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DOJ Reschedules Medical Marijuana Products to Schedule III — What It Means for Research

Justice Department Places FDA-Approved Marijuana Products and Products Containing Marijuana Subject to a Qualifying State-issued License in Schedule III, Strengthening Medical Research While Maintaining Strict Federal Controls

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Press release overview

Short summary The Department of Justice and DEA have issued an order placing FDA‑approved marijuana products and state‑licensed medical marijuana products into Schedule III, and announced an expedited administrative hearing to consider broader rescheduling of marijuana beginning June 29, 2026. The move aims to expand research access while maintaining federal controls and accelerates the rulemaking timeline by withdrawing prior proceedings.

Press release overview The Department of Justice and DEA recently issued actions that clarify federal treatment of FDA-approved and state-licensed medical marijuana products, opening a clearer path for research and regulatory alignment. That federal movement reduces legal friction for clinical studies and signals a more predictable regulatory environment for companies working at the intersection of therapeutics and regulated botanicals.

Each milestone is a discrete deliverable: protocol documents, site activation logs, interim analysis reports, and regulatory meeting minutes.

Why it matters This action reduces legal uncertainty for clinical research and for companies working with state‑regulated medical cannabis programs, creating a clearer regulatory pathway for pragmatic trials and product development.

The Action Expands Access to Approved Therapies and Supports State-Regulated Medical Marijuana Programs

In accordance with President Trump’s December 18, 2025, Executive Order on Increasing Medical Marijuana and Cannabidiol Research, the Justice Department and the Drug Enforcement Administration (DEA) today announced the issuance of an order immediately placing both FDA-approved products containing marijuana and marijuana products regulated by a state medical marijuana license in Schedule III of the Controlled Substances Act, as well as the initiation of an expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III. The new hearing, beginning June 29, 2026, will provide a timely and legally compliant pathway to evaluate broader changes to marijuana’s status under federal law. Together, these actions provide immediate and long-term clarity to researchers, patients, and providers alike while still maintaining strict federal controls against illicit drug trafficking.

Acting Attorney General Todd Blanche is placing both FDA-approved drug products containing marijuana, and medicinal marijuana products subject to a qualifying state-issued license in Schedule III under his authority to reschedule drugs to carry out the United States’ obligations under the Single Convention on Narcotic Drugs. This action recognizes the longstanding regulation of medical marijuana by state governments and the need for a common-sense approach to this reality.

“The Department of Justice is delivering on President Trump’s promise to expand Americans’ access to medical treatment options,” said Acting Attorney General Todd Blanche. “This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information.”

“Under the direction of President Trump and Acting Attorney General Blanche, DEA is expeditiously moving forward with the administrative hearing process — bringing consistency and oversight to an area that has lacked both,” said DEA Administrator Terry Cole.  “Our men and women in law enforcement remain committed to fighting drug cartels, the fentanyl epidemic, and protecting American lives.”

Separately, the Department announced procedural updates to expedite the ongoing rulemaking process required to fully remove marijuana from Schedule I and place it into Schedule III under the Controlled Substances Act.

Under the prior administration, a notice of proposed rulemaking was published in the Federal Register on May 21, 2024, followed by a notice of hearing on August 29, 2024. Upon further review, the DEA is withdrawing the prior notice of hearing and terminating those proceedings in order to move more efficiently toward the completion of marijuana’s complete redesignation. This action will accelerate the administrative process, include firm deadlines, and allow DEA to proceed in the most expeditious manner consistent with federal law.

DEA will hold a new administrative hearing beginning June 29, 2026, regarding the proposed rescheduling of marijuana. A new notice of hearing is being published in the Federal Register to govern these proceedings and facilitate a timely resolution of the rulemaking.

Today’s order is reflective of the Department of Justice’s continued dedication to common-sense policies and the prioritization of the safety and well-being of all Americans.

PaiNT Research 2026

Why PAiNT Is a Meaningful Step Forward

PAiNT (Predictive, Artificial, Intelligence, Natural, Theraputics) is designed to bridge the gap between academic rigor and real-world clinical deployment. It matters now because:

  • Practical design reduces barriers to enrollment by using streamlined protocols and remote data capture.

  • Adaptive methods let researchers update trial parameters in response to interim results, improving efficiency and ethical oversight.

