submitted and licenses being issued. State authorities capitulated to this grassroots pressure and extended the deadline in November. Gov. Rick Snyder signed temporary “emergency rules” to oversee the dispensaries in the meantime, CBS Detroit noted as the deadline was impending in December. The new deadline for state applications was set at Feb. 15, the same as that for the city of Detroit.

So there has been a sense of kicking the can down the road — until now.

Michigan passed a medical marijuana law in 2008, but the initial dispensary system subsequently established was struck down by the state Supreme Court in 2013. The court found that under proper interpretation of the Michigan Medical Marihuana Act, retail distribution of cannabis was not allowed. The Medical Marihuana Facilities Licensing Act was passed in 2016 to reboot the dispensary system, clarifying this ambiguous point in the 2008 law. But implementation of the new system has also been slow and contentious, leaving dispensaries in the legal “gray zone.”

The most recent controversy surrounds the two Detroit ballot measures that were passed in November, loosening restrictions on where dispensaries can operate in the city, which had been imposed by ordinance in 2015. Proponents of the ballot measures — chiefly in the group Citizens for Sensible Cannabis Reform —argued that the zoning restrictions discriminated against the city’s African American community. On Feb. 16, a Wayne County Circuit Court judge slapped down the measures, finding that zoning cannot be enacted by voter initiative under Michigan law. But Citizens for Sensible Cannabis Reform is preparing an appeal — meaning that the matter could drag on for months, leaving dispensaries in legal limbo.

If Michigan can ever get this mess straightened out, the cannabis economy could potentially boom in the state that has long been a national symbol of post-industrial hard times and urban blight. The Free Press reports that there are 378 cannabis business licenses pending with state authorities, but still awaiting approval from municipal authorities. Another 117 pending state applications already have such local approval, and are good to go as soon as the new regulatory regime gets off the ground. Hopefully, that will happen later this year. But whether the outlets now being ordered closed will survive to win legitimacy under the new regime remains to be seen.

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