By: Scott F. Roberts
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Is it too Late to Get a Michigan Marijuana Business License?
The Department of Licensing and Regulatory Affairs, also known as “LARA”, first released the state MMFLA application in early December and started accepting applications within a couple weeks of its release. Since this time, LARA has been swamped with hundreds upon hundreds of commercial medical marijuana license applications.
Many potential clients ask us whether it is simply too late to get a Michigan cannabis business license. This concern is especially prevalent among dispensary—i.e. “provisioning center”—clients. This is likely due to the fact that since the enactment of the Medical Marihuana Facilities Licensing Act (MMFLA) and the Emergency Rules, there have been many hyped up “deadlines” that have come and passed. Not only that, but many cities (e.g. Lansing) had their own application deadlines for provisioning center applications. With all of these state and municipal deadlines, it can seem like the clock always seems to be ticking down to a deadline.
Before answering whether its “too late” to get into the Michigan Cannabis industry, let’s first consider who is impacted by these deadlines. MMFLA applicants who were operating a marijuana business were required to turn in their state application by February 15th, 2018. These applicants had faced a drop-dead date of June 15, 2018 to either receive a state license or shut down their operations. Failure to do either would risk any continued activity being considered an increased chance to be denied licensure by the Medical Marihuana Licensing Board (MMLB). To help ensure the continued protection of medical marijuana patients, under the new rules, proposed medical marijuana facilities that would otherwise require a state operating license under the MMFLA may continue to operate until September 15, 2018 without impacting the applicant’s eligibility for licensure.
In other words, the February 15th, June 15th, and now the September 15th, 2018 deadline either are or were wholly irrelevant for new MMFLA applicants, as were most of the “deadlines” that had scared many of our marijuana business clients. In fact, we believe that now is the best time to break into Michigan’s marijuana industry, as entering the medical industry this year will allow marijuana business owners to “cut the line” when it comes to entering Michigan’s soon-to-be recreational marijuana market.
However, as we explain in more detail below, this window will not stay open forever. We do recommend to business owners looking to enter the Michigan marijuana market should that they should do so sooner rather than later.
Get a Headstart on the Recreational Marijuana Business Industry
With the MiLegalize ballot initiative set for the November 2018 election, and polls indicating that it has a strong likelihood of passing, it looks almost certain that recreational marijuana is coming to Michigan. Smart cannabis companies are therefore looking beyond the MMFLA and Michigan’s medical marijuana market to the state’s expected legalization of recreational marijuana. The MiLegalize initiative, also known as the Regulate Marijuana Like Alcohol initiative (RMLA) sets forth approximately four pages of requirements and new application procedures for operating a Michigan recreational marijuana business. With similar state marijuana statutes, such as the MMFLA, being almost ten times longer, LARA will still need to promulgate additional rules to guide the application process.
We expect that many people will be looking to obtain a recreational marijuana business license upon passage of the Act, and applicants will benefit greatly from having an MMFLA license as part of their application package. The license types under the RMLA closely mirror the MMFLA (with the addition of the new Microbusiness license ), and through the process for transitioning from a licensed MMFLA business to a recreational marijuana business is not yet clear.
One rule that was not left to LARA, however, was that only MMFLA licensees can apply for Michigan recreational commercial licenses for all license types except 100 plant grows and Marijuana microbusinesses for the first two years. By giving a preference to businesses that have obtained a medical marijuana business license, the state ensures that these licensees meet stricter requirements and that the licensees have paid for not only the MMFLA application fee/regulatory assessments, but also the recreational marijuana application fee.
The practical implications of this are huge. To enter Michigan’s recreational market, you need to first enter the state’s medical marijuana market since only MMFLA licensees can apply for all but two of the new recreational marijuana licenses created by the RMLA. Not only that, but with LARA already overwhelmed with applications, there are rumors that there could be a moratorium on new applications by the end of the year. It is no surprise that the Board is political , and many expect that the Board will choose to slow down the number of applications it considers so as to limit the number of marijuana businesses in the industry. This could mean that if you do not apply this year, or at least before any possible mortarium, you could be shut out of Michigan cannabis market until 2020 or beyond.