  • Integrated data systems combine EHR, patient-reported outcomes, and device telemetry for richer, faster insights.

  • Networked partnerships with clinics and state-regulated programs accelerate recruitment and real-world validation.

Together, these elements shorten timelines, lower costs, and increase the likelihood that promising therapies reach patients sooner.

Steven Smith — Comments on the Future

Summary view

Steven Smith sees the DOJ/DEA action as a structural positive for companies positioned to run pragmatic, state‑aligned clinical research. He emphasizes that execution and transparent milestone delivery will determine whether the regulatory shift translates into durable value.

Steven Smith, Inspirational Technologies / PAiNT Network

Predictive Artificial Intelligence News & Technology 2026
P a i N T Pallette 2026

 


 

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“As we step into 2026, I’m proud of what we’ve built — and even more excited for what’s ahead. PAiNT Network is more than a platform. It’s a movement. A canvas for reform, creativity, and community‑powered change. Whether you’re an advocate, a researcher, or simply someone who believes in better — thank you for being part of this journey. Let’s keep painting the future together.”  Steven Smith – founder, Inspirational Technologies.

Let the colors run wild. Let the pixels speak truth. Let the paint be wet.   2026

Brought to you by the PaiNT Network (2025) an inspiration from Inspirational Technologies

Predictive Artificial Intelligence News & Technology 2026

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Inspirational Technologies – We Inspire Change

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Medical Marijuana Seniors concerned over Potential Recreational Legalization.

Steven M Smith InspirationalTech.org CEO since 2013.

Thank you for consideration.

Inspirational Technologies
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We, at Inspirational Technologies are at the forefront of Inspirational and Frontrunners on the frontier of current technology.

Thank you for your interest in Inspirational Technologies, a health and wellness company that focuses on hemp and cannabis products. Here is some information about the company and its CEO, Steven Smith, as well as some statistics on marijuana legalization in Florida.

Inspirational Technologies was founded in 2013 by Steven Smith, who is also the CEO and owner of the company. The company’s mission is to inspire collective minds to foster health, wellness, beauty, and inspiration through hemp and cannabis products. The company operated as a subsidiary of Marijuana Company of America, Inc., a publicly traded company that invests in the legal cannabis and hemp industries. Inspirational Technologies offers a background review of a variety of hemp and cannabis products, and lines of CBD products that includes tinctures, capsules, creams, and pet drops. The company also provides educational and marketing services to promote the benefits of hemp and cannabis.

Steven Smith is a veteran entrepreneur and innovator who has been involved in the hemp and cannabis industry for over a decade. He has a background in technology, media, and entertainment, and has worked as a producer, director, and writer for various projects. He is also a passionate advocate for hemp and cannabis legalization and reform and has participated in several initiatives and campaigns to support the cause. He is a member of the Florida Hemp Council, a nonprofit organization that represents the interests of the hemp industry in Florida. He is also a frequent speaker and guest at various events and podcasts related to hemp and cannabis.

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Marijuana in Florida is illegal for recreational use, but legal for medical use for patients with qualifying conditions. The state legalized medical marijuana in 2016, after voters approved Amendment 2, which expanded the list of qualifying conditions and allowed for more dispensaries and products. As of June 2021, there were over 600,000 registered medical marijuana patients and over 300 licensed dispensaries in Florida.

However, recreational marijuana remains prohibited in Florida, and the penalties for possession vary by the amount, from financial fines to jail time. The state has not yet passed any laws to decriminalize or legalize recreational marijuana, despite several attempts by activists and lawmakers. In 2020, a proposed constitutional amendment to legalize recreational marijuana failed to gather enough signatures to qualify for the ballot. In 2021, another proposed amendment, backed by Trulieve, one of the largest medical marijuana providers in Florida, received enough signatures to qualify for the 2024 ballot. However, the amendment is facing legal challenges from the Florida Attorney General, who argues that the amendment is misleading and violates the single-subject rule.

According to a recent poll, 60 percent of Florida voters approve of legalizing recreational marijuana, while 34 percent oppose it and 6 percent are undecided. The poll also found that support for legalization varies by age, gender, party affiliation, and region. Younger, female, Democratic, and urban voters are more likely to support legalization than older, male, Republican, and rural voters.

