Bipartisan legislation would clear the way for the state of Michigan to enter into compacts with American Indian tribes over cannabis industry regulation and taxation.
State lawmakers and tribal advocates say the two-bill package, which passed both chambers of the Legislature this month and now awaits action from Gov. Gretchen Whitmer, would create parity between tribally licensed and state licensed cannabis operators.
If enacted, Senate Bills 179 and 180 would allow tribal cannabis operators to buy or sell products within the state’s regulated market so long as the tribes match the state’s 10% excise tax on cannabis.
Tribes would also qualify for distributions from the state’s Marihuana Regulation Fund at the same rate as counties and local governments.
The fund pays out 15% of its unexpended balance each year to counties and local governments based on the number of marijuana retailers and microbusinesses within their jurisdictions.
Cannabis compacts “would finally allow tribally owned businesses access to the state recreational marijuana economy and access to the Marijuana Enforcement Tracking and Compliance system, both of which tribal nations have been unable to participate in since marijuana was first legalized in the state of Michigan,” Whitney Gravelle, president of the Bay Mills Indian Community, said in recent testimony on the bills.
Bay Mills Indian Community, which is based in Brimley in Michigan’s eastern Upper Peninsula and has about 2,200 enrolled members, was the first tribe to legalize the recreational use of marijuana, the first to open a tribally owned marijuana retail business within its reservation, and the first to launch its own commercial grow operation.
Federally recognized tribes are sovereign nations that can create laws and regulations within their reservations, but their ability to expand beyond those boundaries has been limited by state law, which to date has not allowed the Cannabis Regulatory Agency to interact with tribes.
“Presently, Bay Mills Indian Community licenses and regulates our marijuana activity within the jurisdiction of our tribal nation, but we are unable to share that information with the state, nor does the state share any information with Bay Mills,” Gravelle said. “This means that when there’s a product issue or a product recall, we are not part of that product recall within the METRC system and we only find out through public notice. And we are not able to share any information that we may have with the state of Michigan regarding our product.”
Gravelle called on leaders to pass the legislation as an important step “to be able to protect public health and welfare” for the state and tribal communities.
In addition to Gravelle at Bay Mills Indian Community, representatives from the Grand Traverse Band of Ottawa and Chippewa Indians and the Saginaw Chippewa Indian Tribe of Michigan indicated support for the bills, along with the Michigan Cannabis Industry Association and Marshall-based Common Citizen, one of the state’s largest cannabis operators.
The state Cannabis Regulatory Agency also supports the bills.
A spokesperson for the governor’s office said it was too soon to tell how Whitmer would weigh in on the legislation.
‘Proactive and cooperative’
Tanya Gibbs, managing partner in the Grand Rapids office of Rosette LLP, a majority Native-owned law firm, thinks the legislation would be a good deal for Michigan tribes that choose to get into the cannabis industry. Gibbs advises tribes on non-gaming economic development projects, including cannabis operations.
“Like any piece of legislation, it’s not perfect, but the biggest win is the ability for tribes to compact directly with the CRA. That’s going to be helpful,” said Gibbs, noting that she wishes the state “had not left tribes out to begin with.”
Even so, Gibbs praised the state for taking an individual approach to meet tribes where they are on the issue of cannabis, as opposed to forcing them all into a blanket agreement. She said the CRA has been holding monthly meetings with Michigan tribes about this legislation for the last two years. Gibbs described the CRA as being “proactive and cooperative” with the tribes in pushing for this legislation to get enacted.
“This was a situation where the state was like, ‘We understand that you’re all doing it kind of differently, and some of you may not participate at all, and we’re OK with that,’” Gibbs said. “Time will tell to see how accurate that will end up being.”
According to Gibbs, the CRA has informed the tribes that it is working on a draft 10-point compact, but the agency has not yet shared the document with stakeholders.
Sen. Jeff Irwin, a Democrat from Ann Arbor who sponsored one of the bills, said the bill package will eliminate barriers and create a fair system for both tribal and state-licensed operators.
“We’d no longer have two silos but one system for the trade in cannabis here in Michigan,” he said in testimony during a recent Regulatory Reform committee hearing.
Under the bills, tribes would be given access to the state’s METRC system, which will increase the opportunities for tribal cannabis operators to monetize their excess production. Gibbs called that a “big win” for tribes that are currently producing cannabis and have no outlet for their excess inventory.
“A lot of that is going to waste and costing tribes money,” Gibbs said.
Breaking an impasse
To date, most tribes that are participating in the cannabis industry are doing so as landlords for cannabis operators, generally in areas where the surrounding communities have opted out of allowing recreational cannabis businesses. Tribes, which are exempt from state and local laws, are leveraging their sovereignty to craft laws that allow state-licensed cannabis retailers to operate on tribal lands.
In West Michigan, the Pokagon Band of Potawatomi this spring opened a tribally owned marijuana retail and consumption lounge called Rolling Embers on tribal land near New Buffalo, just over the border from Indiana.
The issue of tribal-state compacts for cannabis arose after Bay Mills Indian Community launched its vertically integrated operations in 2020. At the time, the tribe said the state was unwilling to talk about a path forward toward an agreement.
Gibbs said the impasse began to break in spring 2021 when legislators began drafting the current bills.
She does not expect the legislation to influence more tribes to jump into the cannabis industry, largely because “most tribes in Michigan have already determined how they’re going to engage.”
“I don’t think this necessarily changes anybody’s opinion,” she said. “A majority of the tribes have already made up their mind on it.”
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