CBD Likely to Receive Stricter Regulatory Scrutiny in Michigan Following Governor’s Executive Order

Significant changes in Michigan’s cannabis regulatory framework go into effect on April 13, 2022, following Governor Whitmer’s Executive Order No. 2022-1.

Pursuant to the Executive Order, the Marijuana Regulatory Agency, which oversees marijuana growing, processing, and sales, will become the Cannabis Regulatory Agency (the “Agency”).

And the authorities, powers, duties, functions, and responsibilities of the Department of Agriculture and Rural Development to license and regulate processor-handlers under the Industrial Hemp Research and Development Act are being transferred to the Agency to be administered by the Agency. While the Agency will begin overseeing the processing, distribution and selling of hemp products, such as CBD, the Department of Agriculture and Rural Development will continue to oversee hemp cultivation.

An article in Crain’s Detroit Business which discusses the changes wrought by the Executive Order, also speculates about the possibility of more stringent regulations on CBD products. Andrew Brisbo, executive director of the Michigan Regulatory Agency, is quoted as saying “nothing will change” in the short term, and that “changes that will potentially come will be through a legislative process.”

Brisbo suggests that changes will focus on CBD products meant for human consumption, and that such products will “likely…be put through some kind of testing regime.”

We will continue to monitor these developments and keep you informed about other changes impacting Michigan’s cannabis industry. If you have any questions, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043.

MRA Proposed Expansion of Class A Microbusiness License

Last year the Michigan Marijuana Regulatory Agency (MRA) proposed changes to marijuana industry rules that would expand the state’s Class A microbusiness license.

Introduced in late July 2021, the proposed rule changes would add two new license types and reduce fees and costs associated with obtaining and renewing licenses. Previously, a Class A microbusiness could grow, process, and sell its own marijuana and marijuana products, but not purchase wholesale products from other licensed businesses for resale. The proposed rules would make the following changes:

  • Double the amount of plants a microbusiness can cultivate, from 150 to 300;
  • Allow for the purchase of marijuana concentrate and marijuana-infused products from licensed processors; and
  • Authorize licensees to purchase or accept mature plants from an individual, registered qualifying patient, or registered primary caregiver.

There is one important caveat – the new microbusiness license would ban in-house processing that was previously allowed under the old license.

The Michigan Cannabis Manufacturers Association (MCMA) has stated its opposition to the  proposed changes, arguing that the proposed Class A microbusiness license changes exceed the MRA’s authority to broaden license types under state statute.

We will continue to monitor this situation and other important developments in the Michigan legal cannabis industry. If you have any questions, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

Michigan Law Imposes New Product Liability Insurance Requirements on Legal Cannabis Licensees

At the end of 2021, the Michigan legislature passed and Governor Whitmer signed into law a new cannabis liability insurance law that mandates proof of product liability insurance coverage for licensed cannabis businesses and new applicants. The new rules take effect March 30, 2022.

Michigan Senate Bill 461 (Public Act 160 of 2021) requires every licensee or applicant to file with the Michigan Marijuana Regulatory Authority (MRA): “[P]roof of financial responsibility for liability for bodily injury to lawful users resulting from the manufacture, distribution, transportation, or sale of adulterated marihuana or adulterated marihuana-infused product in an amount not less than $100,000.00 for each license.”

The statute defines “adulterated marihuana” as “a product sold as marihuana that contains any unintended substance or chemical or biological matter other than marihuana that causes adverse reaction after ingestion or consumption.”

Additional requirements include:

  • The insurance policy is issued by a licensed insurance company or licensed captive insurance company in Michigan.
  • The insurance policy does not include a provision relieving an insurer from liability for payment of any claim for which the insured may be held liable under the act.
  • Covers bodily injuries to a qualifying patient, including injuries that are caused by the intentional conduct of the licensee (but not if the licensee acted with the intent to harm).

In addition, a licensee must file an “attestation of compliance” with the requirements of the statute with the MRA, on a form approved by the MRA, which is signed by the officer of the licensed insurance company or licensed captive insurance company that issues the policy.

To the extent a licensee fails to maintain proof of financial responsibility as required under statute, the MRA will immediately suspend the licensee’s license until such proof is provided. A licensee also cannot cancel required liability insurance unless the licensee gives the MRA 30 days’ prior written notice and procures new proof of financial responsibility and delivers that proof to the MRA within 30 days after giving notice.

Given that this law takes effect on March 30, 2022, it is important for existing licensees and applicants to move fast in order to meet its requirements. For questions or assistance, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

MRA Orders Largest Marijuana Product Recall in Michigan History

Michigan’s Marijuana Regulatory Agency (MRA) issued its largest marijuana recall ever on November 17 because of concerns over safety tests conducted by two companies.