I hope this information was helpful and informative. If you have any more questions, please feel free to ask me. 😊

We, at Inspirational Technologies are at the forefront of Inspirational and Frontrunners on the frontier of current technology.

We are often faced with our own personal conflicts which directly influence our interactions with our peers and family. 

When Inspirational Technologies is an endorsement of the “Cannabis” approach to the medical condition, we say, let’s let the look at the data and the people who say that they benefit for cannabis alternatives.

Beginning in Late November 2023 Inspirational Technologies will promote the long-awaited series, “In the Weeds with Steve “. An Inspirational Technologies production under their own “Background Noise Productions Studios.

 

Steven M Smith InspirationalTech.org

CEO since 2013.

#IntheWeedswithSteve

Thank you for consideration.

 

 

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Recreational marijuana could be on 2024 Florida ballot!

Recreational marijuana could be on 2024 ballot.

Josh Cascio reports.

TAMPA, Fla. – The Smart & Safe Florida campaign, funded by Trulieve, says it has collected more than one million signatures to legalize the adult use of recreational marijuana in Florida.

That’s more than enough signatures to get on the 2024 ballot, assuming the ballot language is approved by the heavily conservative-leaning state supreme court.

Attorney General Ashley Moody is among those fighting it, saying the court should reject the proposal. Still, this advancement in the process has the pro-legalization side feeling confident.

“I have confidence that it’s going to pass the Supreme Court review. And then really, you know, it’s up to the voters and the people of Florida,” said Michael Minardi, an attorney and Chairman of Regulate Florida.

If the initiative does pass, it would need the approval of at least 60 percent of voters. In 2016, 71 percent of voters approved medical marijuana.

Minardi believes legalization would increase tourism, jobs and create a tax windfall.

Trulieve says it has collected more than 965,000 signatures for the Smart and Safe Campaign to legalize the adult use of recreational marijuana in Florida.

“Absolutely, I would see in excess of, you know, one to two billion dollars the first couple of years of adult use here in the state of Florida,” he said.

On the other hand, opponents say Florida doesn’t need another intoxicant, especially in the hands of kids.

“There’s more problems with abuse and addiction. We need more treatment. So, I think the costs would be much higher than the average voter would know about,” said Ellen Snelling with the Hillsborough County Anti-Drug Alliance. “It’s kind of like marijuana on crack. We do not need this legalized in our state,” she added.

 

 

It’s still unclear when the state Supreme Court will make its ruling on the ballot language….

#IntheWeedswithSteve

 

Be patient Florida, this too, shall pass!






Steven M Smith

InspirationalTech.org

CEO since 2013.

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Happy 420 — Origins, Laws, and the Moment We’re In

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Happy 420 — Origins, Laws, and the Moment We’re In


1. The Origin Story: How 420 Became a Cultural Signal

420 began as a simple meeting time among a group of California high‑schoolers in 1971 — the Waldos — who used “4:20” as a code for gathering after school. What started as an inside joke traveled through music culture, especially Grateful Dead circles, and eventually became a universal shorthand for cannabis itself.

Over the decades, 4:20 p.m. became a daily ritual, and April 20th evolved into a cultural holiday — part celebration, part protest, part community gathering. The beauty of 420 is that it was never created by a corporation, a government, or a marketing team. It grew organically, carried by people who believed in freedom, curiosity, and connection.

That’s why the origin still matters. It reminds us that cannabis culture was built from the ground up — by people, not institutions.


2. The Current Landscape: State Laws in 2026

The United States now lives in a patchwork reality:

  • Medical cannabis is legal in the majority of states, including Florida, where the program continues to expand in patient count and product availability.
  • Adult‑use legalization has passed in many states, but not all — and the rules vary dramatically.
  • Federal law still classifies cannabis as illegal, creating contradictions in banking, research, interstate commerce, and patient access.
  • Hemp remains federally legal, but states continue to tighten rules around intoxicating hemp derivatives.

This patchwork creates confusion for patients, consumers, businesses, and law enforcement. It also creates opportunity — because every year, more states move toward reform, and public support continues to grow.

Even in states without adult‑use legalization, medical programs like Florida’s show that regulated access can coexist with safety, oversight, and economic benefit.


