Two new laws passed in Michigan that will allow legal cannabis businesses in the state, to work with Indian tribal dispensaries. They are awaiting the governor’s signature.
New Michigan laws to work with tribal dispensaries
Last week, Michigan’s House of Representatives passed two bills. The two bills, SB 180 and SB 179, passed through the Senate earlier in June. The meat of the story is around SB 180; although the two bills work together, and neither can go into effect, without the other. This makes them two parts of the same general law.
These new laws, should they get signed off on, would make it legal for approved operators in Michigan to make deals with Indian tribal dispensaries. Without the bill, the two function as separate entities due to Native American sovereignty. Though it certainly hasn’t always been respected, the US does afford Native American populations a certain amount of sovereignty due to the extensive century-long slaughter that occurred when European settlers colonized the Americas.
In Michigan, the legal cannabis trade is governed by the CRA – Cannabis Regulatory Authority. SB 180 would allow this agency to legally deal with the tribal dispensaries in terms of regulatory issues; as well as to allow the transport of cannabis products, to and from tribal locations. The second part, SB 179, would allow some of the collected tax money from cannabis, to go back to the tribes based on sales. This last line is important, because it involves a very big catch.
Michigan has a high 10% excise sin tax on legal cannabis products, which is imposed under the idea that cannabis is dangerous; and which immediately makes for high and unnecessary tax rates on all cannabis products. This tax is added on despite other more standard taxes, like sales tax; even though it takes away the ability to be competitive with lower-priced black markets. Under SB 180, if a tribe enters into an agreement with the CRA, its then required to also charge and collect at least 10% tax. As in, Michigan is telling the tribes they would have to charge more money for products.
This bill is seemingly designed to encourage the tribes to raise their prices. Of course, this would make them less competitive with both legal markets, and black markets; with no obvious upside for the tribes. The tribes don’t need help from the state of Michigan to sell their products, which makes it questionable why any would sign a deal with the CRA. It’s desirable for Michigan, on the other hand; because it would level the playing fields, and require higher pricing for Native American establishments. This would make them less competitive with state dispensaries.
Will it matter if the governor signs the laws or not? It’s hard to imagine this working, but then, people are certainly corruptible. Even with the ability for corruption, though, the entire reason the current model (without such a law) is so useful for tribes, is because it allows for a high level of competition. If any tribe makes a deal with the CRA, it’ll throw away its ability for this. It looks like a hail Mary move by Michigan to attempt to stop a tribal market, that it already knows it can’t compete with.
Native Americans and weed
Native American sovereignty is seen with Indian casinos; which were the first way the Native American population began using its separateness to its advantage. And it worked. But times changed; and the introduction of online casinos has cut into the sales of brick and mortar locations, rendering many obsolete. As a result of this shift, tribes have recently picked up on their ability to enter the cannabis industry; without the heavy regulatory laws and taxes of the legal US markets.
This, like gambling, was not an immediate win. Despite the US talking out of one side of its mouth about Native American sovereignty since the signing of the constitution; it isn’t really upheld universally. In fact, casinos stand as an example both of this sovereignty, as well as the push-back to it. Native American tribes, despite this supposed sovereignty, must share profits with states, and submit to regulation under the Indian Gaming Regulatory Act; which indicates a lack of total sovereignty in the end.
When it comes to cannabis, US governments can still get in the way of tribal businesses; but its very much frowned on. In 2013, the Cole Memo, along with growing attention on the situation; more solidified the idea publicly that US governments shouldn’t tell Indian populations what they can do, without consultation. Although it also does not take away the federal government’s ability to intervene. This was repealed in 2018, but there is strong hesitance by US governments to go after tribes. Likely because it looks really bad; and because the constitution technically protects their rights of sovereignty.
In the last few years, more and more tribal dispensaries have opened in different states. Tribes can quickly legalize and update laws, which is a huge advantage over the slow-moving governmental systems of America. Therefore, they can institute and change pricing schemes overnight, and remain competitive with any other cannabis market. They are also not beholden to the expensive regulatory measures that US governments continue to institute; despite this leading to producers going broke, and not enough dispensaries to sell products.
Beyond this, Native American tribes don’t need to include unnecessary taxes like sin taxes; which drive up prices even more, and put a huge burden on producers. Without these extra costs, or slow systems; a tribe can legalize overnight, have a business up and running in days or weeks, and can adapt it quickly to changing conditions. Best part of all, because of the extreme abuse of these populations historically, and the growing awareness and disapproval of this; federal and state governments have a hard time complaining; or using the same fear-tactic lines against them, that they use against black markets.
Where else we see this happen
Though several tribal operations opened within the last few years, the last several months has seen an explosion in the general story; and a pick-up in the rate at which the tribes are entering the business. This has spurred different moves by different states. It should be remembered every state is currently having issues reigning in black markets, dealing with overproduction, and opening enough dispensaries; which are all issues related to poorly constructed regulation.
Stories out of Minnesota show a possibility of states and tribes working together; which exemplifies the lack of state power. This was evidenced when the Chippewa’s White Earth reservation legalized cannabis in August, and then nearly immediately opened dispensaries. A tobacco store on the reservation called Asema Tobacco and Pipe, advertised on social media it would sell weed; though it was not authorized by tribal law to do so.
The act was met by a raid performed by tribal police and state police in conjunction. What exactly this means, is hard to say. But it does show Minnesota law enforcement had to play ball with tribal rights, and could not act on its own; or at the very least, didn’t want the public scrutiny of attempting to do so. It could not tear anything down, or make arrests, or show any violence. This is a new concept. In the past, this could have led to massive bloodshed.
In New York, a more direct move was made, that shows the state is grappling with the issue of competition. Last month, about a third of New York’s total legislature signed an open letter to the governor, to support a bill entitled the Cannabis Crop Rescue Act. This is actually two companion bills; one from the Senate and one from the Assembly. They would allow legal New York producers to sell their product to tribal dispensaries.
Much like with Michigan, there is a logical discrepancy, however. Michigan’s law would require tribal dispensaries to limit their competitiveness by raising prices. The New York law depends on tribal dispensaries willing to pay for US-grown weed. While the implication is that the tribes would pay a break-even amount; they can logically grow weed way more inexpensively, which makes this a pretty bad deal.
It’s hard to know if there’s pressure put on tribes to submit to deals. The reality is that US governments have never been fair to them in the past; and public scrutiny might be the impetus for backhanded moves. My thought is that any tribe that makes a deal with a US government, that specifically limits its own business; is likely doing so out of some kind of pressure, or a deal meant for personal gain over tribal gain. As of right now, however, its difficult to know if the tribes will play ball; or if states like New York and Michigan, are simply flailing around, and hoping for a good response.
Indian tribal dispensaries are quickly showing an ability to rise to the top of legal weed markets, and Michigan is a great example. It’s hard to say how this will affect current legal and black markets going forward; but it makes for one of the most interesting stories to follow in today’s world of weed. Plus, the biggest positive of all, is that tribal dispensaries give buyers a new way to buy legal weed products, and to do so at generally lower prices.
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