LANSING, MI — Michigan’s wide-open marijuana market wants to shut its doors.

Amid plummeting prices, skimpy profit margins and heavy black market competition, the state’s largest cannabis lobbying organization this week called on lawmakers to stop issuing new marijuana licenses.

“It’s because people are continuing to bring in illicit product — conversion oil and other products — into the regulated market,” said Michigan Cannabis Industry Association Director Robin Schneider. “You really have to start to look at: if we can’t get this under control, why are we continuing to issue more licenses?”

LIMITLESS LICENSING

While Schneider said her 400-plus-business trade organization supports a halt on new licenses, that contradicts language in the 2018 law Schneider and other marijuana pioneers helped write.

The existing law decentralizes licensing so that local municipalities control if and how many marijuana businesses operate within their borders. The number of available licenses is limitless.

With the local government’s blessing, if an applicant meets other state requirements, the Cannabis Regulatory Agency (CRA) issues the license — regardless of market saturation or economic considerations.

This has led to situations in which one community may host dozens of retail shops, while a neighboring municipality bans marijuana commerce entirely.

According to Schneider, the original intent of the law’s free-market language worked; now it’s time to reevaluate.

“Originally there was a lot of concern about a monopoly … Because of that threat in Michigan, we swum the other way,” Schneider said. Now she wants to see the pendulum swing the other direction.

BLACK MARKET COMPETITION

Schneider said she’d support putting a moratorium in place “until we see reasonable meaningful enforcement.” She also believes regulators “are doing everything in their power to go after these bad actors and hold them accountable.”

Marijuana businesses say they’re being undercut by unscrupulous competitors who purchase black market marijuana and sneak it into the regulated market, as well as out-of-state players selling unregulated, synthesized marijuana produced from legal hemp through a loophole. The products are then sold at gas stations, smoke shops and online.

Related: Boom to bust: The rise and fall of Michigan’s hemp farming program

The federal government legalized hemp farming in 2018. Hemp is defined as cannabis that contains negligible amounts of THC, the psychoactive compound in marijuana. But processors learned how to scientifically convert CBD, which doesn’t required a marijuana license, into psychoactive marijuana. Producers then market the products under the cloak of hemp.

Although many argue these products are already illegal under Michigan law, the laws are rarely enforced.

Related: THC converted from hemp may soon compete with marijuana in Michigan

‘WHACK-A-MOLE’

The issue was discussed at length when CRA Director Brian Hanna, Schneider and others addressed the state Senate Regulatory Affairs Commission on Wednesday, April 23.

Hanna said the CRA has limited tools available to combat the two-pronged illicit marijuana threat.

We have no power over producers or retailers that aren’t in the regulated market, he said, and due to a 2024 court ruling, the CRA “doesn’t have the authority to summarily suspend a license for egregious conduct.”

Hanna said “beefed-up” rules could be put in place this year that would give the CRA the ability to shutter businesses found to be in possession of illicit marijuana or for interfering with investigations, among other reasons.

Schneider said, even when the CRA harshly disciplines companies found to be breaking the rules, it doesn’t stop them.

“How can we expect our regulators to ever catch up on enforcement for illicit activity when they are required by law to continue issuing new licenses,” she said. “This allows criminal organizations repeatedly enter our program, creating an endless game of Whack-a-Mole.”

Schneider said when businesses face harsh fines or have their licenses revoked, “they’re able to go pull the next license (and) put it in a relative’s name.”

She wasn’t able to provide a specific example of this scenario but said it is “common knowledge” within the industry.

OVERSUPPLY

Hanna also cited market oversupply as an issue threatening the market.

“In 2019, the average retail (cost for an) ounce of marijuana flower was over $500,” Hanna told lawmakers. “Now, today, it’s $65.”

Hanna blamed the price implosion on a glut of marijuana produced by a dispropotionately high number of growers attempting to unload their cannabis through a stagnating number of retailers.

A slide he displayed showed the number of grow licenses more than doubled since 2022, while the number of retailers inched upward about 10%.

As of March, CRA monthly data showed there were 857 marijuana stores licensed statewide, and 2,578 grow licenses, the vast majority of which allow license holders to grow up to 5,000 plants at a time.

Hanna didn’t call for a license moratorium but told lawmakers that without the ability to cap licenses, the agency has little ability to correct the lopsided supply chain.

“We don’t have a position at this time,” CRA spokesman David Harns told MLive. “If and when the CRA takes a position, it will be done through the legislative process.”

‘I DON’T SUPPORT IT’

States like Oregon and Oklahoma have faced marijuana price cratering similar to Michigan and implemented licensing moratoriums that remain in place today.

In Oregon, the licensing system operates similar to liquor in Michigan. In order to obtain a license, new marijuana businesses must obtain their license from an existing license holder.

Schneider said this “might be a good option” for Michigan but “we’re still in the begining stages of this discussion.

Jamie Lowell, a longtime marijuana advocate who has often worked alongside Schneider, disagrees.

“I understand why a moratorium might sound appealing—many businesses are under real pressure,“ said Lowell, the operations manager for the Meds Cafe cannabis retail chain and a board member with Michigan NORML. ”But I don’t support it. It goes against the intent of the (2018 law), which was meant to ensure an open, competitive market—not one modeled after alcohol …

“A freeze mostly protects larger operators and limits future opportunity. Other states, like Oregon and Oklahoma, have tried moratoriums, and they didn’t solve oversupply or market instability.”