3. The Political Climate: Optimism with Realism

The political climate around cannabis in 2026 is defined by momentum, contradiction, and public demand outpacing policy.

Here’s what’s shaping the moment:

  • Public support for legalization remains high, across party lines, according to multiple national polls.
  • Congress continues to debate reform, including banking protections and rescheduling proposals, but progress is slow.
  • States are acting faster than the federal government, creating a widening gap between state policy and federal law.
  • Courts and regulators are increasingly involved in defining the boundaries of hemp, THC limits, and product safety.
  • Advocacy groups continue to push for expungement, patient rights, and equitable access.

Optimism is justified — the direction of travel is clear — but realism is necessary. Reform is happening, but not at the pace many expected. The next breakthroughs will likely come from a combination of state‑level action, federal administrative changes, and continued public pressure.


Commentary by Steven Smith

Advocate for Cannabis Reform, Founder of Inspirational Technologies & PAiNT Research

“I’ve always believed that cannabis reform is ultimately about people — patients, veterans, families, and communities who deserve access, safety, and honesty. I’m optimistic, but I’m also realistic. I’ve seen how slow the system can move, how politics can stall progress, and how misinformation can cloud public understanding. But I’ve also seen something stronger: the steady rise of informed citizens who refuse to let outdated laws define their lives.”

“The future of cannabis is not just about legalization — it’s about education, research, and responsible access. Vaporizers, for example, represent a safer, more controlled way for many people to consume. They reduce combustion‑related harms and allow for precise dosing. As technology improves, so will safety, consistency, and patient confidence.”

“420 is a celebration, but it’s also a reminder. A reminder that reform is unfinished. A reminder that millions still lack access. A reminder that science must guide policy, not stigma. And a reminder that the culture that created 420 — grassroots, hopeful, human — is still alive.”

“And yes — it’s 4:20 somewhere. In fact, it’s 4:20 forty‑eight times a day around the world. That’s forty‑eight reminders that progress continues, that community matters, and that the future is brighter than the past.”


Closing Thought

Two days before 420, the message is simple:
Honor the origin. Understand the laws. Stay engaged in the political moment. Celebrate responsibly. And keep pushing for a future where cannabis policy reflects science, compassion, and common sense.


🌿 CANNABIS LAWS BY STATE ( 2026)

Cannabis policy in the United States has evolved dramatically since California first recognized medical cannabis in 1996. Three decades later, the national landscape is a patchwork of adult‑use legalization, medical programs, decriminalization reforms, and a shrinking number of prohibition states.

As of 2026, most Americans live in a state where cannabis is legal in some form. Federal law still classifies cannabis as illegal, but state‑level reforms continue to expand, and public support for legalization remains at historic highs.

Below is the updated 2026 state-by-state breakdown.


2026 CANNABIS LEGALITY TABLE 

Legend:

  • AU = Adult Use Legal
  • MED = Medical Legal
  • DEC = Decriminalized
  • CBD = CBD‑Only
  • IL = Illegal / Full Prohibition

This version is optimized for WordPress: clean columns, no broken spacing, and consistent formatting.


