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Michigan caregiver advocates rally against perceived threat to alter growing rights

A social media-based boycott against large cannabis cultivators, organized by Michigan cannabis patient advocates upset with perceived threats against caregiver rights, has roiled the state’s cannabis community this last week. The online vigor has resulted in one company publicly repudiating its membership in the Michigan Cannabis Manufacturers’ Association (MCMA), a national company distancing itself from the trade group, and the trade group’s website going dark.

Patient advocates began to organize on Instagram and Facebook following a May 10 podcast interview with Ryan Ori, an executive at cultivator Six Labs, where Ori claimed Michigan cannabis caregivers are illegally selling cannabis to dispensaries and directly on the black market.

“Too much competition is bad for business, not just as the business entity owner. It’s because you can’t police it, there’s no enforcement. There’s no ability to keep the quality control measures the government is trying to control,” said Ori, responding to questions about his thoughts on caregivers. “We’re competing against people who are not only cheating, but putting the public at risk, and these are tax dollars not going into your coffers.”

Ori and Six Labs did not respond to a request for comment by publication.

Michigan law allows caregivers to maintain up to 72 plants for five patients and themselves. Those plants do not have to be tracked with Metrc, the state’s seed-to-sale tracking system, nor do they have to be submitted for testing, as is required of cannabis sold through medical or adult-use dispensaries.

Today, caregiver-grown cannabis is supposed to be grown specifically for individual patients, and not for retail sale. But until 2020, caregivers were legally allowed to sell to medical dispensaries, a critical element in the state’s supply chain as nascent medical cultivators grew. Citing adequate supply, the Michigan Marijuana Regulatory Agency (MRA) phased out caregiver sales to dispensaries by September 30, 2020.

Today, Michigan maintains a significant caregiver population. As of April 30, Michigan reported 30,689 caregivers and 250,805 patients.

In an interview with Grown In on May 17, the executive director of MCMA, Steve Linder, echoed Ori’s May 10 comments, when he said, “there are two types of distribution systems that don’t test, that don’t create jobs, and don’t pay taxes. One is the totally illegal marketplace. And then the gray area.”

Contacted by phone Wednesday, Linder said he was unable to provide further comment. MCMA’s website also went dark this week.

Since then, Linder has become persona non-grata among Michigan patient advocates, and his organization the target of numerous memes passed around Facebook and Instagram. Advocates have been calling for a boycott of MCMA member companies and of ancillary companies connected to those member companies.

But, it’s not really a true boycott, says some advocates. “This boycott only exists on social media. There is no organization,” said Adam Brook, cannabis advocate and organizer for 25 years of Ann Arbor’s legendary HashBash. “You had all these people that came from this illicit market to the licensed market. And they have now forgotten where they’ve come from, and there are a bunch of people that are calling them out for that.”

Still, the calls for a boycott have gotten loud enough that at least one MCMA founding member, multi-state operator Pleasantrees, announced on Instagram Tuesday that it had “resigned its membership of MCMA”, while emphasizing that it is “not about” “unlicensed, large-scale, for-profit, commercial ‘caregiver’ operations and delivery services”.

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Pleasantrees did not respond to a request for comment by publication.

The shockwave of caregiver advocate has expanded far enough that Rezwan Khan, CEO of cannabis seed company DNA Genetics, contacted Grown In directly to ensure that Michigan caregivers knew that his company, which has seed licensing agreements with numerous Michigan growers, is in stark opposition to curtailing caregiver rights.

“For us, it’s been really disheartening to be attached to statements that MCMA and Steve Linder made regarding his opinion regarding caregivers,” said Khan. “How could a seed company be against home grow?”

It would seem that caregiver rights are almost unassailable, since they were enshrined in the state’s 2016 referendum, legalizing medical cannabis sales. Because the law was created through a referendum, the legislature must obtain 75% majorities in both chambers to make changes. However, moves by the state’s cannabis regulators to merge the state’s separate medical and adult-use systems, has concerned caregiver advocates.

“This year we’re going to be making changes to the law. You just roll your extra bill onto there, and nobody notices, right? It happens all the time,” said Rick Thompson, a cannabis advocate. “There’s probably ten different changes already.”

Indeed, a draft bill was circulated at the end of the Michigan legislature’s last session to merge the medical and adult-use regulatory systems. But MRA’s spokesperson, David Harns says nothing has moved on that issue this session.

“There have been no drafts this session and the MRA has not pursued this topic with legislators,” Harns told Grown In on Tuesday.

Michigan marijuana market evolves on different fronts

It has been a remarkably smooth and successful ride for Michigan’s cannabis industry, and regulators hope to keep it that way as the growing network of suppliers and sellers face an inevitable period of consolidation and stubborn competition from old-school street dealers who do not share their overhead and red-tape burdens.

The state Marijuana Regulatory Authority (MRA) said average monthly revenue from medical and recreational sales grew more than 50 percent in 2021, reaching $168 million for the just the month of December, including a record $135 million in recreational sales. July was the most lucrative month with sales of $171 million. Recreational sales increased 16 percent in the second half of 2021 while medical sales were down some 23 percent compared to the same period in 2020.

The 10 percent state excise tax on recreational sales has proven to be a nice payoff for a state that has not had a lot of economic victories for the past few decades. But the excise tax is just one component of the overhead that adds to the price of store-bought weed supplies.

