Collapse of cannabis industry

By Mark H. Stowers

The new American Gold Rush – cannabis. The Wild West arrived in the Midwest through cannabis sales, with Michigan leading the way in legalizing recreational use in 2018. A decade earlier, medicinal use had been legalized in November 2008, and by 2019, there were approximately 450 medical provisioning centers, serving 283,000 registered patients – one of the largest in the United States. The number of licensed facilities for growing, processing, and compliance for the medical market was in the hundreds as well. In October of 2019, Michigan began accepting applications for its first recreational marijuana businesses, with sales beginning on December 1, 2019. The initial licenses were awarded in November 2019, primarily to existing medical license holders who could meet the conversion criteria. By the end of 2019 and into early January 2020, there were 27 active adult-use licenses across the state.

Some municipalities eagerly jumped in early, opting in for recreational cannabis, hoping to fill city coffers with the green gold, while others chose to opt out of the cannabis boom. Recreational sales began in December 2019, following increased efforts by cities and states to establish laws and regulations. The industry was initially described as “flying the plane while building it.”

The first dispensary opened in Walled Lake in March 2020 and during fiscal year 2020, Michigan collected over $341 million from adult-use marijuana sales taxes, with $45.7 million available for distribution from the Marihuana Regulation Fund to 38 cities, seven villages, 21 townships, and 38 counties receiving payments from the fund for each licensed retail store and micro business within their jurisdiction. For the state’s 2020 fiscal year, each eligible municipality and county received about $28,000 for each licensed retail store or micro business. Oakland County received $196,009 that year, and Walled Lake was allocated $56,002 for its two licenses. Overall, the industry brought in $341 million in 2020 and has steadily climbed to $1.79 billion in 2021, $2.29 billion in 2022, $3.06 billion in 2023, $3.29 billion in 2024 and of September 2025, has brought in $2.1 billion, according to the Michigan Cannabis Industry Association. Since recreational sales began, the state has collected more than $1.7 billion in adult-use cannabis tax revenues.

A closer look at 2024 shows that 108 cities, 36 villages, 80 townships, 74 counties and four Indian tribes received nearly $100 million in payments from the Marihuana Regulation Fund. For the state of Michigan's 2024 fiscal year, this means each eligible municipality, county and federally recognized Indian tribe received more than $58,200 for every licensed retail store and micro business located within its jurisdiction.

In 2024, the state disbursed $99,454,551 among municipalities, tribes and counties. This funding originated from the 10 percent excise taxes on both wholesale and retail sales, along with licensing and application fees from cannabis businesses. The six percent sales tax collected from each sale is allocated to the state’s general fund, School Aid Fund, and the Michigan Transportation Fund. The 228 entities received $49,727,275 for 854 licenses. The state also paid the same total amount to 74 Michigan county governments. Additionally, four Indian Tribes holding eight licenses received a total of $931,658 for 2024. 

The 2024 cannabis Gold Rush in Oakland County spanned 50 licenses, including Berkley with five licenses and $291,143.00 paid from the state fund; Ferndale with six licenses and $349,371; Hazel Park with 10 licenses and $582,286; Village of Holly with one license and $58,228; Village of Lake Orion with one license and $58,228; Madison Heights with three licenses and $174,685; Orion Township with one license and $58,228; Oxford Township with three licenses and $174,685; Village of Oxford with six licenses and $349,371; Pleasant Ridge with two licenses and $116,457; Royal Oak with three licenses and $174,685; Southfield with two licenses and $116,457; Walled Lake with three licenses and $174,685; and Waterford Township with four licenses and $232,914. Oakland County received a total of $2,911,433 in 2024 from these 50 licenses. 

Michigan licensed 609 retailers in 2022, along with 825 growers and 202 processors. Those numbers grew in 2023 to 751 retailers, 963 growers and 250 processors. By 2024, there were 793 retailers, 1,044 growers and 274 processors. In September of 2025, there were 851 retailers (down from 857 in March), 2,588 growers and 275 processors.

However, the steady growth of the industry brought with it some downside in terms of pricing of cannabis produc­­­t.

