On Monday, September 27, Michigan’s Marijuana Regulatory Agency will hold a public hearing on draft administrative rules updating all of the State’s current cannabis-related rules other than for hemp. The deadline to provide written public comments is that Monday at 5 p.m.

In a six-part series, Dykema outlines the substantive proposed changes in each of 10 draft rule sets and then will conclude with coverage of next week’s hearing. Yesterday, we covered the Marihuana Licenses Rule Set, and today we cover the Marihuana Licensees Rule Set, encompassing Rules 420.101 to 420.112a. Rules without substantive changes are not included.

  • R 420.101
    • Definitions would be added for “another party,” “other party,” and “Parties” for those businesses that are licensing their intellectual property or providing management “or other services” to a licensed marijuana business.
    • “Intellectual property” would be broadly defined to include trade secrets, patents, trademarks, copyrights, and brands and recipes.
    • A definition of “Licensing agreement” would be added, and includes any “understanding” or contract concerning the licensing of IP.
    • A definition of “management or other agreement” would be added, and include any contract for the provision of management or other services where the third party can exercise control or receive more than 10% of gross or net profit.
  • R 420.102 Marihuana grower license (AU).
    • Would clarify that a Grower must “accurately” input transactions into METRC. (This same change is found in the rules for every license type.)
    • Would expressly state that a Grower may not purchase or accept transfer of mature plants from an individual, patient, or caregiver.
  • R 420.103 Marihuana processor license (AU). The proposed rule would delete a provision that currently permits a licensee who holds processor licenses at multiple locations to transfer inventory between locations. (This may still be allowed under a different subsection of the same rule.)
  • R 420.104 Marihuana retailer license (AU). The proposed rule would delete the provision that currently permits a licensee who holds retailer licenses at multiple locations to transfer inventory between locations. (This may still be allowed under a different subsection of the same rule.)
  • R 420.105 Marihuana microbusiness license (AU). The prohibition on a microbusiness accepting mature plants that would be contained in the Grower rule would be added here.
  • R 420.105a Class A marihuana microbusiness license (AU). This is likely to be one of the most contested provisions in the proposed rules. Although this license type was recommended by MRA’s Racial Equity Advisory Workgroup, that group’s suggestion was for a license to be used by disadvantaged individuals; the proposed rule is in no way tied to racial or social equity.
    • This license would represent a substantial and dramatic change and allow everything that a microbusiness can do, but also the following: (A) grow 300 plants (only mature plants count); (B) purchase marihuana concentrate and marihuana-infused products from processors; (C) purchase plants, tissue cultures, seeds, or clones from MMFLA or MRTMA Growers; and (D) purchase mature plants from individuals (age 21+), patients, and caregivers. This final item is not allowed for growers or the original microbusinesses and would appear to violate both MRTMA and the MMMA.
    • Class A micros would be full-fledged retailers able to acquire just harvested plants from multiple sources including caregivers, and to operate as a grower, processor, and retailer for a license fee $20,000 less than those three licenses would cost.
  • R 420.107 Marihuana safety compliance facility license (AU). MRTMA labs would be allowed to test marijuana from individuals who are home growing under MRTMA.
  • R 420.108 Grower license (MED).
    • The proposed changes to this rule are the same as the proposed changes for the MRTMA Grower license above.
    • The MMFLA does not allow growers to accept returns of product from processors or provisioning centers, which can be done on the adult-use side. MRA has sanctioned licensees for doing so this. MRA would now include that prohibition in the rule.
  • R 420.112 Safety compliance facility license (MED). Would clarify that a lab may not perform testing for licensees or for fees before receiving accreditation.
  • R 420.112a Licensing, management, or other agreements. MRA’s current rules only address licensing agreements by providing that a Licensor is automatically excluded from being an applicant if the agreement is approved by MRA. The rules are silent with respect to management contracts, leaving outside management entities to be reviewed as “managerial employees.” This newly proposed rule would mandate approval of such agreements.
    • This rule would incorporate MRA’s current “Advisory Bulletin” and associated review process for licensing agreements, and extend that to contracts for management “or other services.”
    • For licensing agreements, the current requirement that royalties be based on the number of units sold or a monthly rate would be deleted.
    • For licensing agreements, the rule would require that all payments made to the third party be made by the licensee that is party to the agreement and not by other licensees. It would also require that all business operations related to production, sale, invoicing, and payment for marijuana products be performed by the licensed entity.