More than half of Michigan's $3.2 billion weed industry came from illegal sales

Only legalized for recreational use a year-and-a-half ago, Michigan marijuana has turned into a multi-billion dollar industry.

The business of growing and selling weed in Michigan is now worth nearly $3.2 billion, according to the first-ever study commissioned to assess the economic impact of legal pot in the state.

But not all the news was good. According to the Michigan Cannabis Manufacturers Association, which commissioned a firm to conduct the study, two-thirds of the market is unregulated. That means a lot of untested products - a public safety concern - and a lot of untaxed transactions - a state economic concern.

The study "reflects a vibrant regulated marketplace with unlimited economic potential," said Shelly Edgerton, the Board Chair of the MCMA. But "there are major storm clouds on the horizon," said the group's executive director, Stephen Linder.

Here are some other findings from the study.

State revenue 

From the billions of sales recorded, the study found the state generated $169 million in tax and fee revenues last year. 

Some of that money goes toward schools, roads, and local governments that otherwise wouldn't have in years prior.

Earlier this year, the state reported that an excise tax on marijuana sales would send $10 million to municipalities, $23.2 million to schools and roads, and another $12.5 million toward administrative and start-up costs.

Illicit purchases

But approximately 70% of pot purchases occur outside retail stores - which means most business is still happening outside the public realm. 

According to the report, the off-the-book sales makeup the primary way for Michigan residents to get their weed.

"Our research also shows that a large amount of cannabis comes from sources that are not subject to the State’s safety testing requirements. Transactions from these sources typically do not produce tax revenue," said Brian Peterson, the director of public policy for the Anderson Economic Group. 

How many use weed

The study also found that one in five residents used weed in 2020 - or almost 2 million residents. 

While both took off at the same time, many believe the pandemic's emergency and public health orders to stay home likely created a larger market for prospective pot users. 

Because dispensaries were considered essential services at the time, they were allowed to remain open. 

Growing business

The report also found 400 licensed medical provisioning centers and 300 adult-use retail stores for weed. 

It's a sign the state has seen the legal industry explode with popularity since the first few adult-use stores opened in December 2019. 

Trouble in Detroit

The recreational weed industry didn't see success everywhere, however. It hit a few snags in Detroit after the city attempted to redirect some of its business to residents by prioritizing people that had lived in the city for years.

A lawsuit against the city's plan to give preference to longtime residents successfully challenged its standing in court. Last week, a judge ordered the city to stop the practice, saying it was likely unconstitutional.