Michigan's Top Cannabis Regulator Promises Crackdown as Prices Free-Fall

The state's Cannabis Regulatory Agency is preparing to launch a new offensive to combat illicit market product.

This story was reprinted with permission from Crain’s Detroit Business and written by Dustin Walsh

For Michigan’s marijuana industry, a crackdown is coming.

The state’s Cannabis Regulatory Agency is preparing to launch a new offensive to combat illicit market product that’s been long-rumored to be making its way into the regulated industry, Brian Hanna, the newly appointed acting director of the agency, told reporters in a media roundtable Tuesday morning at the CRA’s Lansing headquarters.

Hanna, who was appointed by Gov. Gretchen Whitmer as the successor to to the agency’s founding Director Andrew Brisbo in September, declined to reveal details, but the proposed crackdown is designed to rid the legal market of oversupply due to illegally grown products entering the market and driving down prices.

Legal marijuana prices have plummeted in the state in the past 18 months, down to $109.88 per ounce of flower in September from $203.84 per ounce a year earlier.

Pressure on the Cannabis Regulatory Agency has been mounting in recent months, leading to Brisbo’s resignation and the industry favoring Hanna, a former Michigan State Police crime analyst, for the top regulatory gig.

Hanna said the agency is aware of illegal market marijuana in the system but is unsure of its scope.

“Anybody cutting corners or cheating, we want to expose that,” Hanna said. “But we don’t know at what point it’s coming into the supply chain.”

The number of active marijuana plants being grown in the licensed market increased 120 percent between August 2021 and August 2022, just above sales growth of 103 percent. Yet, licensed market inventory, by pounds, grew more than 400 percent during the same 12 months, suggesting that at least some illicit weed is making its way into the system.

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Crain’s reported last week about how growers and retailers in the industry believe the illegal product is getting in.

Andrew Sereno, CEO of Manchester-based grower Glacial Farms LLC, told Crain’s that the variability of output and skill among growers makes it almost impossible for the state to determine how much product should come from a plant. Without a somewhat standard yield, knowing if all the product coming from a grower was grown legally is difficult.

“It is very easy for a bad actor grower to ‘harvest’ some plants and then have outside material enter in at that point,” Sereno said. “Who is to say whether they actually had a 20-, 40- or 60-pound harvest?”

The theory is that distillate — the refined cannabis resins used in edibles, tinctures and vape cartridges — is being produced in illegal states without the interference of regulatory hurdles, such as Oklahoma, much more cheaply, and then shipped in to be sold on the legal market at a higher price.

The anonymous retailer said a liter of illegal distillate is $500 but is retailing for about $1,700 in Michigan.

Hanna noted the same “rumors” of how illegal weed is finding a way in the regulated market.

Since taking over the job, Hanna, a former intelligence officer in the U.S. Army, said the agency is boosting its forces to help tackle the problem. The agency has hired a half-dozen regulatory agents so the industry can perform more random inspections and a new lab scientist to help the agency spot-check product in hopes of determining a yield so it can find inconsistencies in grower output.

Hanna said the agency had pulled back on inspections during the COVID-19 pandemic to protect its staff but is now planning to ramp up those efforts.

“Unannounced inspections are coming,” Hanna said. “The majority of stakeholders want to see more inspections.”

A major issue the agency continues to contend with is the misuse of surveillance cameras required under the CRA rules. Operators are required to continuously record, and store for 30 days, video of marijuana being grown, sold, processed or stored in a facility.

The agency has found operators are deleting camera footage at random points, which at worst would trigger a $5,000 fine from the agency. That’s a slap on the wrist compared with losing a grow or retail license.

“There appears to be a consistent camera issue at businesses,” Hanna said. “Camera issues are unacceptable.”

Hanna declined to say whether the agency planned to raise the fine or what other measures it plans to take.

He did promise the public and industry stakeholders would be made aware of a new crackdown and new rules in the near future.

“Stay tuned,” Hanna said.

Agrify

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