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Michigan Rolls Out Proposed New Cannabis Regulations

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Michigan is now one of a few states around the country that has achieved legalization of both medical and recreational marijuana for a few years, thanks to a forward thinking legislature as well as voters. These years have been crucial for the Michigan Marijuana Regulatory Agency (MRA) in regard to recognizing the effectiveness and failures of its marijuana laws. This recognition allows the MRA to craft better policy for both the medical and recreational marijuana industries.

In July of 2021, the MRA filed new proposed rules that reflect what the agency deemed missing in its current versions of Michigan marijuana laws. Many of the changes have to do with regulatory affairs and internal clarification for the MRA as far as definitions, but there are a number of changes that will have direct effects on recreational and medical marijuana businesses alike.

New Lab Testing Requirements and Lab Quality Assurance Procedures

Whether it’s processors producing the product, retailers selling the product, or consumers consuming the product, everyone wants the highest quality product possible. Originally, this meant less pesticides on the cannabis and high THC content in the cannabis. Now, increased scientific research from both the state and federal government levels has brought improved lab standards and quality assurances.

The new proposed rules will treat testing centers in a more uniform manner between medical and recreational laboratory compliance centers. They’ll also create specified tracking regulations for cannabis products that are combined with other products, even in small amounts, to create a final product to ensure maintained quality throughout the creation of this final product.

Requirements for All Expired Products to be Destroyed

Prior to this rule change proposal, state law allowed many expired cannabis products to remain in a legal gray area as far as what must immediately happen to them upon expiration, where some processors or retailers of the industry would try to rework the product to sell it. Obviously after product has reached its expiration date, it should be destroyed, but retailers (or provisioning centers) are not always capable of the proper destruction process.

Thus, the new law proposal would allow retailers to return an expired cannabis product back to the processor it was purchased from for the destruction and mixture with solid waste. Processors may have to destroy entire harvests of marijuana at times if the batch does not meet quality standards, so they are generally equipped to properly destroy any expired cannabis product, making one less problem for retailers when products expire.

New Limitations on Employee Samples

The proposed rule will also change the limits placed upon samples provided to employees of cannabis business. The largest modification now allows medical and recreational cannabis sales locations to provide sample to employees. Prior to this, only cultivators and processors could provided samples.

This was odd as a large reason for providing employee samples is to increase the employee’s familiarity and understanding of the product. You’d think consumers would want the people selling them the products to have that increased understanding as well as the cultivators, now they can. Another shortcoming the new rule addresses is requiring quality assurance testing for any employee samples.

Financial Record Regulations That Business Owners Must Maintain + Written Standard Operating Procedures

New proposed regulations regarding the financial records of marijuana businesses in Michigan would require more extensive tracking of income and expenses than the MRA did previously. The new industry standard will be to keep track of:

  • Cash logs.
  • Sales records.
  • Purchase of inventory.
  • Invoices.
  • Receipts.
  • Deposit slips. 
  • Cancelled checks.
  • Employee compensation records.
  • Tax records. 

Requiring these types of records will not only help the MRA to keep track of the financial aspect of the Michigan cannabis industry, but will ultimately also benefit marijuana business owners by forcing them to maintain a better record keeping system and make important information easier to locate.

In a similar fashion, there is a new requirement for any cannabis business in Michigan to have standard operating procedures written and on site at all times. This may appear like a burden to business owners, but having some written procedures in place on how to operate would also benefit cannabis businesses. Employees may have questions that arise during business operations and if the owner can’t be reached to answer written procedures would be a great help. Regardless, it will be a new requirement to maintain these written procedures if these proposed laws are finalized.

Proposed Regulations for Drive-Thru or Curbside Pickup

For obvious reasons, 2020 saw an explosion in the rate of curbside orders. For much of the year this was in fact the only way a cannabis provisioning center could operate in Michigan. Provisioning centers adapted quickly to this new method, and both the medical and the recreational market have readily embraced this feature of retailers. Despite the emergency health mandates being scaled back and dispensaries opening their doors again, the curbside pickup market, or as the MRA refers to it, contactless and limited contact transactions, have remained very prevalent.

As such, the MRA decided to establish permanent regulations for these types of transactions in the new law proposal. Fortunately, the MRA proposal appears to follow the practices that most dispensaries arrived at naturally; the law will just require these practices to be written down, such as the location of the curbside pickup area being labeled on the business location plan.

Company Equity Ownership of 2.5% Must Be Disclosed

Another new small change to MRA policies is that any person with 2.5% or more equity ownership must be disclosed as opposed to 5% previously. The MRA wants more transparency as far as where the funding for Michigan marijuana businesses is coming from exactly.

In addition to lowering the equity limits, the MRA now requires specific information from the entity that owns the 2.5% or more. The proposed law will require the personnel of any entity helping to fund a marijuana business to be disclosed in the licensing application in an effort to identify any potential illegal funding sources. Failing to provide all persons involved with an entity owning 2.5% or more will result in a stalled licensing process.

Class A Marihuana Microbusiness License

A long awaited addition to the MRA policies regarding the Marihuana Microbuisness license is also in the proposed rule changes. The law will establish a Class A Marihuana Mcirobusiness license for Michigan that imposes many necessary changes that will level the playing field for small business owners attempting to compete in the legalized marijuana industry.

New Limitations on Percentage of Annual Profit Transferred

Another change that emphasizes the MRA’s goal to achieve complete transparency in the cannabis industry financial sector is a new regulation on transfers of profit to outside entities that amounts to 10% of a marijuana business’s annual calendar or fiscal year’s profit.

This law will place new stipulations on what a cannabis business may do with its profits as anyone receiving 10% or more of the business’s profits will be considered an extension of the license holder and must be included in the license application or license renewal for that year. Companies will now have to ensure financial agreements they have with any entity will comply with these new rules.

Additional Disciplinary Rules Restricting Who Can Work at Cannabis Business

The final aspect of rule changes proposed in July or 2021 affect who may work at a cannabis business in Michigan. These proposed changes will establish an exclusion list that will prevent anyone on the list from working at a cannabis business in the state.

The exclusion criteria range from a conviction for selling controlled substance to a minor, to a pattern of convictions for theft or fraud, to being previously found ineligible for a license upon applying, to conduct that endangers public health; if an individual meets any of the criteria in the rule, the MRA then has full discretion to exclude them from working at any cannabis business.

Exclusions can be temporary or permanent, and may be challenged by requesting a hearing on the exclusion. However, if no hearing is requested or the challenge is defeated, the person remains on the exclusion list until a different determination is reached by the MRA. Business owners in both the medical and recreational cannabis industries will have to pay close attention to these exclusion lists as failing to exclude someone on the list from your cannabis business could result in disciplinary proceedings.

Conclusion

With no real obstacles in their path, these proposed rules are likely to become law within the next few months and will be enforced promptly. If you are a marijuana business owner in Michigan, you will definitely want to determine if your business will remain compliant after the laws are finalized. Consulting with Michigan cannabis legal experts will help ensure your doors stay open when these new laws are put in place.

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