Permanent Administrative Rules for Marijuana Licenses: The Imperative of Supporting the Industry We Started

By on February 21st, 2020

The Medical Marijuana Facilities Licensing Act (“MMFLA”) and the Michigan Regulation and Taxation of Marijuana Act (“MRTMA”) are the statutes that govern the licensing of medical and recreational cannabis businesses in Michigan.  It makes sense that the department that regulates these businesses, the Marijuana Regulatory Agency (“MRA”), would want to streamline a set of administrative rules to cover both.   

A set of permanent joint rules will also lend some sense of stability to an industry that has been fluid and unpredictable in its growth patterns over the past four years.  That stability cannot come soon enough for Michigan’s cannabis business owners, who are barely surviving the explosive and sometimes erratic pattern of policy development and implementation recently coming out of the MRA as it works toward separating the legal and illegal markets and positions Michigan as a national industry leader.  

While we have many years of regulatory fine-tuning ahead, it is important for the survival of this nascent industry that the Rules not only advance the industry, but do so in the way intended by the voters.   One problematic rule set is that which administers the statutory language of MRTMA Section 91, which governs the licensing of commercial recreational cannabis facilities.  The MRTMA Emergency Rules currently in place conflict with and undermine the statutory language that requires the MRA to issue a recreational license to an applicant in a municipality that was passive at the time of the application.  In other words, the language of the voter-approved law that requires the issuance of some licenses has been nullified to make their issuance impossible.  

The joint permanent rules must correct that error, not just for the health of the industry, but for the health of our state’s democratic system.  That is not to suggest anything so dramatic as our democratic system failing as a result.  What I am saying, however, is that a brand new industry cannot survive, thrive, create jobs and spawn economic growth if its businesses cannot rely on the plain language of the statutes for its planning and development.  

New businesses should not have to guess whether rules which are invalid on their face will be ignored or embraced at their peril.  The appropriate path for the rule-makers must be to create rules supportive of the statutes and, to the extent that the statutory language requires amending, to allow Michigan’s tried and true legislative system for doing so to take its course.  

In the case of MRTMA Section 9, the current rules unfortunately hinder licensing in a way not intended by either the statute or the voters.  MRTMA allows a municipality to either permit (“opt-in”) or prohibit (“opt-out”) recreational adult use marijuana facilities.  The Act also contemplates that a municipality might not take any action.  Unlike its medical marijuana companion statute, a passive municipality is tacitly consenting to recreational adult use facilities under MRTMA.  The Act then states in Section 9.3 that if a municipality is passive, the MRA must issue a license to an otherwise qualified applicant who is not violating any municipal ordinance in effect “at the time of application.”  

The problem is that the MRTMA Emergency Rules2 removed the words “at the time of application”, and created additional rules that, together:   

  1. Shifts the control over compliance with the statute to the municipality in a way that makes it impossible to secure a license for a prospective applicant in a municipality  that has taken no action; 
  2. Conflicts directly with, and subverts the purpose of, the statutory language; 
  3. Gives individual municipal employees the ability to directly engage with the MRA, without any formal municipal action or authority, to interfere with, and stop, the issuance of a state MRTMA facility license, even where the municipality did not opt-in or opt-out of MRTMA, and where the applicant meets all of the other requirements for a license. 

In short, the MRTMA Emergency Rules prevent the issuance of licenses where the statute would require them.  

These rules are not only invalid because they conflict with and invalidate the statutory language, but because they violate the statute’s prohibition against “unreasonably impracticable” rules:  rules that are so difficult to comply with that a reasonably prudent businessperson would not bother trying to get a license.   Finally, they are invalid because they effectively amend the statute, which is not the right of the regulatory body, and can only be accomplished by a subsequent ballot-initiative or a three-quarter majority vote of both houses of the state legislature. 

The practical effect of the application of these invalid rules is that about two dozen licensed, open and operating medical marijuana facilities have been denied recreational adult use licenses, because they are in cities that, for whatever reason, did not opt out of MRTMA, and then changed their minds after these businesses applied for recreational licenses.  But for these invalid rules, the MRA would have had to issue recreational licenses to these businesses.  Instead, these businesses are now suffering crippling financial losses because they cannot compete with licensed recreational facilities in other cities.  

It’s easy to look at the Michigan cannabis industry from the outside and assume that it is an elite club of well-connected millionaires flipping their start-ups into the next Microsoft.  The reality is much different, particularly in Michigan, where both marijuana laws were designed to create small business and local economic growth.  Take it from someone who represents dozens and dozens of these cannabis start-ups:  they are just Michigan families trying to make a living.  They have children, mortgages and employees, just like the rest of us, and they happen to believe that cannabis is less dangerous when it is legal and taxed.  In a market as challenging and as fast developing as the legal cannabis industry, we owe these small businesses support, not endless obstacles.  

I know that the MRA is steadfast in its objective execution of the rules as written, and I am confident, having worked closely with the MRA, that supporting this industry is the mission they live every day.  Unfortunately, it is unclear whether the new rules would apply retroactively to the businesses that were denied licenses under the Emergency Rules, and that is why a legal challenge is necessary.  

Not every badly drafted rule requires judicial review.   This industry is not for the impatient or the short-sighted to be sure.  However, law-abiding small business owners have to be able to rely on the value of clear statutory language, and the people of the State of Michigan have to be able to rely on our government to carry out the laws as written.  

Visit www.cannabisattorneysofmichigan.com


1http://legislature.mi.gov/doc.aspx?mcl-333-27959

2https://www.michigan.gov/documents/lara/Adult_Use_Marihuana_Establishments_659804_7.pdf

The Managing Partner of Pollicella Tompkins, PLLC, Denise Pollicella started Cannabis Attorneys of Michigan in 2009 to advance marihuana law in Michigan.  In addition to regularly writing, speaking and educating on Michigan’s cannabis laws, Ms. Pollicella was actively involved in crafting the Medical Marihuana Facilities Licensing Act and continues to be a leader in developing the emerging Michigan cannabis industry.

A graduate of the University of Michigan, Ann Arbor, and Wayne State Law School, Ms. Pollicella’s 23 years of private and corporate practice have focused on business transactions, regulatory and corporate law, and advocacy.

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