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Major Michigan Announcements: Licensing Checklist, Proposed Capitalization Requirements, Other Important Standards

Cannabis Law Blog

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Major Michigan Announcements: Licensing Checklist, Proposed Capitalization Requirements, Other Important Standards

At today’s meeting of the Michigan Medical Marihuana Licensing Board (Board), the State’s Department of Licensing and Regulatory Affairs (LARA) unveiled a checklist for medical marihuana license applications, announced proposed capitalization requirements, and sought public input on other regulations for marihuana facilities.

All of this activity comes as LARA prepares to issue emergency rules for operators under Michigan’s new Medical Marihuana Facilities Licensing Act (MMFLA). As regular readers of this blog know, the State will begin accepting applications for medical marihuana operations on December 15. LARA will be releasing emergency rules next month, and is preparing for a “road show” to provide details to the public.

One of the most hotly anticipated rule topics under the MMFLA is the level of capital LARA will mandate potential applicants to demonstrate. LARA today announced that it is recommending that all applicants be required to show access to liquid assets sufficient to cover capital requirements, fees and assessments, and some period of operational costs. While LARA has not yet defined what types of funds may be used to satisfy capital requirements, the Department will require that a CPA attest to an applicant’s ability to access funds. LARA’s recommended requirements are as follows:

  • Class A (500 plant) Grower: $150,000
  • Class B (1,000 plant) Grower: $300,000
  • Class C (1,500 plant) Grower: $500,000
  • Processor: $300,000
  • Provisioning Center (retailer): $300,000
  • Secure Transporter: $200,000
  • Safety Compliance Facility (testing lab): $200,000

The above capital requirements will be applied on a per license basis for applicants who seek multiple licenses. Thus, someone seeking to hold 5 Class C licenses would have a capital requirement of $2,500,000. Someone seeking to vertically integrate with a Class B license, processor license, and single store would have a requirement of $900,000.

Not surprisingly, LARA’s proposed numbers were the source of great controversy and debate. Board Members David LaMontaine and Vivian Pickard expressed concern that the numbers could prevent small businesses and incumbent caregivers and dispensaries from obtaining licenses. Board Members Don Bailey and Nichole Cover, however, noted that the requirements are far lower than many other states, and that the State has an interest in ensuring that licensees are viable, as struggling businesses may be more tempted to divert marijuana outside of the regulated system.

During public comment, many speakers echoed the concerns of Mr. LaMontaine. Others took issue with the concept that capitalization should be examined in reference to liquid assets. They pointed out that many existing caregivers, as well as more prepared applicants, have already made their capital expenditures for equipment and buildings. Such assets, they argued, should thus be counted toward fulfilling the State’s requirements.

In addition to capital levels, LARA also discussed proposed insurance requirements. LARA is considering requiring $100,000 in premises coverage, vehicle insurance consistent with Michigan’s no-fault requirements, and some level of insurance for professional liability and pollution. Participation in workers’ compensation insurance will also of course be required.

LARA next announced its proposal for THC limits in infused products. The Department first explained that LARA will not have any potency limits applicable to extracts or concentrates, as the State does not consider them to be infused products. Rather than having blanket THC limits, LARA will impose limits on 3 categories of infused products, as follows:

  • Edibles: 500 mg THC per container, 50 mg THC per serving.
  • “High potency” products (tinctures): 1000 mg THC per container.
  • Topicals: 6% THC by volume.

All products must test for homogeneity within +/- 10 percent.

Finally, LARA announced its intention for daily purchase limits. LARA ultimately determined that the daily purchase limit should equal the possession limit under the State’s Medical Marihuana Act, which is 2.5 ounces of flower or the equivalent for infused product. Although some Board members took the position that LARA should impose weekly or monthly limits, to prevent patients from acquiring the maximum every day, the Department responded that its analysis of the law is that the State does not have the authority to set such limits.

LARA will take the feedback from today’s meeting and use it to craft final emergency rules, which we anticipate to be released next month. LARA will also incorporate recommendations from work groups formed to advise it on these rules—those recommendations will be the subject of another blog post in the immediate future.

After revealing its intent with regard to those specific rules topics, LARA announced that it has prepared a licensing checklist, which was made available at the end of today’s meeting. While not all-inclusive, and subject to change, the checklist will allow potential applicants to begin to assemble the materials needed to apply for a license. That checklist should be made available on the Department’s web site shortly.

As always, check back with Dykema’s Cannabis Law Blog for further updates.