Michigan Marijuana News: Wholesale Tax, License Caps, and Lawsuits

Michigan marijuana industry news in 2026 is dominated by four pressures hitting at once: a steep multi-year price collapse, a new 24% wholesale tax that took effect January 1, business closures tied to oversupply, and a partial federal rescheduling that gives medical operators meaningful tax relief. Sales volume keeps setting records, but revenue is sliding, lawsuits are moving through the Court of Claims, and the Legislature is weighing the first hard cap on licenses since legalization.

Prices Keep Falling, Even as Volume Grows

Michigan retailers sold nearly 260,000 more pounds of flower in 2025 than in 2024, but total revenue came in around $3.17 billion, roughly $113 million less than the prior year. By December 2025, an ounce of flower averaged $58.22, down 16% year-over-year, with vape prices off nearly 20%.¹ For context, flower averaged more than $200 an ounce in June 2021. That’s about a 70% drop in four years.²

The slide carried into 2026. May 2026 sales reached about $259.9 million on more than 30.6 million units, with the average item price dropping to $8.49 from $9.37 a year earlier. That’s a 4.7% revenue decline despite 5.2% unit growth.³ Through the first five months of 2026, Michigan cannabis businesses generated roughly $1.23 billion.⁴

Oversupply, Closures, and a Big Exit

The driver is supply. Michigan had more than 850 cannabis businesses operating as of mid-2025, and growers added 470,000 plants in June of that year alone, bringing the statewide total to 3.2 million plants while sales were sliding.² Robin Schneider of the Michigan Cannabis Industry Association said “unlimited cultivation licenses have created oversupply” that has pulled wholesale prices down across the chain.¹

Operators are leaving. The number of operating retail stores fell from 848 in 2024 to 838 in 2025.¹ Toronto-based TerrAscend announced a full withdrawal from Michigan, closing 20 retail locations and four cultivation facilities and calling it an “extremely difficult market.”² The industry supports roughly 47,000 jobs statewide, and stakeholders warn of more closures and layoffs.

The 24% Wholesale Tax

A 24% wholesale excise tax on adult-use marijuana took effect January 1, 2026. It sits on top of the existing 10% retail excise tax and the 6% state sales tax, and it was enacted as part of a road-funding package signed by Governor Gretchen Whitmer.⁵ Revenue flows primarily into a new Neighborhood Roads Fund covering bridge repair, local road agencies, and rail grade separations.⁶

Collections are running well below projections. Through April 30, 2026, the state had collected nearly $34 million, roughly one-third of the House Fiscal Agency’s quarterly estimate of $105 million (or $420 million annualized).⁵ A Michigan Department of Transportation memo flagged that ongoing litigation could further affect both timing and availability of the money.⁷

The Two Court of Claims Lawsuits

Two cases before Judge Sima G. Patel in the Michigan Court of Claims are challenging the tax.

Holistic Research Group v. Michigan Department of Treasury (Case No. 25-000159-MT) argues the tax effectively amends the voter-approved Michigan Regulation and Taxation of Marihuana Act (MRTMA) and therefore required a three-fourths supermajority in both chambers rather than the simple majority used to pass it.⁸

Michigan Cannabis Industry Association v. State of Michigan (Case No. 25-000160-MM), filed in late March 2026, raises a “tax pyramiding” argument that the 24% wholesale levy functions as a sales tax imposed on top of existing sales taxes, pushing the effective consumer rate past the 6% constitutional limit.⁹ The MCIA also argued the bill violated the Title-Object Clause of the Michigan Constitution through a “change-of-purpose” legislative tactic.¹⁰

In November 2025, Judge Patel denied preliminary injunctions in both cases, letting the state keep collecting while litigation proceeds. She granted the state summary disposition on the Title-Object Clause claim, finding the tax sufficiently related to the bill’s road-funding purpose. She denied the state’s bid to dismiss the broader question of whether the tax undermines MRTMA’s goal of keeping legal prices competitive with the illicit market, ruling that question needs discovery.⁸ Both cases are active, and industry observers expect them to eventually reach the Michigan Supreme Court.⁹

Senate Bill 597 Would Cap Licenses

Senator Sam Singh (D-East Lansing) introduced Senate Bill 597 in response to the oversupply. The bill would freeze new licenses for testing labs, transportation companies, and growing operations cultivating more than 150 plants, and it would cap retail stores at one per 10,000 residents in any municipality. New “large grower” licenses allowing up to 2,000 plants would no longer be issued; future cultivation permits would be limited to Class A growers (up to 100 plants) and microbusinesses (up to 150 plants).¹¹

The Senate Fiscal Agency warned the bill could create “regional monopolies or oligopolies” where existing license counts already exceed the proposed ratios. The disparities are large. New Buffalo Township, with roughly 2,600 residents, has 25 dispensaries. Detroit, with 61, would still have room under the formula.¹¹

