Cannabis industry stakeholders share their thoughts on proposed marijuana rule changes

A lengthy list of proposed rule changes was on the minds of industry stakeholders who attended Michigan's Cannabis Regulatory Agency's quarterly public meeting Thursday.

Many comments at the more than two-hour-long meeting, held both in-person in Lansing and virtually, centered on a 13-page list of proposed rule changes released about a month ago.

Industry stakeholders voiced their support of, and concerns with, several of the proposed rules, including one that would require licensees who are creating any pre-roll product to have the product tested in final form (stakeholders said that if the flower is already being tested, why would it have to be tested again once it's in a pre-rolled joint?) and a proposed rule that would require standard terpene (aromatic compounds that contribute to marijuana's smell and flavor) profile testing of cannabis flower.

"While we understand many of these changes may be necessary, many of our clients feel that a lot of these (proposed rules) would unnecessarily drive up operational costs and make it harder and harder for them to serve the market and remain profitable," a caller, who identified himself as Sam Paulus with Urban Legal Group, said. "Already being one of the most heavily regulated industries, additional burdens are always met with skepticism."

There was one proposed rule that meeting attendees were largely in support of: a rule that would allow the CRA to deny a license or license renewal based on civil judgments or court orders resulting from unpaid debt for work, services, products or equipment.

"Right now, repeat offenders who routinely place large orders with seemingly no intention of ever paying the vendors are creating a ripple effect of financial harm throughout our industry," Robin Schneider, executive director of the Michigan Cannabis Industry Association, said.

Schneider said she frequently gets calls from members who say that a business has not paid their invoice for a product that has already been sold.

"This scenario is theft and we'd like to see those repeat offenders when they have multiple civil judgments against them stopped so that they can't continue to prey on other unsuspecting businesses," she said.

Cannabis businesses not paying their bills has increasingly become a problem in the industry as it has gotten more competitive and challenging to operate in. The price of cannabis flower has rapidly declined over the past few years due to an oversupply of flower, and margins have shrunk for companies as a result, decreasing profitability.

Cannabis companies don't have the option to file for bankruptcy protection because marijuana is still illegal under federal law and bankruptcy cases are exclusively handled by federal courts.

More: More Michigan marijuana companies expected to come under receivership control

More: A major Michigan pot company is in receivership. It isn't the only one that's struggling.

John Fraser, Michigan team leader of the law firm Dykema’s cannabis practice, raised concerns about this proposed rule, though, in an interview with the Detroit Free Press ahead of the public meeting.

"Saying we're going to take away somebody's license because they can't pay their bills, well, now you're guaranteeing that the creditor is never going to get paid," Fraser said. "If the business doesn't make any money anymore, how are they going to pay you?"

Fraser said this proposed rule addresses an issue many businesses have experienced but doesn't get at the underlying issue. One of his ideas to solve this problem is for the CRA to raise this issue with the state Legislature and come up with a statute that makes clear that county sheriffs have the authority to go into a marijuana business and seize goods in connection with a judgment, for example.

"At the end of the day, the goal here should be to try as much as possible to treat marijuana businesses like any other business," he said.

The proposed rules are going through a formal public hearing process and it's anticipated that the rules could go into effect early next year, David Harns, a spokesperson for the CRA, said.

Contact Adrienne Roberts: amroberts@freepress.com.

This article originally appeared on Detroit Free Press: Stakeholders share their thoughts on proposed marijuana rule changes