Trends and Hot Topics: Michigan Jackpot?

, Trends and Hot Topics: Michigan Jackpot?

State’s big marijuana market could be a boon for entrepreneurs – provided anti-MJ forces don’t stand in the way

By John Schroyer

Looking for a hot investment opportunity in the cannabis industry, but can’t decide which state market to enter? Michigan could be a solid option – with some caveats.

There’s strong demand for marijuana in Michigan, and plenty of appetite, with entrepreneurs champing at the bit as the state this year rolls out its new medical marijuana regulatory regime. But events in Detroit in early 2018 have raised questions about just how the Motor City’s cannabis industry – as well as those in other municipalities – will be structured and how large it will be allowed to grow by anti-cannabis government officials.

Michigan is home to nearly 270,000 registered medical cannabis patients as of November 2017, according to a state report from the Michigan Department of Licensing and Regulatory Affairs. That’s up nearly 100,000 since early 2016.

The boom in patients puts Michigan among the hottest state MMJ markets in the United States, after California’s estimated 800,000 or so patients and ahead of Arizona’s roughly 156,000 patients.

The state is also likely to legalize recreational marijuana in November – the main question is whether cannabis opponents will be able to keep a ballot question from going before voters with some type of technicality, as they did in 2016.

In general, Michigan voters have supported pro-marijuana ballot questions whenever the topic has come before them. And polling indicates that rec is already ahead with Michigan voters, meaning it’s likely the state will join the eight others that have approved full-fledged adult-use markets.

If Michigan does legalize adult use this year, it’ll be the first Midwestern state to do so. (There’s a possibility Ohio will legalize rec, too, but that state campaign was still in its infancy as of press time, making it difficult to gauge its chance of success.)

That means rec MJ tourism for Michigan license winners from places like Illinois, Indiana, Ohio, Wisconsin and probably plenty of other nearby states, providing yet another reason to be optimistic about the sales potential for Michigan cannabis companies.

There have already been reports from Michigan of localities dealing with huge wait lines for local MMJ business license applications. The long lines come while the state is in the midst of implementing a new regulatory system for its longstanding gray-market dispensaries and other businesses. At least one large-scale cannabis business park is underway just a few miles from the state capitol in Lansing, and there was even a booth on the expo hall floor at last November’s MJBizCon in Las Vegas run by a small company claiming to be selling local business licenses.

There’s good reason for the business optimism:

  • Real estate prices in much of Michigan are at rock bottom, part of the legacy of the automotive industry’s collapse last century.
  • There are no state license caps.
  • The market won’t have an in-state residency requirement after June.

Of course, there’s always a catch.

Michigan – like other free-market examples before it, such as Colorado and Oregon – will almost certainly be saturated with competition, and a lot of the licensing questions and problems will emerge at the local level.

Detroit, like much of California, has a lengthy history of gray-market dispensaries that weren’t quite criminal but also weren’t completely legal.

In 2016, the city council threw down the gauntlet. It enacted two new laws designed to shrink the industry – from an estimated 200-plus dispensaries to about 60 – by making it illegal for MMJ retailers to operate within the vast majority of legal business locations.

Local cannabis activists fought back with a pair of municipal ballot measures in 2017, and they won. But now, city officials are trying to get those voter-approved initiatives thrown out in favor of maintaining a strict zoning clampdown on Detroit cannabis companies, and it’s not clear what the outcome will be.

There are similar anti-MJ moves at the local level across Michigan, the same way towns and counties in Colorado and Oregon responded after those states enacted full legalization. All three states give a lot of deference to towns and counties that want to opt out of the cannabis industry.

That doesn’t mean Michigan won’t prove to be a good investment for the right operator. Even if rec legalization somehow fails this November – and I’d be willing to bet it won’t – that still leaves more than a quarter of a million medical cannabis patients waiting to be served. And there are also plenty of marijuana-friendly towns that have already embraced longstanding MMJ companies, with more likely to follow this year.

All indications are that Michigan is ripe for professionals who are willing to build bridges with local governments – which is what plenty of longtime existing dispensaries have done – and spend the necessary capital to get a medical marijuana business up and running.

To be sure, there will be plenty of hurdles – as with any U.S. cannabis market. But in the near term, Michigan could prove one of the more profitable states in which to run a marijuana business.

John Schroyer can be reached at