Although the September 15, 2018 MMFLA deadline doesn’t apply to any new MMFLA application, many may mistakenly believe that this cutoff date somehow applies to all MMFLA application and that it is therefore too late for them to submit their own MMFLA application. This is not true. Although there is a possibility of a hard deadline for all applicants sometime in the future, there are no such deadlines currently in place. Accordingly, getting started now will provide significant advantages for obtaining a recreational marijuana business in the coming months.
With LARA and the Licensing Board needing an estimated six months to process an MMFLA commercial application, applying now would allow you to obtain a commercial license right around the time that the new recreational framework is being put into place. This brings us to our next topic—why now is a great time to start the long and intensive MMFLA application process, and why this process could benefit those looking to enter the recreational market.
Getting Started Early
The MMFLA application is a fairly complex application process, requiring not only a 40+ page application, but years of additional financial statements attested statements from a CPA as to your financial condition, background checks, and other documents. Compiling all of these documents usually takes a lot more time than many people plan for or may realize initially. Our clients generally spend weeks or months pulling together all of the necessary documents before they can successfully submit an application. Just getting the third year of financial institution statements can takes weeks to obtain from some banks and credit unions.
While this can be quite the hurdle to jump over, one person’s “hurdle” is another person’s barrier to entry. The thoroughness and tediousness of the MMFLA application process is likely partly responsible for the lack of large out-of-state players positioning themselves for what is set to be one of the biggest recreational states in the country. For fellow Michigan residents, or even smaller out of state players, this is welcome news.
Application Preparation and Review Will Take Time
As there are many moving parts to this application process, we suggest allowing 1-2 months for a full and complete MMFLA license application to be submitted to the state. By getting a jumpstart on the process now, you can ensure that you will be considered for licensure faster by the MMLB. The state’s application review process is fairly intensive. First the application is reviewed by the Department of Licensing and Regulatory Affairs, which vets the applicants and usually asks for additional information prior to sending the application to the MMLB.
The MMLB is a 5-person panel that meets once per month to vote on whether to approve or deny licenses for selected applicants. This monthly meeting may consider any number of applications, however the most they have considered in one meeting has been 19.
As of the May 2018 BMMR meeting, there were almost 600 applications submitted, waiting to be reviewed by the Board and no licenses have been awarded. Since no meeting has been held since May, it is a safe assumption that this 600 number has grown significantly over the span of several weeks.
Putting it All Together
If you are looking to enter the Michigan marijuana industry in the near future, we strongly advise you to start the medical marijuana commercial licensing process right away. The MMFLA application process can take a while to get through. While LARA initially said about four months, we are currently advising clients that they should prepare for it to possibly take several months longer than this given the current application backlog.
Even if you don’t have a property picked out, now is still the best time the MMFLA Part 1 process. You will have plenty of time to locate and tie up the right property while LARA and the licensing board review your Part 1 application. Accordingly, we recommend that potential business owners and groups looking to enter Michigan’s recreational marijuana market act now to enter the state’s medical marijuana market. Failing to do so could shut you out of the market for years to come.
If you should have any questions or concerns about getting started on your application, contact a Medical Marijuana Business Attorney today! Even a short consultation can pay dividends if you come prepared with a list of questions and can provide any details about your proposed marijuana business. Our office works closely with other professionals in the marijuana industry, such as CPAs and political consultants, to help our clients identify any potential issues and navigate the application process efficiently. These resources and expertise can help ensure that once all the documents have been provided, the rest of the application process moves smoothly.
Mr. Roberts is the founder and managing member of Scott Roberts Law, a Detroit-based Cannabis Business Law Firm founded in 2014. Scott has spent his entire career representing businesses and helping them comply with municipal, state and local regulations, as well as assisting on transactional corporate and real estate matters. Scott is an accomplished attorney, author and public speaker, having spoke at CannaCon, Cannabis Industrial Marketplace, CannabisAid, and 420 Canna Expo, to name a few. He has also taught Continuing Legal Education on Marijuana business matters, meaning other attorneys see him speak to learn about the nuances of cannabis business law.