Pothole Tax Unleashed: Judge Denies Injunction, 24% Levy is Coming

The Grinch came early to Michigan’s cannabis industry this year, and he wore a black robe.

The clock is officially ticking.

In a decision handed down on Monday, Dec. 8, Court of Claims Judge Sima Patel delivered a stinging, if “partial,” blow to the state’s cannabis businesses. She ruled to deny a preliminary injunction against the state’s new 24% wholesale cannabis tax.

In plain language: The tax is coming.

Barring an eleventh-hour reprieve from a higher court, the Comprehensive Road Funding Tax Act of 2025—with the moniker of the “Pothole Tax”—is set to take effect on Jan. 1.

The political establishment, it seems, has decided to fix the state’s crumbling roads by pushing a stable, legal and once-thriving industry to the brink.

 

A Stinging Tax on a Fragile Market

Michigan’s cannabis market is not merely maturing; it is suffering an acute crisis.

Years of rubber-stamping cultivation licenses led to rampant oversupply and market saturation. Wholesale prices have plummeted to unsustainable lows, resulting in store closures, mass layoffs and razor-thin or non-existent profit margins for most operators.

Against this backdrop of financial devastation, the Legislature, in a brazen maneuver, passed the 24% wholesale tax. This punitive levy will be on top of the existing 10% excise tax and the 6% sales tax. For a product starting at the farm, the total tax burden is now threatening to approach 40% before it ever reaches a consumer’s hands.

The message from Lansing’s lawmakers is clear: We asked for economic freedom, and they sent a devastating bill. They are trying to fund road repairs by driving a regulated industry into the ground.

 

The Legal Fight: Losing a Battle,

Continuing the War

The core of the Michigan Cannabis Industry Association’s unified constitutional challenge is that this new tax is illegal because it improperly amends the 2018 voter-approved legalization initiative, MRTMA, that allowed expanded marijuana sales. Under state law, any amendment to a citizen-initiated act requires an almost impossible three-fourths supermajority in both legislative houses. The Pothole Tax passed with simple, not super, majorities.

The industry argued that the tax fundamentally changes the financial structure of the MRTMA, thereby amending it without the required vote.

However, Judge Patel refused to block the tax immediately.

Her reasoning was that the 24% tax was passed as a separate Public Act with a separate, explicit purpose—road funding. In her view, it did not directly amend the original MRTMA, making it too difficult to justify the high legal bar for a temporary injunction.

This is what makes the ruling “partial,” because while the judge said the tax can start in January, she did not dismiss the underlying lawsuit.

She gave the industry’s lawyers a critical path forward, signaling the constitutional challenge remains serious. Judge Patel specifically requested that both sides gather and present more evidence on two key areas:

 * The true intentions of the MRTMA’s drafters to see if the new tax violates the foundational structure of the ballot initiative.

 * The actual, devastating economic impact of the new tax on the industry and whether this impact effectively nullifies the purpose of the original legalization law.

This means the legal war is far from over. It simply means that businesses—including those here in Lansterdam—must now prepare to pay a crushing tax while they simultaneously fight to have that tax ruled unconstitutional.

 

The View From Lansterdam: 

Threat to the Consumer

The consequences for our local cannabis community are immediate and severe.

Lansing is a recognized hub of Michigan’s cannabis economy, home to flagship retailers and innovative cultivators. This ruling directly threatens the local success stories we’ve watched grow.

For consumers, the consequences are simple: Significantly higher prices.

Lansing’s dispensaries, which have kept product affordable, will now be forced to absorb or pass on this massive new cost. When the final taxes are tallied, the price gap between a legal, tested, regulated product and an unregulated black-market product will widen dramatically.

This is the ultimate irony: By prioritizing a quick cash grab for roads, the Legislature is actively undermining the legal market they have created. They are effectively incentivizing consumers to return to the unlicensed street market—the very market the MRTMA was designed to eradicate. If consumers flee the legal channel, the state will collect less revenue from the existing 10% tax, potentially defeating the entire financial goal of the new road tax.

The state’s action threatens to compromise a model that other states have looked to for leadership. Lansing’s cannabis industry has poured millions into the local economy and created thousands of jobs. Now, they are being punished for their success.

 

What Comes Next

For now, the focus shifts from the courtroom to the cash register.

Industry operators must make painful choices between raising consumer prices and destroying their already thin margins. Consumers must brace for a major price hike that has nothing to do with market demand.

Judge Patel’s ruling is a tough loss, but it was not a verdict on the law itself. The lawsuit remains the industry’s most powerful defense, and the fight for the integrity of the MRTMA continues.

The question Lansing residents should be asking their elected officials is simple: Was the immediate, reckless collection of road money worth risking one of Michigan’s most vital and fastest-growing legal industries?

The answer, starting Jan. 1st, will cost all of us.