In June 2021, the average retail price for a cannabis flower – the most popular product – was at an all-time high, exceeding $200 per ounce. Annual sales, according to the Cannabis Regulatory Agency's Statistical Report, reached $1.79 billion in 2021, $2.29 billion in 2022, $3.06 billion in 2023, and $3.29 billion in 2024. Cannabis licenses also continued to increase, from 357 in 2020, to 748 in 2021, 1,148 in 2022, 1,474 in 2023, and more than 1,700 in 2024. However, with an overabundance of dispensaries and increasing inventory, prices continue to fall. According to the Michigan Cannabis Industry Association, in February 2025, cannabis flower was around $65 an ounce, dropping below $62 in August, and some retailers have offered prices in the $40 range during promotional sales.

And the golden cannabis goose is getting squeezed even more. This time by the state. Governor Gretchen Whitmer has signed into law a 24 percent tax on the wholesale price of adult-use marijuana sold from a cannabis establishment to a licensed retailer, starting January 1, 2026. This revenue is intended to support the Comprehensive Road Funding Fund in repairing roads and bridges. Those in the cannabis industry are challenging this new law in court, but those challenges have not gone to trial yet.

Robin Schneider, Executive Director at the Michigan Cannabis Industry Association (MiCIA), couldn’t comment due to her being a plaintiff in the lawsuit against the new tax. She did manage to add, “The margins are very slim. The cost of regulations are very high. The industry is already struggling. And that's the bulk of what I can say.”

Even before the tax was announced, the industry had been contracting.

Some observers say that the rapid growth of the industry was accelerated even more when the COVID-19 pandemic hit, with workers spending more time out of the office which brought about higher demand. The industry responded with an increase in growing and sales operations, only to find a declining demand when the pandemic neared its end.

TerrAscend Corp., a leading North American cannabis company, exited the Michigan market and sold all of the company’s Michigan assets, including four cultivation and processing facilities, twenty retail dispensaries, and real estate, resulting in about 250 job losses.

“After an extensive evaluation, we have made the strategic decision to exit the Michigan market,” Jason Wild, Executive Chairman of TerrAscend, said in a company press release. “Michigan is an extremely difficult market and we have come to the realization that our resources can be better utilized in our other markets.”

Much of the TerrAscend cannabis related business was purchased by Lume Cannabis, which has state-wide coverage and will soon open its 43rd dispensary.

Some minor help for the industry could come from the Cannabis Regulatory Agency (CRA) which oversees the industry.

David Harns, Public relations manager for the CRA offered details of what the state agency does for the industry.

“From the regulatory perspective, we don't set policy, we just implement it,” Harns said. “We’ll put in place that which the legislature puts into statute. And as a regulatory body, we're always in constant contact with the industry, with stakeholders to make sure that we take into account any of the things, any of the issues that they have that we have control over to make sure that we adjust our ways.”

The CRA has to make sure that the public is safe and that the product is tested and that everything is regulated and licensed. If there are ways in which we can make things easier on the businesses in the space, we definitely want to do that. We have a very transparent agency that meets with stakeholders on a regular basis and takes into account the things that they would like to see. We have a pretty good relationship with our licensees, our stakeholders, our consumers, where they know that they can explain to us what they're thinking and what their thoughts are, and we can, do everything we can to improve the space.”

Currently, the CRA is “working on the administrative rules, and we have been for the last couple of years where we're making sure that we update the rules to account for the changes in the industry. It's been a process where we've received feedback on the front end while we're drafting the rules and then took feedback after we drafted them. We are currently in the process of finalizing the last part of the rules, and then we'll present them to JCAR (Joint Committee on Administrative Rules), which is part of the state legislature. Those rules will then take effect next year. Hopefully, we'll make things a little bit more efficient and somewhat easier on the industry as well. And then one of the other big things we're working on right now is getting our reference laboratory open next summer and start testing.”

The CRA creates the monthly report on the industry and it can be found at Michigan.gov/CRA under resources and then licensing and statistical reports.

Overall, forty states, three territories and the District of Columbia allow the medical use of cannabis products as of June 2025. Twenty-four states, three territories and the District of Columbia allow or regulate cannabis for non-medical use by adults as of the same date.

