Pot Goes Pro
A new generation seeks its fortune in the marijuana business.
by Patrick Dunn
From the June, 2018 issue
Attorney Dennis Hayes has been representing clients in marijuana cases ever since his friend John Sinclair got out of prison in 1971. But these days he's beginning to visualize an end to his decades-long fight to legitimize weed and those who deal in it.
Hayes' Kerrytown office is packed wall-to-wall with decades' worth of concert posters and family photos. He's seventy-seven, and there's a weariness in the eyes that look out from behind his large, square glasses. He speaks with no-nonsense sharpness, noting that the marijuana business has "dramatically changed" thanks to broader social acceptance and increasingly permissive state laws.
For decades, Hayes represented marijuana users who, like Sinclair, faced criminal charges. But in 2008, voters approved the Michigan Medical Marihuana Act (MMMA), which legalized use of the plant by those with qualified medical conditions. When it took effect the following year, he says, he became "essentially a business lawyer."
That effect amplified after the state passed the Medical Marihuana Facilities Licensing Act (MMFLA) in 2016 and began accepting license applications for marijuana businesses in December 2017. Along with opportunity, that brought plenty of new regulations--and paperwork--for marijuana businesses. The state's facility license application alone is a whopping forty-seven pages.
Hayes worked for years with the Ann Arbor Medical Cannabis Guild, which represents seven of Ann Arbor's dispensaries. Guild member Rachel Pell of People's Choice on W. Liberty calls him "a hero to the hippie generation" and "a freedom fighter." But early this year, Hayes ended the relationship. "It became a bureaucratic job doing their applications," he says. "I didn't want to do that."
Even greater changes may be coming: supporters are working on a ballot initiative to legalize recreational use of marijuana in Michigan. Hayes is "fairly confident" it will pass--and that he'll retire if it does.
The younger people who will carry on in Ann Arbor's cannabis industry are even more optimistic that full legalization is coming. But that sea change is already bringing fresh challenges.
Eric Parkhurst, the challenges included camping outside City Hall in a February snowstorm. A bearded hipster with an engaging grin, Parkhurst developed an interest in cannabis nine years ago, when his girlfriend, now wife, tried it "out of desperation" to relieve pain from a blood clot in her head. It worked better than the opiates she'd been prescribed, so the couple moved from Minnesota to Ann Arbor to take advantage of legal medical weed.
Becca Parkhurst became a registered medical marijuana patient; Eric registered as a caregiver, growing pot for her and for several patients they met at their children's preschool.
Parkhurst moved his growing facility from his basement to a commercial space at 2394 Winewood about a year and a half ago. But until the new state act took effect last year, such "grows" were in a legal gray area-and he also wanted to expand into processing and sales.
The city wouldn't even take his applications if someone else within a 600-foot radius applied first--and he'd heard that competitors were looking at locations on the same block. So when the city announced on a Friday that it would take special exception use applications for dispensaries the following Monday, he headed directly to City Hall.
He was the second person in line, and two or three more joined the queue over the weekend. "I think it snowed six or eight inches," he says. The police wouldn't let them set up tents or heaters, "so it was sleeping bags and lots of layers." But otherwise, the officers "were very nice ... they brought us coffee and hot chocolate."
Another dozen applicants showed up Monday morning. "Everyone was friendly, but a lot of people weren't talking about what their location was and what their plans were," Parkhurst says.
He was the first from his area, so the city took his application. He hasn't heard back yet, and doesn't expect to soon--"there's 400 applications in, and they've just started going through them."
Ann Arbor approved a licensing ordinance for dispensaries in 2011, but no licenses were ever issued due to uncertainty over the legality of selling weed. The 2008 ballot initiative permitted "caregivers" to grow up to twelve plants each for up to five "patients." There was no provision for retail sales, but many dispensaries now source weed from multiple growers and sell to thousands of patients.
The law finally caught up with passage of the MMFLA in 2016: it creates state licenses for growers, processors, transporters, provisioning centers, and safety compliance facilities. In February city council amended Ann Arbor's zoning to permit businesses in all five of the new categories. So many applications poured in that in April the city put a temporary moratorium on new ones.
But along with legitimizing marijuana businesses, the state is pushing them to get bigger. Harry Cayce, Pell's father and former co-owner of People's Choice, predicts that the new rules will drive most local growers out of business.
"We're not supposed to buy from caregivers, but we have since we opened the door," Cayce says. "And it's worked perfectly." But the MMFLA's Class A license, the smallest, allows the holder to grow up to 500 plants--and requires evidence of $150,000 in capitalization. That doubles to $300,000 for a Class B license allowing for 1,000 plants and hits half a million dollars for a Class C license to grow up to 1,500.
Cayce says "the vast majority" of the caregivers People's Choice buys from won't be able to meet those requirements. Even those that can are likely to have difficulty providing the three years of banking records the state requires: federal laws make it difficult for marijuana businesses to maintain bank accounts.
"Right now, we support twenty-five vendors," Cayce says. "Next year we'll support three."
Yet the general mood among dispensary owners is relief. Dori Edwards, owner of the Bloom City Club dispensary on Miller, says it used to feel "really taboo" for her customers even to be in her waiting room. But "now people are starting to really feel a lot more comfortable, because once we have that license the state can't just come in and raid us. There was always that threat before."
