Dykema lawyers discuss cannabis industry.

Byline: Thomas Franz

With the window for adult-use cannabis applications opening Nov. 1, several attorneys from Dykema Gossett PLLC held a forum to cover the coming changes to marijuana laws in Michigan and how businesses can ready themselves.

R. Lance Boldrey, a Lansing attorney who leads Dykema's cannabis practice group, said there will be an expedited process for companies already licensed in the medical space.

"The state has several hundred licenses for growing, retail, testing and secure transport in medical. We fully expect that the first of those licensees will have those licenses in hand before the end of this calendar year," Boldrey said.

Boldrey added that there will be significant interplay between the medical and adult-use industry, which means medical licensees will be able to transfer their medical product to the adult-use market within their same company.

"We won't be waiting for growers to put plants in the ground and harvest and produce. We'll be operational with adult use very quickly," Boldrey said.

Boldrey explained that a key difference between medical and adult-use cannabis is that municipalities choose to "opt out" of adult use rather than opting in for medical facilities.

Presently, Boldrey said about 150 of more than 1,700 Michigan municipalities have opted into medical.

For adult-use communities, the new statute dictates that municipalities provide a competitive licensing process if they set a cap on the number of adult-use licenses.

"That's going to be a nightmare for communities in Michigan which have had a first-come, first-serve method, or a lottery method when it comes to medical, and they're now going to have to score for adult use," Boldrey said. "We have seen lots of litigation of cities' selection criteria, and we expect the same for adult use where you have people with little experience judging these investments."

M&A possibilities

Dykema's director of business services Jin-Kyu Koh said during the forum that the cannabis industry is similar to the "Wild West" currently as it relates to mergers and acquisitions.

"When representing investors or the company in a capital raising transaction, you really need to be mindful and comply with the regulatory framework," said Koh, who is based in Detroit.

In banking, Koh said many M&A transactions include escrow for security and indemnification obligations, but because of the federal prohibition, the options for escrow agents are limited.

"In structuring these...