Marijuana remains illegal under United States federal law as it is classified as a Schedule I controlled substance under the Controlled Substances Act, which means the federal government considers it to have a high potential for abuse and no accepted medical use. This classification makes the possession, sale and cultivation of marijuana illegal at the federal level, regardless of state laws. Due to this federal law, anyone possessing it on federal property anywhere in the United States can be arrested. This includes national parks, federal buildings, courthouses, military bases and airports operated by federal agencies. Even in a state where marijuana is legal, possession on federal land or property is subject to federal enforcement.

Additionally, traveling across state lines with marijuana can bring federal prosecution, especially if entering a state where marijuana remains illegal. States differ in marijuana laws and possession in states where it is not legalized for recreational or medical use is cause for arrest. Some states have decriminalized possession, but others still impose criminal penalties.

The growth of the cannabis industry in Michigan has also brought some crime challenges and one of its promises – the elimination of black market for cannabis – has basically proved to be a failure.

There have been a total of 73 break-ins across 11 types of licensed facilities. Retailers experienced 30 break-ins, while Grower Class C businesses faced 25. Nine processor license holders also had break-ins. The numbers for break-ins were 149 in 2022, 223 in 2023, and 127 in 2024. Each year, retail license facilities experience the highest number of break-ins. 

Oakland County Sheriff Michael Bouchard has seen an increase in black market marijuana activity in Oakland County and across the state.

“The black market is definitely a very big thing, and it's also violent,” Bouchard said. "We're seeing more and more large-scale illegal operations. In fact, our narcotics team has said that we're a net exporting state at this point. They've even seen in some of their investigations where people are taking large amounts of marijuana to Chicago and trading it for cocaine.”

He explained that violence in the black market is increasing.

“We've had two homicides in Oakland County this year, specifically in ripoffs from illegal marijuana operations. And one played itself out in a very, very public, dangerous way. You had an individual that was going to sell a large amount of marijuana to a group of individuals that drove up from another state. And the investigation leads us to believe that they decided, instead of paying for it, they were going to do an armed robbery. And a gun battle ensued with one person dead, one person shot, and a chaotic scene in broad daylight in Rochester Hills and ended with a car wreck. And that was just one we had this year. We had another one where people came from another state and murdered a guy at a facility where there was a large amount of marijuana. So there needs to be a recognition that, A, it's legal. These companies have gone through the compliance and the regulation and the taxation. They need to have more support in taking out people that are breaking the law and doing it in a violent way.”

Bouchard explained the upcoming 24 percent tax will only increase illegal cannabis and cause legal businesses to cut their already thin profit margin even more, perhaps going deeper into the red in their dispensary. And the legislature needs to create better laws that work for the industry.

“You make it very hard for the licensed and regulated businesses to succeed when, most recently, they put a very large tax on them, an additional tax, which makes the black market all the more attractive,” he said. “My desire is that the legislature go through and clean up the existing act. We have licensed and regulated and legal facilities, and in my opinion, they should be protected better from illegitimate and black market operators.”

One problem is the lack of clear penalties.

“When people are taking large amounts of marijuana and moving around and selling it and doing things that are incongruous with the licensed and regulated facilities, there's this kind of thought process, if you will, ‘it's legal now.’ Well, it's legal, yes, but there's a system. Everyone keeps saying, let's make it like alcohol. You wouldn't have a distillery that's not inspected, not licensed, not taxed, being able to move with impunity, basically, around the state selling liquor. For any kind of marijuana, the price point obviously is very different in the black market that's not licensed, that doesn't have to go through the cost to get into the business. It isn't inspected and regulated and pays a very large tax on it. The cost for somebody that's doing it in the black market illegally is dramatically different and therefore the profit hugely higher. And so, I think the legislature needs to be cognizant of that and do something to target those that are operating outside of Michigan's laws.”

Even if prices rise, Bouchard notes it’s much safer to purchase from a licensed dispensary than through the black market.

“I keep telling our marijuana consumers – do not buy anything on the street because you have no idea where it's coming from and it hasn't been inspected. It could be adulterated with fentanyl. We've actually seen fentanyl sprayed on marijuana street sales. It could be that it's got mold or dust mites. You have no idea what you're getting and it's dangerous. Go to a licensed, inspected, regulated facility and there, that's exactly what you're getting.”

