The Michigan cannabis industry grew by about $28 million in 2017, according to the latest data from the state’s Department of Licensing and Regulatory Affairs.

This year, the Michigan Legislature voted to legalize recreational use of cannabis, and it will be regulated by the state’s Department of Licensing and Regulatory Affairs (LARA). There are over 50 marijuana licenses currently issued in Michigan, and it is expected that the number of licenses will increase to over 100 by the end of 2018. Some of the biggest licensed producers (LPs) are looking to expand their operations, and LARA recently issued licenses to several new companies, including marijuana retail stores.

After medical marijuana was approved in Michigan in 2008, the state has slowly expanded the number of licensed medicinal dispensaries to over 150, and recreational sales of marijuana to adults over the age of 21 have been legal since last fall. Once recreational sales begin, the market for cannabis in Michigan is predicted to grow to more than $3.2 billion, and the fastest growing markets will be the more remote areas of the state.

As a result, 70 percent of buyers are still using illegal or unauthorized transactions, according to the report, which offers the first look at the state’s cannabis market 18 months after marijuana became available for recreational use in the state.

The report also shows that one in five Michigan residents, or 2 million people, will use marijuana by 2020, a 75 percent increase from 2010.

According to the MCMA, Michigan can consider cannabis an untapped revenue source for the state and its local governments. At the same time, the group’s website states that it intends to curb sales that do not go through group members and other approved sellers.

Shelly Edgerton, executive director of the MCMA, said Monday at a news conference that the marijuana market has unlimited economic potential for Michigan.

The bottom line is that Michigan loves cannabis, and this study shows it, Edgerton said.

According to the report, total sales of cannabis through dispensaries reached nearly $1 billion in 2020 and generated nearly $130 million in taxes and royalties. Medical and recreational marijuana is subject to a 6% sales tax, and a 10% excise tax also applies to recreational cannabis purchases.

Use of medical marijuana has been legal in Michigan since 2008.  Recreational cannabis was legalized in the state in 2018 by direct vote and cannot be purchased by adults 21 and older until December 2019. Eighteen states have legalized marijuana and eleven states have dispensaries that sell cannabis for adult use.

The unregulated market includes marijuana dispensed by caregivers, grown at home, or obtained illegally. These cannabis sources are not subject to the same taxes and fees that residents pay at dispensaries, nor are they subject to the same security checks and inspections.

Michigan law allows for a limited amount of home-grown marijuana, but distributing marijuana without a license is considered a felony and can result in fines and criminal charges.

The study does not provide an exact percentage for each source of unregulated cannabis in Michigan.

Although the MCMA said it has no policy recommendations based on the report’s findings, Steve Linder, executive director of the MCMA, insisted that any distribution of marijuana in the state must go through a regulated market so it can be tested and taxed.

Nevertheless, healthcare providers have expressed concern that more regulation – at the request of producers and distributors – could limit their right to grow cannabis for medical distribution.

Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML), told Bridge Michigan that there are several reasons why consumers buy cannabis from illegal sources, noting that it could be for price, access or because someone is underage. States can also allow municipalities to ban the sale of marijuana and can raise taxes and fees, which can make it easier to buy marijuana from illegal sources.

For Michigan, which recently legalized marijuana for adults, the sheer size of the illegal cannabis market is not surprising, Armentano said. According to him, once cannabis is legalized in a given state, demand usually begins to increase, leading to higher prices for the product. As the supply of the product increases and formal markets develop, prices may fall, which may encourage consumers to use legal channels to obtain cannabis.

In December 2019, when sales began, the price of an ounce of recreational marijuana was $516.21 and medical marijuana was $267.30, according to the Marijuana Regulatory Authority. In May 2021, recreational cannabis was sold at an average retail price of $221.21 per ounce and medical cannabis at $197.68 per ounce.

The illegal market is undermined by the legal market, and over time the legal market begins to overtake the illegal market, Armentano said. The more mature and developed the legal market becomes, the more people turn to it ….. This will not happen overnight.

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