Regulators Take Action on Controversial Practices
In a bid to clean up Michigan’s legal marijuana market, state regulators are proposing new rules aimed at ending the controversial conversion of CBD to THC. This method has raised eyebrows and created chaos in the industry as prices plummet and profit margins shrink. The Cannabis Regulatory Agency (CRA) announced these proposed changes on Monday, which include 96 amendments to the existing legal framework.
New Rules Target Illicit Market Infiltration
The proposed regulations are designed to close loopholes that have allowed illicitly grown and often illegally imported marijuana products to flood the legal market. Among the key changes is the outright ban on the conversion of CBD into THC, a process that has been exploited by some businesses. The CRA also plans to deny license renewals for companies with civil judgments against them, require growers to track all products in a statewide monitoring system, and mandate that all product testing be conducted in front of a camera.
Legal Market Faces Flood of Illegally Grown Marijuana
Law enforcement officials have expressed concerns over the influx of illegally grown marijuana in the past year. This issue was exacerbated by a Michigan Court of Appeals ruling in October 2023, which interpreted state recreational marijuana laws in a way that allowed illegal growers to face only minor misdemeanors rather than felony charges. Fortunately, this ruling was recently reversed, providing a glimmer of hope for legal operators.
Real-Life Consequences of the Current Regulations
One notable case involves Endrit Cali, a business owner from HiCloud LLC, who was pulled over by Michigan State Police last November while in possession of 43.5 pounds of marijuana flower. Although law enforcement suspected that Cali was involved in illegal activities, he ultimately pled guilty to a misdemeanor charge, resulting in a mere $950 fine, while the felony possession charge was dismissed.
Controversial Imports Under Scrutiny
Another alarming incident involved One Love Labs, a Chesaning-based company that allegedly imported over 110 pounds of isolate, a concentrated product containing pure CBD or THC. They misclassified this product as a legal hemp concentrate from Oregon. Testing revealed that the product contained a staggering 86.49% THC, far exceeding the federal legal limit of 0.3% for hemp. This breach of both federal and state regulations has raised serious questions about the integrity of the legal market.
Testing Regulations Aim to Improve Market Integrity
In an effort to enhance accountability, the CRA is proposing that companies test their products in their final form rather than just the raw marijuana flower. This change aims to prevent processors from diluting their products with cheaper, converted, or illegally sourced marijuana. The hope is that these new testing requirements will restore some integrity to the legal market.
Market Conditions Worsen as Prices Drop
The legal marijuana market in Michigan is facing significant challenges, with prices for cannabis dropping another 6% in October, reaching a record low. The average price for an ounce of cannabis flower has fallen nearly 21% year-to-date, now sitting at $73.99. This price compression is largely attributed to an oversupply of product, with 3.56 million active plants being cultivated in the state—a 73% year-over-year increase.
Industry Players Feel the Pressure
As margins shrink, some companies are being forced to make tough decisions. Fluresh LLC, for instance, has announced plans to close its $46 million grow facility in Adrian and lay off 46 employees due to unsustainable economics. CEO Brandon Kanitz lamented, “It cost me more to grow in Adrian than I could sell on the market.”
Public Input and Future Steps
As the CRA moves forward with these proposed rules, they are encouraging public feedback before finalizing any changes. Brian Hanna, executive director of the CRA, noted that the proposed rules are a response to extensive feedback received over the past two years. The agency aims to set Michigan’s cannabis industry on a path toward success while aligning with potential federal regulations.
With a public hearing scheduled for early next year, the future of Michigan’s cannabis market hangs in the balance as stakeholders eagerly await the outcome of these proposed changes.