Because SB 597 would amend voter-approved marijuana law, it requires a three-fourths supermajority in both chambers. As of late June 2026, the bill was still in the Senate Regulatory Affairs Committee after a second hearing. The committee heard testimony on updated language, including provisions tying license eligibility to clearance of outstanding tax debt, but took no formal vote.¹²¹³

Federal Rescheduling Changed the Tax Math for Medical Operators

On April 22, 2026, Acting Attorney General Todd Blanche issued an order reclassifying two categories of marijuana from Schedule I to Schedule III of the Controlled Substances Act: FDA-approved marijuana products, and marijuana subject to a qualifying state-issued medical license. The action followed a December 2025 executive order from President Trump aimed at expanding medical marijuana and cannabidiol research. A broader administrative hearing on the full rescheduling of marijuana was scheduled to begin June 29, 2026.¹⁴

For Michigan medical cannabis businesses, the most immediate practical effect is federal tax relief. Under Schedule I, Section 280E of the Internal Revenue Code barred cannabis businesses from deducting ordinary business expenses on federal returns. Rescheduling lifts that restriction for operations covered by a state medical marijuana license, allowing standard deductions and potentially federal research and development credits. Michigan had already decoupled from Section 280E at the state level, so the change primarily opens up federal returns. Treasury announced it would issue transition guidance, confirming the relief applies to the full 2026 tax year.¹⁵

Recreational marijuana remains Schedule I. Businesses holding both medical and recreational licenses may need to allocate expenses separately to claim the federal deductions. Most cannabis products sold in state-licensed retailers also haven’t been through FDA approval, so health insurers aren’t expected to cover them and federal strength and purity testing standards don’t apply.¹⁵

Banking Is Still Mostly Cash

Federal banking restrictions continue to force many Michigan cannabis businesses to operate primarily in cash, creating security risks and complicating tax compliance. In July 2025, Michigan Attorney General Dana Nessel joined a bipartisan coalition of state attorneys general urging Congress to pass the SAFER Banking Act of 2025, which would provide a legal safe harbor for banks and credit unions serving state-licensed cannabis businesses.¹⁶ Michigan enacted a limited state-level safe harbor for financial institutions serving medical marijuana licensees in 2018, but no equivalent protection exists for recreational cannabis at either the state or federal level.¹⁷

Hemp-Derived Intoxicants Moving Under CRA Oversight

Alongside the licensing debate, Michigan lawmakers are moving to bring synthetic and hemp-derived intoxicating products such as delta-8 THC under state oversight. These products can currently be sold in gas stations and convenience stores without age verification or state testing. Senate Bill 599, which would create the Industrial Hemp Processing Act and set up a licensing framework for consumable hemp products, has passed the Michigan Senate along with companion bills SB 600 through 602.¹⁸ If enacted, the Cannabis Regulatory Agency would gain authority over these products.¹¹

Next CRA Rules Hearing: July 23, 2026

The Cannabis Regulatory Agency is updating its administrative rules governing the marijuana industry. After a spring 2025 public comment period that generated more than 700 suggested changes, the agency implemented over 120 revisions and opened a second comment period.¹⁹ The second public hearing is set for July 23, 2026, at the CRA’s Lansing offices, with in-person, virtual, and written participation options.²⁰

1
MJBizDaily. Michigan Cannabis Sales Hit Record High in 2025 but Revenue Drops
2
Bridge Michigan. Michigan Marijuana Market Cratering Amid Oversupply, Difficult Market
3
Headset. Michigan Cannabis Market Data
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MJBizDaily. Michigan’s Top Cannabis Regulator Elected President of CANNRA
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WLNS. Michigan Marijuana Tax Shortfall
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Michigan Department of Treasury. Wholesale Marijuana Tax
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Michigan Department of Transportation. NRF Collection Update
8
Michigan Court of Claims. Holistic Research Group v. Michigan Department of Treasury, Case No. 25-000159-MT
9
Michigan Public Radio. Another Lawsuit Challenges Michigan’s New Marijuana Wholesale Tax
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Michigan Court of Claims. Court of Claims Opinion, Case No. 25-000159-MT
11
Bridge Michigan. Sweeping Plan Would Cap Michigan Marijuana Businesses, Freeze New Applications
12
Michigan Advance. Proposed Changes to Marijuana License Cap Legislation Include New Rules on Outstanding Tax Debt
13
MMJ Daily. Senate Bill Ties New Licenses to Outstanding Tax Debt
14
U.S. Department of Justice. Justice Department Places FDA-Approved Marijuana Products and Products Containing Marijuana
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Michigan Medicine. What Does Cannabis Rescheduling Mean for Science and Society
16
Michigan Attorney General. Attorney General Nessel Joins Bipartisan Coalition Supporting Federal Cannabis Banking Reform
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Abrigo. Cannabis Banking in Michigan
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Michigan Senate Fiscal Agency. Senate Fiscal Agency Legislative Notes
19
Michigan LARA. Update on the Marijuana Rules Promulgation
20
Michigan LARA. Marihuana Administrative Rules Second Public Hearing Date Set for July 23, 2026