Most products containing marijuana flower that had passed safety testing at Viridis Laboratories, LLC and Viridis North, LLC between August 10 and November 16 were recalled in a move that reportedly affected products sold at over 400 retail locations. The affected retailers were outlined in a 31-page Public Health and Safety Bulletin issued by the MRA. The recall did not impact inhalable marijuana concentrate products such as vape carts, live resin, distillate, and cannabis concentrate.

The value of the recalled marijuana products is estimated to be in the tens of millions of dollars and affected more than half the current stock for many retailers, according to multiple media reports.

The investigation is ongoing and additional findings may be released by the MRA at a later date.

The reasoning for the recall was “inaccurate and/or unreliable” microbial lab test results according to the MRA, although further details were not released by the agency. Microbial testing is required of cannabis products with the hope of eliminating products containing high levels of mold, bacteria, and yeast. Having a high level of those substances can lead to an increased risk of illness for users, including cases of E. coli and salmonella.

A large state recall mandated by the MRA also occurred in August 2020 after a marijuana flower failed safety and compliance testing for both mold and yeast.

What retailers and consumers should do with recalled products

Retailers are directed to properly dispose of any recalled products in adherence to MRA guidelines and along with processors must discontinue sales and transfers. Proof of product destruction must be sent to the MRA’s compliance email at MRA-Compliance@michigan.gov. Another option is for an affected product to be retested or sent back to the original licensee source.

Additionally, retailers must display recall notices in visible locations on their sales floors.

Customers who purchased the recalled product are expected to return those products to the retailer they purchased it from for disposal.

Product testing is at the heart of medical marijuana legislation

Proponents of a more heavily regulated medical marijuana market argue that a significant amount of marijuana sold in the state is done so illegally as part of an illicit market, which threatens the health and safety of consumers because there is no guarantee the products have been properly tested.

One of the outcomes of this debate is the recent introduction of bills in the Michigan Legislature that would limit the role and more heavily regulate caregivers in growing, storing, and distributing product.

Testing guidelines by the MRA are readily available online

The MRA has created and updated its Sampling and Testing Technical Guidance document for marijuana products. The basic tenet is that all sampling and analysis must be conducted by a laboratory licensed by the MRA and accredited to the International Organization for Standardization (ISO), ISO/IEC 17025:2017 by an International Laboratory Accreditation Cooperation (ILAC) recognized accreditation body or by an entity approved by the MRA.

Our team will continue to keep you updated on this recall and related news, and the progress of any legislation impacting the marijuana industry in Michigan. If you have any questions, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

Video Surveillance Rules for Marijuana Licensees in Michigan

Marijuana licensees in Michigan must adhere to statutory mandates established by the Michigan Regulation and Taxation of Marihuana Act and regulations promulgated by the Michigan Marijuana Regulatory Agency (“MRA”). One such requirement, as discussed in a recent MRA bulletin, is having a properly functioning surveillance system in place 24 hours a day, seven days a week, at all licensee locations.

Surveillance systems must be able to record the following areas:

  • Where marijuana products are weighed, packed, stored, loaded, and unloaded for transportation, prepared, or moved.
  • Entrances and exits.
  • Point of sale or retail areas.
  • Security and back offices including rooms where the surveillance system itself is stored.
  • Anywhere marijuana or marijuana products are destroyed.

Failure to comply with the following requirements may result in disciplinary action.

Immediate response with recording is required

According to the MRA, a functioning, compliant surveillance allows for proper oversight of regulated products and businesses, and helps to ensure the safety of licensees, the licensee’s employees, and the general public. The MRA may request that a licensee provide a video surveillance recording, and if it does the licensee must provide it immediately, or at a later time approved by the agency.

Video surveillance must be maintained and stored for designated periods of time

Licensees must maintain surveillance recordings for 30 days, but the MRA may request that licensees maintain them for a longer period of time. Licensees should have the proper storage devices to provide to the agency on hand and should maintain backup copies of requested surveillance footage. Failure to comply with requests for video recordings may subject licensees to disciplinary proceedings.

Equipment must be working properly and staff training is advisable

Video surveillance equipment must be working properly at all times with a minimum resolution of 720p. In addition, surveillance logs must be updated and accurate. The name of the employee or business owner responsible for monitoring the system must also be made available. The MRA recommends that a licensee designate at least one employee to be trained in using the video surveillance system so that licensees can comply with all requests for the preservation and production of video surveillance.

Suspending operations if surveillance system isn’t working

The MRA recommends that a licensee discontinue operations if its surveillance system isn’t working due to a power loss or otherwise. Any surveillance system must be equipped with a failure notification system that provides notification to the licensee of any interruption or failure of the video surveillance system or video surveillance system storage device. Again, operating without the required video surveillance coverage in place may subject the licensee to disciplinary action.