📊2026 Table

STATE AU MED DEC NOTES (2026)
Alabama ✔️ Medical only
Alaska ✔️ ✔️ ✔️ Fully legal
Arizona ✔️ ✔️ ✔️ Fully legal
Arkansas ✔️ Medical only
California ✔️ ✔️ ✔️ Fully legal
Colorado ✔️ ✔️ ✔️ Fully legal
Connecticut ✔️ ✔️ ✔️ Fully legal
Delaware ✔️ ✔️ ✔️ Adult-use sales active
District of Columbia ✔️ ✔️ ✔️ Sales restricted by Congress
Florida ❌ (no 2026 ballot) ✔️ Medical only
Georgia CBD Low‑THC oil only
Hawaii ✔️ ✔️ ✔️ Adult-use legalized 2024
Idaho CBD CBD‑only; prohibition otherwise
Illinois ✔️ ✔️ ✔️ Fully legal
Indiana Full prohibition
Iowa CBD Limited low‑THC program
Kansas Full prohibition
Kentucky ✔️ (2025 launch) New medical program
Louisiana ✔️ ✔️ Medical + decriminalized
Maine ✔️ ✔️ ✔️ Fully legal
Maryland ✔️ ✔️ ✔️ Fully legal
Massachusetts ✔️ ✔️ ✔️ Fully legal
Michigan ✔️ ✔️ ✔️ Fully legal
Minnesota ✔️ ✔️ ✔️ Adult-use legalized 2023
Mississippi ✔️ Medical only
Missouri ✔️ ✔️ ✔️ Fully legal
Montana ✔️ ✔️ ✔️ Fully legal
Nebraska DEC Decriminalized only
Nevada ✔️ ✔️ ✔️ Fully legal
New Hampshire ✔️ DEC Adult-use still pending
New Jersey ✔️ ✔️ ✔️ Fully legal
New Mexico ✔️ ✔️ ✔️ Fully legal
New York ✔️ ✔️ ✔️ Fully legal
North Carolina CBD DEC CBD‑only + decriminalized
North Dakota ✔️ Medical only
Ohio ✔️ ✔️ ✔️ Adult-use legalized 2023
Oklahoma ✔️ Medical only
Oregon ✔️ ✔️ ✔️ Fully legal
Pennsylvania ✔️ Medical only
Rhode Island ✔️ ✔️ ✔️ Fully legal
South Carolina CBD CBD‑only
South Dakota ✔️ Medical only (adult-use overturned)
Tennessee CBD CBD‑only
Texas CBD Limited low‑THC program
Utah ✔️ Medical only
Vermont ✔️ ✔️ ✔️ Fully legal
Virginia ✔️ ✔️ ✔️ Adult-use legal; sales pending
Washington ✔️ ✔️ ✔️ Fully legal
West Virginia ✔️ Medical only
Wisconsin CBD CBD‑only
Wyoming CBD CBD‑only

📌 Closing 

The national trend remains clear: more states are moving toward regulated adult-use markets, and medical access is now the norm across most of the country. While federal reform remains stalled, state-level legalization continues to expand, driven by voter initiatives, legislative action, and shifting public opinion.

How Do States Decide on Their Cannabis Laws?

For decades, states have been changing their cannabis laws through both ballot initiatives and the legislative process. In states including California, South Dakota and New Jersey, voters have directly approved measures legalizing medical cannabis, recreational cannabis or both.

State legislatures have been passing laws to allow medical cannabis since the 1990s. In 2018, Vermont became the first state to legalize recreational cannabis through its legislature rather than through a ballot initiative. Since then, legislatures in states including Illinois and Virginia have followed suit.

A state’s cannabis laws don’t address every detail of how its system works. Instead, the law creates a framework within which state agencies and local governments can make more specific rules.

What Is Medical Cannabis?

Medical cannabis, as the name suggests, is prescribed by a doctor to treat specific conditions and symptoms. Studies have shown that cannabis can help patients with a variety of health concerns, including:

  • Certain kinds of epilepsy.
  • Nausea and vomiting caused by chemotherapy treatments for cancer.
  • The loss of appetite and weight loss that can be caused by HIV/AIDS.

Scientists continue to study whether cannabis is an effective treatment for some symptoms of multiple sclerosis, chronic pain and other conditions.

How Do States Regulate Medical Cannabis?

Each state’s medical cannabis program is unique, but they share important similarities.

How Do States Regulate Medical Cannabis

A physician will examine a patient and, if appropriate, provide a certification that the patient has a condition that can be treated with medical cannabis. Each state has its own list of qualifying conditions.

Once a patient has a physician’s certification, they can be placed on the state’s medical cannabis registry and issued an identification card. This card entitles them to purchase cannabis at a dispensary — a state-regulated store that is authorized to sell cannabis products. The amount of cannabis someone with a medical cannabis card can possess varies by state.

Another important difference between states is whether they recognize other states’ medical cannabis cards. Individuals must follow the rules of the state they are in, not just the state that issued their ID.

What Is Cannabis Decriminalization?

In addition to implementing and refining medical cannabis programs, states are also continuing to address the question of how to regulate the nonmedical use and possession of cannabis. As the map shows, many states now allow adults to possess and use cannabis with some restrictions. Others have opted instead for decriminalization.

Decriminalization of cannabis does not mean legalization of cannabis. Instead, decriminalization can reduce the legal consequences of those caught possessing or using cannabis.