In a new development, there is now a layer of insurance that will be required for licensed cannabis operations this year: $100,000 worth of product liability insurance to protect customers from adverse reactions caused by marijuana that has been intentionally contaminated or adulterated. The legislation, Senate Bill 461, which was signed by Gov. Gretchen Whitmer in December, doesn’t apply to damages from the long-term effects of chronic use, but it does require operators to keep up their premium payments or face a costly license suspension should the coverage lapse.

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The new rule seemed to surprise a lot of people, including the insurance industry. The National Law Review noted last month that “the most obvious problem” with SB 461 was the requirement that only “admitted” insurers licensed in Michigan could write the coverage while most cannabis-related business insurance is handled by the non-admitted surplus insurance sector, which specializes in new and higher-risk markets.

“Legislating insurance requirements in a highly regulated and evolving industry characterized by unknown risks should only happen when all stakeholders have been heard,” said the article. “The insurance industry is indeed ready and willing to engage with regulators if given the chance. This should be a learning opportunity for other states that may consider enacting similar mandatory insurance requirements for cannabis businesses.”

Outside Interests
The New Year is bringing about other changes in both the scope and makeup of Michigan’s legal cannabis market as the white-collar business world remakes the industry in its own image. Already, cannabis brands from outside Michigan are moving quickly to set up shop in the state with seed-to-sales business plans featuring a construction boom of high-capacity cultivation facilities and shiny new dispensaries.

The market has been buzzing this winter with a stream of announcements from multi-state vendors and operators setting up shop in Michigan. Boxing champion Mike Tyson’s California company Tyson 2.0 signed an “exclusive cultivation partnership” this month with Common Citizen, one of the growing number of marijuana outlets in Michigan that are partnering with producers and dispensary chains from other states. Tyson’s entry into Michigan was revealed the same week that Body and Mind Inc., based dually in Las Vegas and Vancouver, BC, announced it was expanding into its fifth state with a new branded dispensary in west Michigan and the construction of a separate 57,000-square foot production facility.

The influx of new brands has even created a “locals only” loyalty hook for its in-state growers battling for market share. Starzz Cannabis launched a marketing campaign this month touting 26 years of cultivation experience and urging fellow Michiganders to spend their money on Starzz’s artisan style product rather than meekly accepting “corporate weed, which is generally lower quality, lower potency and unfortunately, has no loyalty to our local communities.”

Industry leaders say there are still opportunities for the local “little guy” to find a profitable niche by entering less-saturated locations and expanding vertically on their own. “We’ve seen a lot of our members, even small mom-and-pop retailers, expanding into new areas,” Robin Schneider, director of the Michigan Cannabis Industry Association, recently told MLive.

“We have also seen a number of our retail members open their own license grows and processes this year and become vertically integrated. So, we’ve definitely seen a ton of expansion and expect to see that trend continue.”

Reining In Caregivers
Nearly lost in the shuffle of the current recreational boom is the medical-marijuana sector and the “caregivers” who have been growing their own marijuana to supply relief for clients suffering from various chronic ailments. Current law allows caregiver growers to cultivate a dozen plants per patient, including up to five patients and another dozen plants for their own personal use. That’s 72 plants. Caregivers are also allowed to keep 15 ounces of harvested marijuana on hand.

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Caregivers are now a target of new legislation which, if passed, would trim that generous allotment down to 24 total plants and five ounces of pot. They would also face stricter licensing requirements. The buzzkill bill is based on the premise that the amount of cannabis grown for each patient is more than they are likely to consume, and that the surplus could find its way to the still-thriving illicit market. In fact, the Michigan Cannabis Manufacturers’ Association commissioned a report estimating that 70 percent of the marijuana sold in Michigan in 2020 was sold illegally, including by caregivers who are banned under their license requirements from selling surplus inventory.

Catching Up on Social Equity
Michigan is making the most of what may be the last shot at keeping its cannabis industry in-house and something more than another white-dominated franchise industry. The concept of social equity, which is used in several states, reserves a percentage of cannabis licenses for entrepreneurs from disadvantaged groups and requires other licensees to take steps toward community engagement.

Social equity, however, has become a roadblock to opening the likely massive recreational “adult-use” market in Detroit, where the city has established a “legacy resident” licensing classification that requires applicants to have lived in the city for at least 10 of the past 30 years. The idea is to reserve half of the city’s proposed adult-use licenses for legacy applicants, giving the locals a fair shot at the anticipated bounty.

The law was challenged in federal court almost immediately on constitutional grounds that it discriminates against non-legacy applicants. The federal lawsuit is still pending, and Detroit officials have been blocked from issuing recreational licenses until it is resolved; the judge in the case said last summer it appeared the legacy law was indeed unconstitutional.

More Trouble Than It’s Worth?

Michigan’s industry is highly dependent on the cooperation of local governments since it comes down to city commissions whether recreational marijuana is sold in their communities, where it may be sold and by how many sellers. Without statewide standards and limits on licenses, individual communities can tailor licensing and zoning requirements to their own standards, but they also have to own, enforce and possibly defend them in court.

Mayor Catherine McNally of the lakeshore resort town of Grand Haven, published an opinion column in the local newspaper this month to caution against approving limited recreational pot sales in the upscale resort community, which currently permits only medical marijuana sales. McNally said the lack of statewide licensing standards had created a legal minefield that could stretch the small community’s regulatory and legal resources.

“Many Michigan cities that have tried to permit recreational marijuana sales on a limited basis have been sued for their troubles,” McNally wrote ahead of a Feb. 8 public meeting on the issue, adding her stance that recreational marijuana in Grand Haven was more trouble than it was worth: “We do not have a war chest to fight the cannabis industry. Our safest course is to continue to prohibit recreational sales.”