Without the legislature cleaning up the legal aspects, Bouchard says he could see the legal industry collapsing.

“I think it makes it increasingly possible. Absolutely. Because they're paying the taxes and the regulatory burdens and they've got brick and mortar. They've got all of the things that come with a legitimate business, and it's being completely undermined by individuals that have none of that.”

First Lieutenant Michael Shaw of the Michigan State Police noted that more and more marijuana busts have happened at state lines and the US/Canada border. In September alone, two separate 1,000 pound marijuana busts happened at both the Blue Water and Ambassador Bridges. There has been an uptick in trafficking since COVID and has only gotten worse.

“As a result of the voter mandated changes to Michigan’s marijuana laws, the Michigan State Police (MSP) implemented new policies and procedures that account for the legal use and possession of marijuana by persons age 21 and older,” he said. “The MSP will continue to consult with the Michigan Attorney General’s Office and local prosecutors to ensure our existing department policies and procedures remain current to any changes in the law. Additionally, the current law does not permit marijuana use in public places, nor did it change Michigan’s impaired driving laws, which means that driving under the influence of marijuana remains illegal.”

Jerry Millen, owner of the Greenhouse of Walled Lake was the first recreational dispensary in Oakland County. From his perspective on the industry, problems are prevalent at every level.

“There's a lot of over-saturation. You have cities like Ferndale that have too many stores. You can't have nine stores with a three-block radius,” Millen said. “That was the first mistake. Unlimited licensing. When we put the rules together, we were new at doing it and we made a lot of mistakes in writing the rules. We're paying our penance now for that.”

He also sees the industry as the mom and pop stores versus the bigger corporate chain stores that will eventually win out.

“I think there are some people who have too many stores. I think a lot of the people that were in the industry in the beginning and doing it for the right reason have been pushed out. And I just think you have a lot of these corporate stores trying to take over,” Millen said. “They have a lot of pull. I recently resigned from the MiCIA because I feel we need an organization that's going to represent the small guy. And we don't have that.”

He noted the new 24 percent tax won’t help any of the stores, especially the smaller ones.

“I think you're going to see a bloodbath over the next year. We're already in a bloodbath. People are shutting down stores left and right. My goal is I want to make sure the people that started this industry are still here when it's up and fully running. Because there's a lot of Johnny-come-latellies coming in not caring about the patients, not caring about the plant, not caring about who they hurt along the way. I can't hate on anybody that got into the industry in the past four or five years. I'm trying to ride the coattails of all the OG in the industry. That's what capitalism is. But I feel that some of these people got into our industry here and they're destroying it because all they want to do is make money. And we're getting away from the root of this industry in the beginning was to help people. You can have a viable business and you can help people at the same time. Unfortunately, some people came in here with a lot of money and started over-saturating the market. And I feel some of it was planned. They want to push out the little guy. And they're doing that.”

In reference to the new tax, Millen said, “The tax is ridiculous. You have politicians that really don't care. They put that tax behind the retail store and they put it on the wholesaler so that the consumer doesn't see it on the receipt. But make no mistake, that 24 percent tax is going to be on your receipt. You're not going to see it because you have to pass it along because right now the margins are so slim. Not many people are making any money. They're just floating above water.”

Millen believes the new tax will be implemented despite the fight against it.

“The MiCIA filed the lawsuit, but I think it's a little too late. They should have been in front of it. I don't think the lawsuit's going to go anywhere. You're fighting the politicians. The governor has her own attorneys. Good luck on fighting that. They're not going to win that lawsuit. The tax is going to go through,” he said.

He did explain that the tax won’t be on medical marijuana and he foresees people applying for patient cards to save money on cannabis. And all of the problems will cause the cannabis industry in Michigan to collapse, he speculated.

“It has to. I don't want to say fully collapse, but it needs to constrict because it got too big, too fast. Everybody thought they could open a grower dispensary and make a million dollars overnight. And in the beginning, you could. But I'll tell you right now, there's not a lot of people that have made any money in this industry. There's a lot of people that are in debt. I think in the past two months, you've had 45 or 50 stores either shut down or change hands because the next person always thinks they can do better.”

Millen believes that marijuana will be changed from a Schedule 1 to a Schedule 3 by the current administration, which will change the 280E section of the tax code, making it a federally recognized business that can deduct business expenses and use federally insured banking institutions.

