Company Sues Detroit Over New Recreational Pot Ordinance

A Michigan cannabis retailer has filed a lawsuit against the city of Detroit over a newly passed ordinance that took effect last month.

The Detroit News reports that the suit was “brought by four House of Dank dispensaries—each operating under a unique name,” asserting that the ordinance passed by the city council runs afoul of Michigan’s adult-use recreational cannabis law that was approved by voters in 2018.

According to the Detroit News, the ordinance, which officially took effect on April 20, “doesn’t allow medical marijuana establishments to be eligible to obtain a recreational license for five years.”

Per the Detroit Free Press, the plaintiffs assert that “state law specifies that once municipalities opt into allowing cannabis businesses within city limits, they cannot prevent medical marijuana licensees from obtaining recreational licenses,” and that the ordinance is also problematic because it “prohibits ownership interest in more than one such retail license, meaning even if a medical marijuana business owner gets a recreational license, they could only have it for one store location.”

Should the city adhere to that ordinance, the plaintiffs argue that “medical facilities would not be given a shot at getting a recreational license until 2027, when the medical businesses would have likely already closed their doors from lack of sales,” the Detroit Free Press reported, adding that the plaintiffs have asked “the court to intervene and stop Detroit from prohibiting dispensaries that sell both medical and recreational cannabis.”

The lawsuit represents just the latest setback in Detroit’s effort to belatedly implement an adult-use cannabis market in the city. 

While a majority of Michigan voters approved a ballot measure legalizing recreational pot use for adults in 2018, the state’s most populous city opted out.

In 2020, a year after the first recreational dispensaries opened in the state, Detroit’s city council approved a plan clearing the way for adult-use sales to begin in the city.

The Detroit News reported at the time that the plan sought to “ensure residents will have an equitable opportunity to participate in an industry that’s estimated to yield $3 billion in annual sales,” ensuring that “legacy Detroiters be able to purchase city-owned land at 25% of the fair market value and that all application fees be slashed to 1% of the total cost.”

But last summer, a federal judge ruled that ordinance was likely unconstitutional because it awarded “an unfair, irrational and likely unconstitutional advantage to long-term Detroit residents over all other applicants.”

That forced the Detroit city council to start from scratch once again. Last month, the council passed the latest ordinance, setting the stage for the city to begin processing applications from would-be retailers.

But the latest lawsuit, filed on Wednesday, asserts that the city is “attempting to give certain preferred newcomer applicants an artificial head start by preventing existing medical marijuana provisioning center licensees in the city from even applying until at least 2027—which clearly violates both the letter and spirit of the Michigan Regulation and Taxation Marihuana Act,” the Detroit News reported.

Michael DiLaura, the general counsel for House of Dank, told the Detroit News that “existing [medical cannabis] stores employ thousands of people, pay taxes, paved the way for this industry, and now they’re being legislated out of business unlawfully.”

DiLaura said that there “are a number of stakeholders that feel they were wronged by” the ordinance.

“It’s like the old taxi medallion or golden ticket,” DiLaura said. “That’s just not right and not the best way to design inclusion and opportunity. These stores should be open; We should encourage more people to get into the business but prioritize those that paved the way.”