Decriminalization generally means criminal penalties are replaced with civil penalties. For example, police would issue a citation instead of making an arrest, would not punish an individual with a jail or prison sentence, and the incident would not appear on the individual’s criminal record.

It’s important to note that these more lenient punishments generally only apply to the first-time possession of smaller amounts of cannabis — harsher penalties can be imposed for multiple infractions or for possessing larger amounts.

What Is CBD?

The Cannabis sativa plant contains both delta-9 tetrahydrocannabinol (THC) — the chemical compound found in medical and recreational cannabis — and cannabidiol (CBD). THC is psychoactive — it’s the chemical in cannabis that causes a “high.” CBD is not psychoactive. For this reason, many states have begun loosening restrictions on its use for medicinal and other purposes.

At both the state and federal levels, however, the law surrounding CBD remains complicated and unsettled. This is especially true when it comes to the presence of THC in CBD products. Since the two compounds are chemically similar and derived from the same plant, many CBD products contain some THC. Some states that allow CBD products but have more restrictive laws for THC have specified that CBD products may not contain more than a certain small amount of THC.

By isolating and extracting the CBD from Cannabis sativa plants, it is possible to create CBD-only products. Since these products contain no THC at all, they reduce some of the risk and uncertainty surrounding the production, sale and use of CBD.

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Navigating State Cannabis Laws

The laws addressing recreational cannabis, medical cannabis and CBD continue to evolve. We’ll continue to update our map to reflect changes to each state’s cannabis laws. If you have questions about how specific laws affect your cannabis business, you can always reach out to us — we’ll help you find the answers.

 

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Wholesale Marijuana Flower Prices Plummet. Michigan subject of new dynamics.

Wholesale marijuana flower prices plummet.

Michigan, in particular, subject to new dynamics.

 

Image of cannabis sitting atop $100 bills

 

Prices of wholesale recreational marijuana in Michigan are now as low, or lower, than those in older adult-use states

– underscoring how new markets are ramping up more quickly and, in some cases, becoming glutted.

Industry insiders say cannabis flower in Michigan is readily available for less than $1,000 a pound on the wholesale market – and often for much less – because of oversaturation as more and more cultivation companies come online in a state with no limit on business licenses.

Connie Maxim-Sparrow, a cannabis consultant and marijuana business license holder based in Muskegon, Michigan, characterized the state’s current market conditions as “unstable” – in particular, cannabis growers are spending at least $800 to grow a pound of flower and getting only $600 for it on the wholesale market.

According to Maxim-Sparrow, a year ago a midgrade pound of indoor-grown wholesale flower that tested at around 20% THC potency would sell for $1,800-$2,200.

Now, that same grower is lucky to get $600 a pound, and she’s heard of some selling for as low as $300.

The dynamics playing out in Michigan could offer a harbinger of what’s to come in other new markets.

In particular: As more multistate operators learn how to quickly set up shop in new regions with many producers, the pace of a newly legalized state’s market hitting an oversaturation point is speeding up.

This is more likely to happen in states without licenses caps or that have many growers – unlike limited-license markets that seem more common on the East Coast.

Michigan began marijuana sales at the end of 2019, and the wholesale market prices now more closely resemble those in older markets such as Colorado or Oregon, where wholesale prices have been falling for a year or more.

Colorado’s adult-use sales launched in January 2014, while Oregon’s market launched in October 2015.

Both markets took longer than Michigan’s to experience product saturation and falling prices.

Survival tactics

To survive, cannabis companies across Michigan are tightening their belts, relying on vertical integration and trying to build brand recognition to be more competitive.

Others are limiting their expansion plans or selling out as a wave of consolidation sweeps through the state’s industry.

A few Michigan marijuana retailers have downsized, including major retail chain Lume Cannabis, which closed four of its roughly 30 stores earlier this month.

Meanwhile, Michigan regulators in March implemented new rules, including lower application fees and the removal of licensing tiers, that will further open up the market.

“Everybody’s panicking,” Maxim-Sparrow said.

“Some of us knew this was coming – others are getting caught off guard by the oversupply issue.”

The learning curve for entering the cannabis industry is steep. Start with the fundamentals.

Any cannabis company executive who has been watching what has happened in other mature marijuana market with relatively unlimited licensing, including Colorado and Oregon, should have seen the market headed in this direction, industry insiders aid.