The Michigan legislature is also considering several bills related to the industry which may help the challenged industry.

State Sen. Sam Singh (D-East Lansing) is proposing to indefinitely prohibit the state from issuing new licenses for testing labs, transportation companies and any growing operation cultivating more than 150 plants, beginning in 2026. The number of retail marijuana stores in a given municipality would be capped to not more than one for every 10,000 residents. There are bills that are seeking to move synthetic and hemp-based marijuana-mimicking products under the authority of the state’s Cannabis Regulatory Agency. There is also a bill that would make payments for product between businesses to be COD.

Justin Dunaskiss of Dunaskiss Consulting and Development in Lake Orion has been a leading consultant in the cannabis industry. With several new bills being promoted at the state capital, he explained the benefits of each.

“There's been a whole host of bills introduced both in the House and Senate in Michigan to try to help address some of the concerns and issues that the industry's been having, as well as that the department, the CRA that administers the program, have noticed there's probably well over a dozen bills now. And they'll come together between the House and Senate and get a work group to work on some of the bills because each of them have their own kind of ideas. And some of those go around, such as capping the number of licenses, to try to address the robust supply and robust competition I mentioned. So right now, there's a bill that would cap the number of licenses for the vast majority of license types, particularly the grows, the large grows and the retailers. And for one, in particular for the retailers, for a municipality, we'd only be allowed to have one location, or one retail, for every 10,000 residents in that city or municipality,” Dunaskiss explained. “And the same with the large grows, they wouldn't permit any new large grows, only the smaller class A's or micro businesses.”

The COD bill, or prompt pay as Dunaskiss prefers, “would mirror the liquor industry, where the suppliers would be paid at the time of delivery on the B2B transactions for the wholesale products. It has challenges too because that's a form of credit and financing. Right now, they're not paying for their wholesale products once received.”

He noted that “legislature members are also looking for things that further support their new state run efficiency lab or safety compliance facility so that the state can actually have the ability to go and purchase products from retailers to do third-party independent testing at their lab. They need that. It doesn't explicitly allow for it in the current statute, so we need that fixed so they can do that portion of the testing.”

Dunaskiss added, “this is definitely a make or break year for the vast majority of companies. Some are certainly striving and thriving. But I would still say the vast majority are more maintaining or trying to stay afloat. And so, good or bad, I think the reckoning is coming this year with all these excess factors of these bills that are working their way through, the wholesale tax, and again, just basic supply and demand principles putting a lot of pressure on the industry. Additionally, there are significant tax liabilities outstanding for numerous companies. And so, without bankruptcy protection, a lot of times folding is some of the folks' best options when once they get behind on various bills and taxes.”

Jamie Lowell has been in the cannabis industry for the better part of two decades and began working in the medical marijuana industry before moving into recreational marijuana part of the business.. However, the industry problems led him to leave this year.

“There is a distinct move away from the voter-approved system in attempts to just really radically change it, and not everybody's interested in that,” Lowell said. “There are market imbalances that need to be addressed. And the voter approved system is designed so that the regulators, which is now the CRA, would take different measures under their authority to help do that. Instead of that being the case, many lawmakers, and even the CRA themselves support in some cases some of these things, want to radically change the system. And they're always constantly trying to make it more like something that it is not, like tobacco or alcohol. The new cannabis wholesale tax was never intended. I was one of the drafters of the MRTMA (Michigan Regulation and Taxation of Marihuana Act.) We very purposefully omitted a wholesale excise tax because we were able to see in other jurisdictions what worked and what didn't work, particularly Colorado had the wholesale tax and added to the retail tax.”

Colorado and California both approved recreational cannabis sales through voter initiatives in 2012 and 2016, respectively. The first-ever sale of legal recreational cannabis in the United States was in Colorado in 2014. The Rocky Mountain state was poised for significant profits with its own 20th century “gold rush” of sorts, but one decade later, that first dispensary closed due to market over-saturation. Colorado’s once successful cannabis industry is now a trail of failed businesses and cash-strapped entrepreneurs in its wake.

