Is there a future for metro Detroit ganjapreneurs?

The traditionally covert marijuana business is becoming a legitimate industry in multiple states. But despite Michigan's liberalized cannabis laws, metro Detroit is still mostly out of that loop.

Katie O'Block is one of many entrepreneurs who have flocked to the cannabis industry in the Denver area. O'Block is vice president of marketing for Surna, which opened in March to provide disruptive technology to the cannabis industry. The company's keystone product is a water-cooled chilling system for indoor gardens.

"The industry has come from the attics and the basements and the smaller spaces where these people have been legal caregivers in Colorado for so long," O'Block says. "So they moved it on up to larger warehouses for the commercial space, and the technology didn't meet the demand." 

So [Surna's founders] looked at that and said, ‘Well, there has to be a solution.'"

Colorado's first legal retail marijuana stores opened on January 1 and sales have grown steadily since then, with $750 million in revenue projected by the end of this year. In Washington, recently legalized cannabusiness owners are similarly seeing big sales–and the government is seeing big increases in tax revenue

So what's different in Michigan?

"We're being held back," says Thomas Lavigne, an attorney with the Detroit-based Cannabis Counsel legal firm.

The most obvious restriction is that the Michigan Medical Marihuana Act, adopted by voters in 2008, applies only to medical marijuana and not recreational use. Patients with a medical marijuana registry card may possess up to 2.5 ounces or 12 plants of marijuana, and registered caregivers may possess the same for each qualifying patient they serve–certainly not enough to prompt the use of the larger growing warehouses O'Block references.

Regardless, Lavigne says attorney general Bill Schuette and Michigan's courts have repeatedly pushed to interpret the Marihuana Act in more restrictive ways. A Michigan Supreme Court decision last year ruled that dispensaries–storefront operations selling cannabis–were not protected under the act, in response to a complaint originally filed by Schuette. Lavigne says the Marihuana Act's basic, "compassionate" intent shouldn't be that complicated.

"It's crystal clear," he says. "It's not ambiguous. But somehow the courts can't read English…it just boggles the mind."

Those court actions have done little to stem the proliferation of dispensaries in the metro Detroit area and across the state. Experts interviewed for this story estimated the number of Michigan dispensaries to be between 100 and 200. Rick Thompson is the editor of the online Michigan cannabis news publication "The Compassion Chronicles" and a board member of the Michigan chapter of the National Organization for the Reform of Marijuana Laws. He says dispensaries are "pervasive" in the metro area.

"Considering that metro Detroit doesn't have a specific law allowing for a lot of the cannabis commerce that exists, metro Detroit is doing fantastic," Thompson says. "There is de facto allowance of distribution centers, of small businesses that do some manufacturing [and] growing entities within the city. Although there are a couple of raids, there are still a lot more facilities that are known to local authorities that are tolerated."

However, running a dispensary is still a challenging proposition. Heidi Parikh is the founder and executive director of My Compassion, a Romulus-based cannabis education nonprofit. She says profit is a "dirty word" when it comes to marijuana in Michigan. The Marihuana Act allows for caregivers to be compensated for "costs associated with" assisting their patients. However, marijuana itself is not actually "sold," nor is it taxed as it is in Colorado or Washington. 

"The dispensaries are making money," Parikh says. "It's just not allowed, so you don't hear a lot of talk about it."

Dispensaries also run into difficulties in establishing banking relationships because most financial institutions avoid working with cannabis-related businesses due to the continuing federal prohibition of marijuana. Gary Crafton opened a Detroit dispensary called Mile High Awareness and Wellness Center last year. He says he's had multiple banking relationships shut down, and an ATM pulled from his store, after the banks involved discovered the nature of his business. That's on top of the constant lingering threat of a raid, although Crafton says there are a lot more "bad apples" in the city who he expects would feel a crackdown long before he would.

"The people who want to do this the right way, we really can't," Crafton says. "We don't have an avenue to do it the right way. There's always a gray area."

That grayness can also vary depending on the city or county a Michigan cannabis business resides in. Jamie Lowell opened 3rd Coast Compassion Center, an Ypsilanti dispensary, in 2009. In 2011 it became the first Michigan dispensary to receive an official municipal license. (Ypsilanti is one of several Michigan cities with its own laws licensing and regulating dispensaries.) Lowell says his business might be more challenging to run if he was located in Oakland County, where numerous dispensary raids have taken place.

"It kind of depends where you are, and how aggressive the county prosecutor and the law enforcement agencies are really interested in being over this," Lowell says. "In Washtenaw County we are very fortunate and some things have been easier because there hasn't been this crazy, aggressive attack on adults with small amounts of cannabis helping each other out."

Two bills currently awaiting action by the Michigan Senate could clear up some of the current gray areas in a manner favorable to the cannabis industry. House Bill 4271 and House Bill 5104 both passed the state House of Representatives by overwhelming margins last December. The former would legalize dispensaries in municipalities that don't have a local prohibition against them, while the latter would legalize the medical use of marijuana extracts in edible products. Senate Majority Leader Randy Richardville has indicated support for the bills (a complete turnaround from his earlier expressed opposition), and proponents are hoping they'll pass into law before the end of the year. Dennis Hayes, an Ann Arbor attorney who specializes in medical marijuana law, says HB 5104 would give local entrepreneurs license to market a "profusion" of new products.

"I don't know how many people are smoking joints anymore," Hayes says. "You see them standing outside of bars, but patients, I think, are more sophisticated in terms of what they want and what they think works best for them."

If the bills do pass, it's still only one small step forward for cannabis as an industry in Michigan. 

"I don't think [passage] defines a growth in the industry for entrepreneurs," Parikh says. "I believe they'll want to suppress it and not let it grow too big."

Nonetheless, Thompson says it's a step in the right direction. He says there's still millions of dollars of untapped potential in the local cannabis industry. If Michigan were to go all in on marijuana, the state could even stand to outstrip the competition in the less populous states of Colorado and Washington.

"This is what I call the undiscovered economy," Thompson says. "We've got it already existent. All we've got to do is move it from the black market into the white market, and then there's big benefit."

Patrick Dunn is an Ann Arbor-based freelance writer and a senior writer at Metromode and Concentrate.

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All Photos by David Lewinski Photography

 
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