For years, the prospect of selling adult use cannabis in Detroit has been just over the horizon, dangling out of grasp, tantalizing in its inobtainedness.
And then Wednesday a court vacated a pair of lawsuits obstructing sales. Quickly following up, yesterday morning at 8:00 a.m. the City of Detroit started accepting applications for 60 new adult use sales permits. So happy times are here, right?
“There’s no doubt we’ll be appealing the ruling,” Mike DiLaura, an attorney for one of the plaintiffs’ attorneys told the Detroit Free Press.
“I don’t think it was a strong precedent, and it wasn’t on all fours, as we lawyers would say,” warned cannabis attorney Matt Abel. “I think they [Detroit] have a complicated scheme and this just seems to go on and on and on.”
“My hunch is at least one of those dismissals will be appealed, and stayed again. There’s a lot of question marks in my head,” said Micah Siegal, who operates cannabis company Pure Options in Lansing, and has entertained pitches to join ventures in Detroit.
The city is by far, Michigan’s biggest market, with a population of over 639,000, it’s more than three times the size of Grand Rapids, which is just under 200,000 people. Today, there are less than 50 active medical dispensaries in Detroit, about one store for every 13,000 residents.
The Detroit City Council first considered authorizing adult use sales in October 2020, and from the start there’s been a legal struggle in federal courts and multiple state courts. Since then, sales of medical cannabis have plunged across the state and more recently, prices for adult use cannabis have plunged as well. With wholesale prices under $1,000 a pound, margins are tighter for dispensaries and cultivators alike.
But still, some still think there’s opportunity in Detroit.
“Detroit has a unique niche that has not been tapped into because of the adult use debacle,” said Rebecca Colett of cultivator Calyxeum who has been operating a diverse-applicant incubator for the City of Detroit.
“People do drive to the close suburbs or support the gray market, but now they will support stores around the corner from them. They’ll stay because of pure convenience,” she said. “With more diversity in Detroit space, you’ll see more unique concepts when it comes to stores. There are different consumers out there and they need to be sold to, in different ways.”
Our medical retail members in the city are busy submitting their applications for recreational licenses,” said Robin Schneider, executive director of the Michigan Cannabis Business Industry Association. “The growers and processors are excited to be able to provide the products that they manufacture to Detroit retailers and the benefits of the state’s largest market opening up will be felt statewide.”
“It’s definitely appealing. There’s nothing even close to the size of that market, even as a medical-only jurisdiction. A lot of weight gets shifted in the Detroit shops,” says Pure Options’ Siegal. “[But] in terms of making a significant financial commitment in Detroit, until the dust settles on the litigation, our money is on the side lines.”
For existing medical-only operators, the race is on to see how quickly they can obtain an adult use license. But the city’s program gives permitting preference to current city residents with majority ownership. Over half of current licensed operators belong to out-of-town owners.
This reality has gummed up the works for many who currently operate in Detroit, and those considering investing in the city.
“If we went to Detroit, we could buy a medical only shop right now, but as soon as the ownership transferred, I don’t think we could get an adult use license. We need some assurance that we’ll be able to sell adult use,” said Siegal.
But those limitations are a plus, in Colett’s mind.
“It’s an interesting time for the cannabis economy. There’s lots of opportunity for cannabis tourism, and that’s a real potential for Detroit,” she said. “I don’t expect the equity to change in Detroit overnight just because this has happened. It’s going to take some time. In the first phase, the people who are going to benefit are current black retailers, they already have real estate, a model, a brand.”
“Even though this light has been switched on, there are several others we’re working to switch on.”