Michigan House Looks To Solve Cannabis Industry Issues, Addressing Payment Defaults And Hemp Regulation

Takeways

• HB 4963 would require licensees to pay for cannabis products at the time of transfer.
• HB 4964 and related bills would create a new Industrial Hemp Processing Act and ban intoxicating or converted cannabinoids.
• Passage appears likely, but the final impact will depend on legislative compromise and regulatory enforcement.

On Tuesday, September 16, the Chairman of Michigan's House Regulatory Reform Committee, Representative Joseph Aragona, introduced a package of bills to address two significant problems confronting Michigan's cannabis industry—licensees defaulting on payments and unregulated intoxicating hemp products being sold throughout the state. (This is part two of our examination of this issue in Michigan; part one can be found here, and we've addressed hemp issues in other states and at the federal level elsewhere on the Cannabis Law Blog.)

House Bill 4963

Slow payment and no payment issues are endemic in Michigan's cannabis industry. With struggling retailers and tremendous overproduction, growers and processors demanding payment up front are hard-pressed to sell their wares. (Michigan's Cannabis Regulatory Agency ("CRA") reports show months of unsold inventory and close to a million pounds of fresh frozen waiting to be processed.)

HB 4963 would amend Michigan's adult-use law to require all marijuana licensees to pay for product at the time of transfer. While numerous growers and processors have advocated for this change, not all retailers are in support. Retailers negotiating lower wholesale prices in exchange for immediate payment fear losing a competitive edge. Others argue that it could leave less well-capitalized retailers unable to obtain product. And the lack of a companion amendment to Michigan's medical law may leave loopholes. Nevertheless, comments on proposed CRA rules and at CRA public meetings show what appears to be overwhelming support for HB 4963's concept.

House Bill 4964

This is the lead bill of a package of tie-barred bills that would prohibit both cannabinoids produced via chemical conversion and intoxicating hemp products. It would also require hemp products to be made only by licensed hemp processors and exclude hemp products from Michigan's food law. The bills are the same as bipartisan bills introduced at the end of the last legislative session.

HB 4964 would repeal Michigan's Industrial Hemp Research and Development Act and create a new "Industrial Hemp Processing Act" to regulate the production and sale of consumable hemp products. Products containing intoxicating or converted cannabinoids would be banned. More specifically, HB 4964:

• Classifies cannabinoids as intoxicating, non-intoxicating, potentially intoxicating, or converted.
  • "Non-intoxicating" cannabinoids are:
    • (a) Full spectrum industrial hemp extract that contains no more than 1.75 milligrams of THC per serving and contains a ratio of cannabidiol to THC of greater than or equal to 15-1.
    • (b) Broad spectrum industrial hemp extract.
    • (c) Cannabidiol.
    • (d) Tetrahydrocannabivarin.
    • (e) Cannabichromene.
    • (f) Cannabicitran.
    • (g) Cannabicyclol.
    • (h) Cannabielsotin.
    • (i) Cannabigerol.
    • (j) Cannabidivarin.
    • (k) Cannabinol.
    • (l) Any other cannabinoid that the CRA designates as non-intoxicating through administrative rulemaking.
  • "Intoxicating" cannabinoids are:
    • (a) Delta-9, delta-8, delta-7, delta-10, delta-6a, and delta-10a THC and their isomers.
    • (b) Exo-tetrahydrocannibinol.
    • (c) Metabolites of THC, including 11-hydroxy-THC, 3-hydroxy-THC, or 7-hydroxy-THC.
    • (d) Hydrogenated forms of THC, including hexahydrocannabinol, hexahydrocannabiphorol, and hexahydrocannabihexol.
    • (e) Synthetic forms of THC, including dronabinol.
    • (f) Ester forms of THC, including delta-8 THC-O-acetate, 4 delta-9 THC-O-acetate, and hexahydrocannabinol-O-acetate.
    • (g) Tetrahydrocannabivarins, including delta-8 tetrahydrocannabivarin but excluding delta-9 tetrahydrocannabivarin.
    • (h) Analogues of tetrahydrocannabinols with an alkyl chain of 4 or more carbon atoms, including tetrathydrocannabiphorols, tetrahydrocannabioctyls, tetrahydrocannabihexols, and tetrahydrocannabutols.
    • (i) Any combination of the compounds, including hexahydrocannabiphorol-o-ester, listed above.
    • (j) Any other cannabinoid that the CRA designates as intoxicating through administrative rulemaking (including by emergency rule).
  • "Potentially intoxicating" cannabinoids are: Any other cannabinoid that has not been determined to be non-intoxicating by a state or federal agency, that CRA finds to be potentially intoxicating, and any cannabinoid that is not a phytocannabinoid.
  • "Converted" cannabinoids are those converted from a different cannabinoid using a chemical reaction; the term does not include a cannabinoid created through decarboxylation of a naturally occurring acidic form of a cannabinoid into the corresponding neutral cannabinoid through the use of heat or light, or both, if the following requirements are met: (i) No chemical reagents or catalysts are used to produce the cannabinoid, and (ii) No other chemical change occurs.
• Processing or selling hemp at wholesale would require a hemp processor license. These could only be granted to applicants with a processing location in Michigan.
• No license would be required to sell at retail, but hemp products must come from a state-licensed processor (creating a possible federal pre-emption issue). All products must be tested.
• Except as allowed under Michigan's marijuana laws, nobody would be allowed to process, sell, or transfer intoxicating, potentially intoxicating, or converted cannabinoids or products containing any of those. In addition to fines, violations would be a 93-day misdemeanor for a first violation, and a one-year misdemeanor for any thereafter. Importantly, the penalties section expressly leaves open the ability for prosecutors to bring felony charges for possession of unlicensed THC products with an intent to deliver them.