And even Cayce is encouraged by "the amount of young, intelligent activists coming in" to the business. He notes a shift in the tone of Hash Bash, particularly since the Cannabis Guild and its past president, Mark Passerini, have become more involved in organizing it.
"If you were at Hash Bash ten years ago, you saw all the speakers with the long hair and the tie-dye," Cayce says. "They kind of asked us to step to the back and let the kids with the suits and ties come out, and it's working."
One young activist is Lisa Conine, community outreach coordinator at Om of Medicine, the dispensary Passerini owns on S. Main downtown. She began using marijuana to ease the symptoms of Crohn's disease while she was in college.
Conine has lobbied Congress on marijuana issues, but she started with her own family. "I put together a PowerPoint presentation for my parents, and we watched a couple of documentaries together," she says. "Now my parents are advocates, and they believe in it."
Another standard bearer for the new generation is U-M senior Adam Rosenberg, the founder of Green Wolverine, a U-M club dedicated to the business of cannabis. The club has attracted 188 members since its founding in January 2017, and Rosenberg has since added chapters at four other universities.
Rosenberg stresses that Green Wolverine "has nothing to do with consuming marijuana"--it's focused on "business opportunities that do not touch the plant directly." Dressed in a blazer, he looks like a typical business school student except for his conspicuous gold marijuana-leaf necklace. He does an interview via Skype from Barcelona, where he's working to connect "young, high-potential talent" to the hundreds of cannabis clubs that operate in the city.
Rosenberg says people in the cannabis industry are often assumed to be "doing something brave. They're breaking through the stigma and breaking through this barrier. But in reality, the stigma does not exist anymore to the point that people think it does.
"As far as pushback I've personally received, it's been incredibly minimal. But people who hear about what I've done assume that I've received a lot of pushback, assume that the majority of people were opposed to the idea."
It's that sense of a stigma lifting that makes most local marijuana businesses optimistic that Michigan voters will legalize recreational use this November. Last November the Coalition to Regulate Marijuana Like Alcohol (CRMLA) submitted more than 360,000 signatures in support of the legalization initiative, well above the 252,523 required to get on the ballot. No challenges to the measure were filed, and it's currently awaiting state validation.
If the measure makes the ballot and passes, it could bring a whole new group of "suits and ties" into the business. The Detroit Free Press reported last year that CRMLA's top donor was Smokers Outlet Management, a Troy-based company that owns sixty-eight Wild Bill's Tobacco shops in Michigan and has plans to open a dispensary chain under the name Oasis Wellness Centers.
Jeff Irwin, CRMLA's former political director, says the coalition "took pains" to "give small- and medium-sized Michigan-based businesses a real foothold" in the initiative language. It would limit the number of marijuana businesses in which an individual can hold ownership interest and would issue licenses only to Michigan residents for at least the first two years.
But plenty of new players are interested in real estate for their enterprises. Colliers International senior vice president Jim Chaconas says he's been getting so many calls from brokers inquiring on behalf of marijuana clients that it's "driving me crazy." Many younger brokers, he says, don't understand that medical marijuana businesses can't inhabit buildings that have a federally insured mortgage. "It's not 'no' because we don't want it there," he says, "but 'no' because we legally can't put it there."
The mortgage restrictions are a reminder that the federal government still classifies marijuana as a highly dangerous Schedule 1 controlled substance. In January, attorney general Jeff Sessions rescinded the Cole Memo, an Obama-era policy stating that the Justice Department would not enforce federal marijuana law in states where marijuana had been legalized for recreational or medical use. Medical marijuana prosecutions are still prohibited by the Rohrabacher-Farr amendment, but that's up for renewal in September.
Cannabis advocates, though, say they were less alarmed by the Cole Memo rescission than they were heartened by the bipartisan backlash against the move. "I think that was a telltale sign in our country's political history," Passerini says. And Irwin sees a "silver lining" in the Justice Department's "huffing and puffing"--he thinks it's likely to make it "just a little too dicey" for major corporations to get into the cannabis industry--"which I don't think is a bad thing."
The owners of established dispensaries also seem to have faith in their patients' loyalty to them and their products. "You still see craft breweries popping up and having success," says Edwards of Bloom City. "You still see really great hand-rolled cigarettes. I think that big corporations, when they get their hands on this plant finally and they see how tough it is to really grow good medicine, they're going to be surprised."
Scientists, too, would like to know more about that "medicine." U-M pharmaceutical sciences professor Gus Rosania became interested in doing toxicity research on cannabis after studying the anti-inflammatory properties of dronabinol, a legal synthetic form of THC. But he says he can't study the real thing without wading through "horrendously difficult" paperwork to obtain it from the federal government--and even that isn't the same as studying the marijuana people are actually consuming.
That's made Rosania a vocal advocate for recreational legalization. He spoke at Hash Bash this year and says he's also evangelizing among his colleagues at U-M to support the legalization initiative.
"We've got to know what are the risks and what are the benefits," he says. "There just hasn't been a rational, educated, science-based discussion around that. Everything people know about it is either hype or fear.
"It's ill-founded. And I've got to change that. I've got from now until October."
Dennis Hayes can see the wave of energy behind recreational legalization, but he's been through too much to celebrate now. "I've spent my career fighting at the edges of this at substantial cost to my clients and have put up with a lot of bullshit," he says. "Just a lot of bullshit."
Did he ever expect to see legalization in his lifetime?
"No," he says. "Come on. John Sinclair went to jail for nine-and-a-half to ten years for giving away two joints."
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