Final thoughts for licensees

Obtaining and maintaining a license to legally operate a business under the Michigan Regulation and Taxation of Marihuana Act requires a clear understanding of the rules and regulations, and continual operational vigilance by entrepreneurs and their employees. The detailed rules concerning video surveillance are just one example of the types of issues that must be addressed and adhered to. If you have any questions or require assistance as a licensee in Michigan, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

Michigan Regulatory Agency Clarifies Strict Guidelines for Marijuana Packaging Will Be Enforced Effective February 2022

One of the important objectives of legal marijuana regulations in Michigan is keeping the product out of the hands of minors. To that end, the Michigan Marijuana Regulatory Agency (“MRA”) recently released an advisory bulletin that outlines packaging rules and enforcement guidelines for edible marijuana products in Michigan. This advisory comes in the wake of media reports indicating the number of cases of children ingesting marijuana products has risen based on data from Michigan Poison Centers.

“The MRA is aware of many non-compliant marijuana-infused edible packaging and products available in the market today,” the agency wrote in a statement. “Some of the marijuana packages that appeal to children have images of fruit, animals, or food on the packaging. Others use words that are commonly used in commercial candy such as milk chocolate, peanut butter, gummies, or chews without using the words THC, marijuana, or cannabis as modifiers.”

The MRA also announced that its Enforcement Division’s Field Operations team will be educating marijuana businesses regarding the contents of its bulletin and, effective February 2, 2022, will begin conducting investigations when necessary for marijuana-infused edible products or packaging that fails to comply with the rules. Violations could lead to significant fines.

Relevant Regulations

As set forth in the bulletin, Rule 3(9) of the Marijuana-Infused Products and Edible Marijuana Product Rule Set states a producer of edible marijuana product shall comply with the following:

  • Edible marijuana product packages shall not be in a shape or labeled in a manner that would appeal to minors aged 17 years or younger. Edible marijuana products shall not be associated with, or have, cartoons, caricatures, toys, designs, shapes, labels, or packaging that would appeal to minors.
  • Edible marijuana products shall not be easily confused with commercially sold candy. The use of the word candy or candies on the packaging or labeling is prohibited.
  • Edible marijuana products shall not be in the distinct shape of a human, animal, or fruit, or a shape that bears the likeness or contains characteristics of a realistic or fictional human, animal, or fruit, including artistic, caricature, or cartoon renderings. Edible marijuana products that are geometric shapes and simply fruit flavored are permissible.
  • Edible marijuana products must be in opaque, child-resistant packages or containers that meet the effectiveness specifications outlined in the Code of Federal Regulations (16 CFR 1700.15). Edible marijuana products containing more than one serving must be in a resealable package or container that meets the effectiveness specifications outlined in 16 CFR 1700.15.

The MRA explained that it is aware that there are many non-compliant marijuana-infused edible packaging and products available in the market today. According to the MRA, producers of non-compliant packaged product have the following options:

  • Repackage the products into new, compliant packaging.
  • Place non-transparent stickers on the package to clearly label the product as a marijuana product, THC product, or cannabis product using the same or larger font as the words commonly used in commercial candy.
  • Place non-transparent stickers on non-compliant portions of the packaging for marijuana- infused edible products.
  • Voluntarily destroy the non-compliant product.

Provisioning centers and adult-use retailers who possess packaged products that are non-compliant have the following options:

  • Place non-transparent stickers on non-compliant portions of the packaging for marijuana-infused edible products.
  • Voluntarily destroy the non-compliant product.
  • Adult-use retailers can compliantly send marijuana products back to adult-use processors via a secure transporter.

The MRA also advises that licensees need to correct products or packaging that are “egregiously non-compliant” immediately – or as soon as possible – rather than waiting until February 2, 2022. Examples of egregiously non-compliant products or packaging are identified in the bulletin.

What this means for marijuana product producers

Marijuana manufacturers and retailers should review the advisory bulletin and the underlying regulations, and take steps to begin correcting non-compliant products or packaging immediately in order to ensure compliance by February 2, 2022. For assistance, please contact Paul C. Mallon, Jr., Shareholder and Chair of Fraser Trebilcock’s cannabis law practice.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

There’s a “Growing” Debate in the Michigan Cannabis Industry Between Commercial Producers and Caregivers

Cannabis caregivers and some large commercial marijuana producers in Michigan are at odds in a debate over restricting the number of plants grown and distributed by individual caregivers. Several media reports have indicated that commercial producers are pushing state legislators to require more regulation and licensing for caregivers under the Michigan Medical Marijuana Act. (“MMMA).

