Michigan could face competition after Illinois legislature approves recreational pot

When Illinois Gov. J.B. Pritzker signs legislation legalizing recreational marijuana later this month, it will set up a race for the Midwest.

Who gets to be first in the Midwest to kick off the market for legal weed and capitalize on a potential billion-dollar industry, Michigan or Illinois?

Michigan voters got a head start, voting in November 2018 to legalize marijuana for adult recreational use. The ballot proposal, however, gave state regulators until December 2019 to write the rules and regulations that will govern the marijuana marketplace and begin accepting applications for business licenses.

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But Illinois lawmakers, took a much different approach, approving a 700-page bill that legalized marijuana on May 31 and set a deadline of Jan. 1, 2020, to get the market off the ground.

 “Being the leader in the Midwest would be terrific," said Sen. Heather Steans, D-Chicago, one of the sponsors of the legalization bill. "We could become a real hub for the cannabis industry, not just in the Midwest, but in the rest of the country.”

Michigan's Marijuana Regulatory Agency (MRA) is expected to release draft rules and regulations later this month and begin accepting business license applications later in the fall.

"If we're able to stick to our time frame now on implementing the rules by the end of the month, and then taking applications around three or four months after that, I would anticipate that we'd get some approvals done before the end of the year," said Andrew Brisbo, director of the MRA.

Illinois, however, could have a leg up  on the title of first in the Midwest for a number of reasons:

• The bill approved last month includes all the rules and regulations that will govern the Illinois marijuana marketplace. So half the work of setting up the market is already done
• Illinois' regulated medical marijuana market  is much more established, and its  55 licensed medical dispensaries and 20 growers will automatically be able to add the recreational component to their business model. Although Illinois has far fewer medical conditions that qualify for a medical marijuana card and, therefore, far fewer patients — roughly 40,000 compared with nearly 300,000 in Michigan — Illinois' medical marijuana market kicked off in 2014, nearly four years before Michigan..
•  While Michigan has awarded licenses to 102 medical marijuana dispensaries and 75 growers who will be the first to be considered for recreational licenses when the state begins accepting applications later this fall, the awarding of the licenses won't be automatic. 
• By approving the legalization in the Legislature, rather than at the ballot box, Illinois lawmakers were able to address multiple concepts in one bill, including expungement of criminal records and a more comprehensive approach to taxing. While Michigan has set its tax rate, that amount could change through legislative action, and expungement of criminal records will have to be addressed with additional laws. 

Of the 11 states that have legalized marijuana for adult recreational use, Illinois is the first to approve it through the Legislature rather than a vote by the people. Illinois law doesn't allow ballot initiatives, other than constitutional amendments. 

Illinois state Rep. Kelly Cassidy, D-Chicago, another sponsor of the legislation, said she views the timeline to get the industry off the ground as achievable. The lawmakers had been working on marijuana legalization for more than two years, she said, and waited to introduce the bill until former Gov. Bruce Rauner, a Republican who had promised to veto the measure, was out of office after losing his reelection bid to Pritzker.

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“It’s an aggressive schedule, but not outrageously so. Our regulatory system is pretty robust and we’re equipped to scale up during the time period, so it’s doable to reach the January start date,” she said. “We’ve been spending the last two years being really deliberate about all of this. The bill contains a lot of the administrative language that might be left to a rule making process. So a lot of that stuff is already done.”

Marijuana advocates and business owners in Michigan are worried that Illinois' rush to market will hamper the success of the industry at home. They point to the slow pace of Michigan's medical marijuana marketplace. After the Legislature approved regulating and taxing the medical side of the industry in September 2016, it took nearly two years for the first licenses to be issued.

"We currently have the advantage as the first state in the Midwest. If Illinois gets its (adult use program) up and running before we do, we have the potential of losing a lot of revenue for our state," said Robin Schneider, executive director of the Michigan Cannabis Industry Association. "Michigan has great potential, but we need to lead."

With the new configuration of marijuana regulation in the state — the MRA has taken over licensing responsibility from a politically appointed marijuana licensing board — Schneider said she is more optimistic that the industry will ultimately succeed.

Brisbo said he's more focused on getting the industry up and running smoothly than rushing toward a first-place finish.

"I think it's more important in the short term that we do things right," he said. "It doesn't do any good for me to crow about being first if it's not done well."

Cassidy said the two years the Illinois Legislature worked on the bill will ensure that her state gets it right. 

"Our goal from the start is to be the gold standard for how you do this," Cassidy said. "No state has done this as comprehensively we’ve done it."

Neither side is looking at the other as stiff competition, rather just as players in a growing marketplace.

"I don’t think there were any issues of border wars. I don't think there's a sibling rival component," Cassidy said, noting that it's still illegal to transport marijuana across state lines. So vacationers from Chicago to Lake Michigan's resort towns can enjoy while they're in Michigan, "but if they try to bring it back, they're putting themselves at risk."

Brisbo noted that there are plenty of opportunities in both states to tap into the Midwest market, which experts have estimated will grow to well over $1 billion by 2023.

"Michigan's a great state.We are a tremendous tourist destination," Brisbo said. "There will be plenty of activity in the state and robust opportunities for all businesses that enter the market."

But there will also be big differences between the two markets.

Michigan's law versus Illinois:

Possession of marijuana

 Michigan: Residents who are 21 or older can possess up to 2.5 ounces of marijuana on their person and can have up to 10 ounces in their homes as long as it’s locked up.

Illinois: Residents who are at least 21 can possess 30 grams of cannabis (about 1 ounce), 5 grams of cannabis concentrate or 500 milligrams of THC contained in cannabis-infused products, such as edibles.

Growing marijuana

Michigan: Residents can grow up to 12 plants in their homes for personal use. Communities can limit the number of licensed growers, who can get state licenses to grow up to 2,000 plants.

Illinois: Only registered medical marijuana users can grow up to five plants in their home. Individuals without medical marijuana certification cannot grow their own weed. Initially, only the 20 licensed medical marijuana growers can get licenses for recreational weed for retail sales, but that will expand in the summer of 2020.

Criminal records

Michigan: No provisions to pardon or expunge the criminal records of people convicted of marijuana crimes was included in the state’s marijuana legalization ballot proposal. Bills have been introduced in the Legislature to provide some limited relief for marijuana convictions, but have not gotten a hearing yet.

Illinois: Law includes a gubernatorial pardon for past marijuana possession convictions of up to 30 grams of marijuana and the attorney general can go to court to get those records expunged from a person’s record. For possession charges of 30 to 500 grams of marijuana, the person can petition a court to expunge their record, but prosecutors can object.

Can your boss fire you for using marijuana?

Both Michigan and Illinois laws allow employers to maintain zero-tolerance policies for employees and landlords to prohibit marijuana

Taxing marijuana operations and sales

Michigan: Recreational marijuana sales will be subject to a 10% excise tax and the state’s 6% sales tax.

Illinois: Recreational weed will be taxed at 10% for THC levels at or less than 35 percent; 20% for cannabis-infused products such as edibles, and 25% for THC concentrations of more than 35%. Marijuana sales also will be subject to standard state and local sales tax, cities can add special taxes of up to 3%, counties may add up to 3.75% in unincorporated areas, and Cook County, where Chicago is located, may add up to 3%. A 7% gross receipts tax on the sale of marijuana from growers to dispensaries also will be charged.

Who can sell marijuana

Michigan: Licensed medical marijuana dispensaries in the state — there are 102 in Michigan — will be the first to get recreational licenses in the state.

Illinois: 55 medical marijuana dispensaries have been licensed in the state and they will be the first to get recreational licenses.

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.