In 2020, Colorado’s market ballooned to $2.2 billion. Three years later, sales plummeted to $1.5 billion, leading to layoffs, closures and downsizing. The market downturn hurt state finances, too, as Colorado took in just $282 million in cannabis tax revenues in the last fiscal year, down more than 30 percent from two years earlier.

Originally, Colorado’s marijuana market minted successful local entrepreneurs who built small businesses into national brands. The market drew aspiring cannabis professionals from across the country, similar to the early days of the Michigan cannabis market. And as more and more states legalize recreational marijuana, it depressed the Colorado industry. Neighboring states New Mexico and Arizona now have their own adult-use legal marijuana markets, taking business away from dispensaries on Colorado’s southern border. Tourists who once flooded the state for the opportunity to legally experience Rocky Mountain highs have largely disappeared as the novelty has worn off. Even Texans aren’t driving north to buy cannabis anymore, satisfied with the spread of intoxicating hemp products in their own state. Lowell explained Colorado’s tax was a major part of the downfall of the industry there.

“They were taxed at about 35 percent, and it was not good enough to entice people into that new licensed market, so they had to go back and readdress that. We had the benefit of that information, and so as drafters, we purposely omitted the wholesale tax, and then when we campaigned the Michigan Regulation and Taxation of Marihuana Act (MRTMA) – the tax structure for cannabis, just an excise tax. And then what other applicable taxes, which is the sales tax. Excise tax and sales tax, that's what voters voted on, that's the system that was put into place. She (Governor Whitmer) actually referred to that lack of a wholesale tax as a loophole, which is either ignorant, insensitive, or a purposeful disregard for Michigan voters.”

Michigan border towns were some of the biggest benefactors initially in the cannabis market as surrounding states hadn’t legalized. But that landscape has changed as well.

Illinois first legalized medicinal use in 2013 and in 2020 legalized recreational cannabis for both residents and visitors, but Illinois does not accept out-of-state medical patients. In 2016, Ohio legalized medical marijuana and later legalized recreational use for both residents and visitors in 2023. Ohio does not accept out-of-state medical patients. Indiana and Wisconsin still maintain that all forms of cannabis are illegal. Minnesota has legalized recreational cannabis in 2023 for both residents and visitors but does not accept out-of-state medical patients. They legalized medicinal use in 2014.

Lowell also touched on some of the legislative bills being bandied around Lansing.

“You have bills in the House, there's more of them, but specifically 5105 and 5107, they recriminalize small-time cannabis activity that was taken care of by the Voter Root Act,” he said. “The session's filled with trying to change the system completely from what the voters approved, sometimes doing it, maybe unconstitutionally. A judge will ultimately have to decide that. They are creating the scenario where there's going to be more enforcement now for things that the MRT and the CMA purposefully removed because we're trying to treat cannabis as cannabis, not as something that it is not. And that's the struggle that we're having this session.”

Chef Jake Abraham made a living in the restaurant world before he got involved with the cannabis industry with stores in Ypsilanti.

“I was in it from the beginning. I was the 152nd license given out,” Abraham said. “I was a store in Ypsilanti. I grew that into four stores that I own and managed another five for people. We had organizations out there that said they were helping us and didn't. I was part of the MiCIA, and they just wanted my money. It was a money-making organization, and they say they work for you, but they really don't. It's more of a partisan organization, which I didn't like because I want to sell weed to everybody, not just one side of the fence. And then they really let everybody cheat. There was so much illegal product coming in, and they drove the price down so much, and people just kept lowering prices, lowering prices. When I first started out, a pound of weed cost me $3,200. Now they're going for $400. Where can you make any money? The state didn't help out at all. Brian Hanna (Executive Director at Cannabis Regulatory Agency) was supposed to come in and help everybody, but he didn't. He just keeps fining people. Outlandish fines. I got fined $10,000 because I turned in a self-audit report late,” Abraham said.

From the municipality side, Hazel Park, a city with an annual $5 million dollar pension liability, saw cannabis as a way to help pay that annual debt. They allowed 10 dispensaries. City manager Edward Klobucher was appointed to the position in February of 2002 in the midst of a grave financial crisis. He found ways to balance the budget soon thereafter and saw cannabis as a way to help the city even more. The view of the industry from his desk isn’t as pretty as it once was.