House Bill 4965

HB 4965 would amend Michigan's Medical Marihauna Facilities Licensing Act to remove an existing authorization for medical marijuana processors to process hemp.

House Bill 4966

HB 4966 would amend Michigan's Industrial Hemp Growers Act to remove authorization to sell to hemp processors licensed under the Industrial Hemp Research and Development Act. In what appears to be a legislative drafting error, it would not authorize the sale of hemp to hemp processors licensed under HB 4964's new Industrial Hemp Processing Act but would retain the authorization for growers to sell hemp to medical marijuana processors (whose authority to process hemp would be repealed by HB 4965).

House Bill 4967

HB 4967 would amend Michigan's adult use law to remove CRA's authority to make hemp processing rules; that grant of authority would still exist, it would just now emanate from the new Industrial Hemp Processing Act.

Prospects for Action

Legislators in both parties and in the state House and Senate are keenly aware of the need to address the torrent of unregulated industrial hemp products flooding the state. Such products are routinely sold without age-gating in convenience stores near schools, and these products are proven to have contaminants and THC concentration well beyond what can be sold in the regulated marijuana marketplace. The presence of these unregulated products in the marketplace undercuts investment in the regulated marijuana industry in Michigan. With the sponsorship of the relevant committee chair, passage of some form of legislation to address these issues seems likely.

However, as we have noted when reporting on similar efforts in other states, the hemp industry will claim that the bills will lead to the economic devastation of Michigan farmers. Given interest in providing a meaningful market for hemp farmers, and the development of a burgeoning hemp beverage industry that is starting to find its way into Michigan, there are certainly ongoing conversations about how to bridge the gap with compromise legislation. Governor Whitmer's plan to impose new wholesale taxes to fund roads is also a wildcard. In short, expect changes as the bills progress and additional pieces of legislation.

Finally, even if the bills are enacted, their efficacy will ultimately depend upon the will of regulators and law enforcement to enforce the resulting laws. Despite widespread knowledge of and reporting on large-scale unlicensed marijuana production facilities, we have not seen a willingness of Michigan's Attorney General or of many county prosecuting attorneys to bring felony possession with intent to deliver charges against these operators. And the Michigan Legislature, with hemp industry support, has already mandated that Michigan regulators set THC limits to prevent the sale of intoxicating THC products that meet the federal hemp definition by being under .3% Delta-9 THC. That law took effect nearly four years ago (on October 11, 2021), and no such THC limits have yet been established. While THC limits are proposed as part of CRA's current rulemaking efforts, both the content and effective date remain uncertain.

Check back with Dykema's Cannabis Law Blog for further developments.

Originally published September 18, 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.