The Marijuana Industry Could Clear Its Biggest Hurdle Yet In 2024

The move would have immediate effects on Michigan’s marijuana industry.

The rescheduling would clear up federal rules that ban banks from banking cannabis operations and end the financial discrimination against those who work in the industry and are unable to access traditional mortgages and loans. The move would also end a cursory tax regime under 280E, which prevents marijuana businesses from writing off business expenses involved in the sales of the classified narcotic, translating to tax rates of 70% or higher. Rescheduling would effectively create instant cash flow for most marijuana businesses.

Michigan’s market, though, is likely nearing the sales peak. The state will surpass $3 billion in sales this year and at least one expert predicts the total size of Michigan’s market is about $3.2 billion. And despite a massive growth in overall sales, they have been slowing month-to-month.

Sales peaked in July at $276.7 million and have been sliding, down to $260.5 million in November. Some of those peaks and valleys are seasonal, but there is a finite number of marijuana consumers in a state that isn’t achieving population growth. Industry operators will have to learn to manage expenses and achieve efficiencies to continue growth if the market stagnates in 2024.

While medical marijuana ushered in legal weed in the state, its role in the overall market continues to diminish.

Through November, medical marijuana sales accounted for a paltry 2.8% of total marijuana sales in the state. In January, medical sales totaled $11.3 million. In November, the total dropped to $3.8 million, compared to nearly $257 million in adult-use recreational sales.

The reality is there’s little economic sense to buy medical marijuana, and the state’s strict rules on how dispensaries operate between medical and adult-use means fewer and fewer operators will even maintain their medical licenses. It’s unlikely the medical side will disappear — there are plenty of medical advocates left — but that sector will continue to wither in 2024.

Michigan’s marijuana industry has largely been hinged on its ability to get product in front of customers. A major part of that effort is getting more and more municipalities on board to allow for dispensaries in their respective towns.

It hasn’t been smooth, as dozens of lawsuits have cropped up over the competitive local licensure process. But more and more came online — that is until recently.

In November, voters in Rochester, Birmingham, Grosse Pointe Park, and Keego Harbor rejected marijuana businesses in their communities. Operators in metro Detroit may be out of real estate to expand in the state’s most competitive market. This could create some stagnancy in sales as well.

The question is whether there are markets elsewhere in the state that are ripe for growth.

The state has been battling marijuana testing lab operator Viridis in court for two years and those cases aren’t close to a resolution. At issue is whether Viridis was inflating THC, the psychoactive ingredient in marijuana, for clients to ensure they claim a higher value on the market.

Consumers are more apt to pay top dollar for higher-THC marijuana. Most legal states are knee-deep in controversy about whether labs writ large are inflating THC content and/or passing samples with banned substances to maintain business in the competitive environment.

State regulators acknowledged the problem by planning to construct their own testing lab, which is supported by $4 million from the state budget. If the lab gets off the ground in 2024, expect a big hammer to be swung at cheating players in the market.