“I think the industry is saturated. Again, I think that there are probably too many licenses,” Klobucher said. “There's problems within the industry. We're seeing, for the first time last year, a decline in the tax revenues that we got from the dispensary. The industry appears to be struggling.”

This was the first decline since the industry came to Hazel Park and he noted, “We have growers, we have processing, we have secure transport, and we have labs. We offer every type of cannabis license available in the state of Michigan, specifically in the city of Hazel Park. One of the reasons why we accepted as many dispensaries as we did was because we're having rising increase for our pension system. And that was one of the ways we've tried to cope with the increased costs that we're seeing to our community. That's where we allocate all of those revenues. Our revenues were $585,000 last year. Our pension costs on a yearly basis to service the debt are approximately $5 million. The revenue we receive from the dispensaries obviously does not cover that expense, but it does help shield the taxpayers of Hazel Park from the full brunt of those costs.”

And the impending 24 percent tax won’t do anything good for the industry, according to Klubucher.

“I know this is an important part of the budget solution in Lansing but on the whole, I think that the tax will have a negative impact on the marijuana industry,” he said.

At the Berkley location for Lume, assistant manager Angel Fields has seen customers getting ready for possible changes in the industry.

“A lot of consumers are questioning whether or not we're going to still have that tax enforced next year or not. And a lot of times customers are mentioning trying to stock up more this year before the tax gets started,” she said. “I’m hearing some customers say they are going to go back to growing their own or just trying to figure out finding ways to buy it on the street again.”

Doug Hellyar, President and Chief Operating Officer of Lume Cannabis Company, said he was asked to join by CEO Dave Morrow back in 2019. From his desk, the industry has challenges but looks good.

“In any business, you want high demand and the demand is fantastic here in the state of Michigan,” Hellyar said.

But that demand may dwindle in the coming year with the new tax looming over the industry.

“The wholesale tax is not good for the cannabis industry in Michigan, period. It needed a lot more thought than what was put into it before it was rolled out,” he explained. “And the outcome will be unfavorable. For all players in the industry, and I believe the estimated taxes to be collected from the wholesale tax are dramatically overstated.”

Hellyar and Morrow recently were questioned by state legislators about the industry with Morrow handling most of the discussion explaining the industry in detail. He noted that consumers have a fixed budget of about $60 to spend annually. The new tax would cut that purchase by 20 to 30 percent, further shrinking Michigan’s $3 billion dollar market in 2026. That will lead to even more oversupply.

Hellyar believes the tax won’t be passed on but rather absorbed as much as possible.

“Due to the extremely competitive environment that exists in Michigan, and the massive oversupply of cannabis that exists in Michigan, it is a certainty that operators will not be able to pass on this wholesale tax to the consumer. A lot of this wholesale tax will be absorbed by the operators within Michigan. And this will put massive additional burden on an already challenging marketplace, the most competitive marketplace in the country. And there will be more contraction. In 2025, many players closed their doors. That will be exacerbated in 2026.”

Morrow has an idea he fully believes would turn around the collapsing cannabis industry in Michigan.

“It's the ability to export the regulated product that we currently make,” he said. “We follow all the same testing standards. We follow all the same rules that are in place. And we allow Michigan, who produces the best product, I think, in the country, at the lowest prices in the country, to participate in this $40 billion nationwide market that we're precluded from. And just to put a pin in it, it has nothing to do with federal restrictions. It has to do with the restrictions that we currently face with our Michigan licensing. And so, I believe, that if we have the ability to bleed off the oversupply, things like the 24 percent tax, things like the transitioning to ETF become possible, because there's a solution to deal with the oversupply in the market. If we do not come up with a solution to deal with this, the pressure of those two things, my opinion, will collapse the majority of the business. And then the state's going to be forced into a very tricky situation where you're going to be faced with hundreds of millions of dollars of tax defaults.”

And it would be a short turnaround, Morrow said.

“I think the oversupply problem in Michigan could be corrected within 90 days if we were able to export, and I think that allows everyone to enjoy a larger market that enjoys the state to collect a much larger tax basis. Michigan could take 10 of that $40 billion (national industry number). Could it take 15? I don't know but the current business at three billion dollars, if things stay the same, is going to go down next year, that's a fact.”