Takeaways
- CRA's new disciplinary guidelines reduce fines for about two-thirds of violations, with many cut by 50%.
- The changes come in response to sustained industry pushback amid ongoing economic struggles in Michigan's cannabis market.
- While most fines decreased, penalties have increased for egregious violations like selling illicit cannabis, signaling a shift in enforcement priorities.
During last week's CRA quarterly public hearing, Executive Director Brian Hanna indicated that the agency would be releasing updated disciplinary guidelines that would reflect a change in agency policy to reduce fines in response to significant industry pushback and criticism. On July 1, 2025, CRA released its updated disciplinary guidelines, which generally provide for reductions in fines for about two-thirds of violations. Most of these reductions are substantial—often amounting to a 50% decrease.
Reform of CRA penalties is welcome and much needed. The cannabis industry and stakeholders have voiced their concerns with CRA's fine amounts for violations for the better part of the last three years. While the macroeconomic trends of the Michigan cannabis industry look rosy—with $3.3 billion in retail sales in 2024—the reality on the ground tells a different story. It is no secret that the Michigan cannabis industry is in a state of economic turmoil. While low prices are a boon to consumers, the operating and profit margins for licensees have become increasingly untenable or non-existent. At least one MSO has announced its intention to strategically exit from the Michigan market entirely, and other large operators have substantially cut back their Michigan operations or have entirely ceased conducting business.
These economic headwinds, when combined with substantial regulatory fines—often for explainable or good-faith mistakes—made it extremely difficult or impossible for licensees to operate profitably. Moreover, these conditions compounded to disincentivize investment into the Michigan cannabis market—both internally and externally. As a result, it is encouraging to see CRA responding to industry feedback. It would be foolish to think that these changes alone will reverse the economic trend of the Michigan cannabis market, but they are a lifeline of support at a time when it is desperately needed.
It is also important to note that these reduced fine amounts are unlikely to cause any licensee to lessen their commitment to compliance. While there have undoubtedly been bad actors in Michigan's licensed cannabis market, our experience has been that the overwhelming majority of formal complaints have been aimed towards licensee noncompliance on matters that often amount to human error or unintentional oversight—types of noncompliance matters that are virtually impossible to eliminate, e.g. an entry-level employee makes a data entry error in Metrc or an employee rings up the wrong SKU for a customer. We have even seen formal complaints and significant fines issued for fairly minor noncompliance issues that the licensee self-reported. Although fines continue to greatly exceed those in the licensed alcohol beverage space, CRA's changes are a big step in the right direction to "right-size" fines to better fit the "severity" of the violation.
A few noteworthy changes to discuss:
- Most general Metrc data entry violations have seen their guideline amounts dropped from $10,000 to $5,000, e.g., R 420.102(7), R 420.104(3)(b).
- Late-filed AFS fines have been dropped from $10,000 to $5,000.
- Many labeling error matters have had their fines reduced by 50%, R 420.303a(3)(b) (reduction from $250 to $125 per missing item, per label); R 420.403(1) (reduction of 50%).
It is also worth noting that there have been no changes to the fines and sanctions proposed for violations related to sales of products on administrative hold. Further, while fines have been reduced for many violations, there are a number of additional violations that now contemplate license suspensions or revocations, and increased penalties for the most serious violations. Compliant operators should cheer some of those increases, such as penalties of up to $50,000 plus lengthy suspensions for selling illicit marijuana that was produced outside of the regulated system.
Overall, CRA's updated disciplinary guidelines are a welcome and much-needed lifeline for the industry. We hope that these changes will be accompanied by a reorienting of enforcement efforts to focus on illicit product and risks to public health, and that we see CRA continue to engage with licensees and industry stakeholders. CRA's mission statement seeks to "establish Michigan as the national model for a regulatory program that stimulates business growth while preserving safe consumer access to cannabis." Today's updated disciplinary guidelines are a step in the right direction toward fulfilling that mission, but the work is never finished.
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