Current Caregiver Guidelines

Under the MMMA, anyone can be a caregiver who is 21 or older with no drug or violent felonies of any kind, and no non-violent felonies over the last 10 years. Caregivers are allowed to supply marijuana to up to five “qualifying patients” (not including themselves, if they are also a patient). Under Section 4 of the MMMA, caregivers may possess up to 2.5 ounces of “usable marijuana” and up to “12 marijuana plants” per patient. Accordingly, the MMMA allows for 72 plants and 15 ounces of usable marijuana total, if the caregiver is also a patient.

The Debate Over Licensing and Oversight

The debate over licensing and regulation of the caregiver market involves certain large producers of marijuana and the Michigan Cannabis Manufacturers Association (“MCMA”), on the one side, who are reportedly pushing for more stringent oversight. The other includes caregivers who argue that the legislative push is meant to limit competition by driving more sales to licensed marijuana shops.

Large producers argue that caregivers should be forced to adhere to testing standards to maintain safety and create consumer confidence in product quality. Without these caregiver standards in place, they argue that caregiver sales increase public health risks and lead to more black-market sales.

The MCMA funded a study which found that approximately 70 percent of the $3.2 billion in statewide marijuana sales came from the black market.

According to MCMA Executive Director Stephen Linder, “While there have been many successes in Michigan’s regulated cannabis industry, there are major storm clouds on the horizon. The [study] shows large quantities of untested, illicit cannabis continue flooding the market. This poses a significant threat to patient and consumer safety.”

While media reports do not indicate the specific legislation changes that advocates of reform are pushing for, they are likely focused on imposing stricter caregiver grow limits and product tracking and testing.

Caregiver and patient advocates are fighting back with both grassroots and social-media campaigns to combat the perceived threats to caregiver rights.

We will continue to keep you apprised of further developments in this debate. In the meantime, if you have any questions or require assistance, please contact Paul C. Mallon, Jr., Shareholder and Chair of Fraser Trebilcock’s cannabis law practice.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043. 

Governor Whitmer Signs Law Regulating Delta-8 THC Manufacturing and Sales Starting October 11, 2021

House Bill 4517 is part of a package of legislation that will regulate the manufacturing, sale, and distribution of delta-8 THC products much like other legal marijuana products in Michigan

Governor Whitmer has signed a law allowing only regulated delta-8 THC products to be manufactured and sold in Michigan, effective October 11, 2021. The move to regulate, rather than ban, the delta-8 THC strand was supported by the cannabis industry.

Starting this fall it will be illegal for businesses in Michigan to sell delta-8 products without proper licensing from the Michigan Marijuana Regulatory Agency (“MMRA”). As we detailed in a previous blog, there are currently no standards for selling or distributing delta-8 THC products, which has led to a number of Michigan-based retailers like gas stations and convenience stores selling unregulated delta-8 items.

These products have not undergone the testing and tracking that is required for other legalized recreational marijuana products in Michigan, including those derived from the more common delta-9 THC strand.

The legislation categorizes all THC isomers of the cannabis plant as marijuana, giving the MMRA oversight capabilities. As of mid-July, the sale of delta-8 products is banned in 14 states (Alaska, Arizona, Arkansas, Colorado, Delaware, Idaho, Iowa, Kentucky, Mississippi, Montana, New York, Rhode Island, Vermont and Utah). Delta-8 status is currently under review in four additional states.

The differences between delta-8 and delta-9

Delta-8 THC is a synthetic substance derived from hemp with the only difference being the inclusion of a double bond. The science behind the two compounds is still being researched but the consensus is that due to the location of its double bond, delta-8 binds to the body’s cannabinoid receptors in a slightly different manner than delta-9 THC, resulting in less of a high.

However, there is little research and no reliable clinical trials on delta-8 THC. Delta-9 marijuana products are strictly regulated and subject to stringent testing standards, whereas delta-8 products have typically been produced using unregulated, chemically synthesized cannabinoids that can include additives and byproducts that have not been researched and could be harmful to some consumers.

Impact on businesses

Unlicensed commercial production or sale of delta-8 in Michigan will be punishable by fines starting October 11, 2021. Any retailer operating in Michigan must obtain a state license to sell or distribute delta-8 THC products, which includes mandatory tracking and testing. Only adults 21 and older can legally have or use the compound in the state. The MMRA created a flyer that provides further details.

The Michigan Cannabis Industry Association and the Michigan Cannabis Manufacturers Association both expressed support for the regulation of delta-8 rather than a full ban. The MCMA’s Board Chair Shelly Edgerton told MLive in a July 14 article that the law “takes a giant step toward enforcing the same strict high testing, health and safety guidelines for any product that mimics a cannabis high that is either inhaled or ingested followed by our state’s licensed growers and processors.”

We will continue to provide additional updates on additional developments regarding delta-8 THC, and other issues affecting the marijuana industry in Michigan. If you have any questions, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043.