As 2024 kicks into full swing and we pull ourselves away from family and head back to work, its a good time to look ahead at what the upcoming year has in store. In Michigan, cannabis operators are transitioning from a year that saw the state’s industry reach the $3 billion mark in sales. There has been a retraction in market size across legal cannabis markets in other states, and the Great Lakes State is the only legal market growing at this rate. Retailers and producers have also pushed the average price of an ounce to around $80 in a nonstop race to the bottom on pricing in order to pick up the remaining market share.
As the market sprints toward maturity, the ultra-competitive nature of cannabis will ensure 2024 is another year full of turmoil as winners and losers are established. There are some interesting developments that are being discussed, though, that could offer some aid to beleaguered cannabis operators.
Federal rescheduling and the SAFER Banking Act
It seems like every year, the cannabis community is ablaze with rumors and predictions that this will indeed be the year the federal government decides to relent and reschedule cannabis. That being said, this might be the year.
In addition, federal legalization advocates are signaling that this may be the time for the feds to tackle cannabis operators’ access to banking. The Secure and Fair Enforcement Regulation (SAFER) Banking Act would shield financial institutions from any governmental liabilities when working with licensed cannabis businesses. In addition, it would allow access to banking for cannabis operators, which, over time, could offer traditional funding for the industry. This move could usher in more access to the market for legacy and former-caregiver-run businesses. It would also address the very real problem many in the industry have when it comes to personal mortgages and other aspects of banking that look at a person’s employment.
These two moves would allow Michigan operators, which are being taxed at almost 70%, to immediately start writing off a lot of their costs. Both corporate chads and small craft operators would benefit immensely.
Brian Hanna’s lab
This could also be the year that the Michigan Cannabis Regulatory Agency, the state office that regulates cannabis, opens its testing facility. This has been a priority for Executive Director Brian Hanna since he was appointed to the position in 2022. The independent facility would act as a reference lab to help ensure the Michigan market stays free of any more THC inflation claims.
Many in the industry believe companies tend to shop around at different labs and ultimately choose the ones that produce test results with higher THC levels. I’m fairly biased on this issue, but I believe a number of labs in Michigan partake in this practice. I’ve advocated strongly for a state-run reference lab, and I believe it would go a long way in improving both the climate of the testing industry and consumer confidence in testing.
This issue is plaguing the cannabis industry nationwide. Those who are in the know have an underlying belief that many, if not most, of the most successful testing labs are regularly inflating THC test results. This is a detriment to the industry and cannabis culture at large. It’s nefarious to lie to consumers, but what’s almost more harmful is how the practice has galvanized the THC-percentage arms race being fought by mids producers and craft operators alike. Inflated-THC flower competes for the same market space as flower tested by more virtuous operators. After companies selling this inflated flower obtain a large enough market share, it makes competing against them almost impossible at today’s margins and with consumer perceptions around the value of high-THC products.
There used to be real hallmarks — like taste, smell and bud structure — when it came to determining quality in cannabis. Today, most consumers and purchasing managers ask two questions: “How much?” and “What does it test at?” The Wild West nature of the testing industry is making this worse.
While I’m not sure whether this reference lab could actually dissuade potentially nefarious testing labs or what the impact on the market would be, it would be an amazing first step, and I couldn’t be more proud of the state for pushing to establish this indicator of transparency in our growing industry.
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