“We’ve seen this movie before,” said Tyson Macdonald, adviser to and former chief financial officer of Cloud Cannabis Co., based in Troy, Michigan.

“It is definitely happening with an accelerated pace in Michigan.”

Macdonald partially attributes that to a regulatory structure that allows for stacking of cultivation licenses, which has created very large facilities, many of which came online around the same time.

Not limiting licensing also sped up the situation.

Cannabis businesses executives “should have absolutely been aware that this market was going in this direction when there was not a single cap on a cultivation or processing license,” Maxim-Sparrow said.

 

The pricing situation

Over the past year and half, the state has seen a “ton of new capacity come online,” said Ankur Rungta, co-founder and CEO of C3 Industries, a vertically integrated Michigan marijuana company that also has operations in Massachusetts, Missouri and Oregon.

Rungta, who started out in the cannabis industry with a business in Oregon, said he saw a similar market drop there with overproduction in 2017 and again in 2018.

“Our first market was Oregon, so if anybody should have seen it coming, it was us,” he said.

Yet, Rungta said, the speed of how quickly the Michigan market has become saturated has taken him by surprise.

“We’re definitely getting into a fully supplied or even oversupplied marketplace,” he added.

“That’s definitely putting a lot of pressure on the wholesale market. People are buying the same amount of cannabis; it just costs half of what it used to cost before.”

That’s before the coming fall harvest of outdoor-grown flower hits the market.

“A lot of people are looking at this fall and saying, ‘What’s going to happen?’” Rungta said. “I don’t know that we’ve hit the bottom, to be completely honest with you.”

Macdonald said retailers and manufacturers can buy anything they need for less than $1,000 a pound for wholesale flower.

At Michigan stores, ounces of flower sell for as low as $59-$99, according to Macdonald.

“And a lot of that at the $79-$99 price point, it tests pretty well,” he said. “It’s not terrible product.”

Access isn’t the issue

Some municipalities in Michigan have opted out of allowing marijuana retail stores.

One major area that has yet to open a recreational cannabis store is metro Detroit.

The city finally began accepting license applications for adult-use marijuana businesses on April 20.

That doesn’t necessarily mean there’s a question of consumer access – despite many municipalities opting out of legal cannabis sales.

Maxim-Sparrow said most customers probably must drive only half an hour at most to find a store.

“If you look at a map of Michigan, there’s very few areas that don’t have access,” Rungta said.

Cities such as Ann Arbor are glutted with retail stores, said Mahja Sulemanjee-Bortocek, CEO and founder of High Haven, which owns cannabis business licenses in Bay City, Michigan.

She would like to see municipalities show a better understanding of the economics of cannabis before licensing too many stores in one place.

“They look at it as a revenue stream for them through taxes, which it certainly is,” Sulemanjee-Bortocek said.

But the towns and cities will lose that revenue stream if the retailers can’t turn a profit and stay open, she added.

“It’s a short win for them. Not a long-term situation,” Sulemanjee-Bortocek said.

Turning to vertical integration

Some companies are banding together to increase their brand power through collaborations and white labeling.

Others are trying to become vertically integrated but are running out of capital as they try to build out their retail or cultivation businesses.

Rungta said that a vertically integrated business structure is becoming more important, so a company can have a “hedge or cushion against some of the wholesale volatility that’s out there.”

He expects more businesses will head in that direction over time.

His strategy is to both move a “sizable chunk” of business through company-owned retail stores while also selling on the wholesale market.

The successful companies are those who saw this coming and built their business model around current pricing, not when the market opened and prices were much higher.

Rungta said the companies that will survive have a clear strategy such as offering a value product or a premium product with a business structured accordingly and a reasonable margin to support their operations.

By “reasonable,” he said a 40% gross margin is a good baseline.

“Those people are having success and, in some cases, continuing to even grab market share,” he said.

But, Rungta said, the branding and quality need to match the product for it to work.

As this all plays out, expect to see more consolidation as business are swallowed up by larger ones and some even go under. The amount of capital a business has could be the deciding factor.

“In this environment, it’s challenging for everybody,” Rungta said. “But it’s most challenging for the smaller businesses.”

Bart Schaneman can be reached at bart.schaneman@mjbizdaily.com.

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