Is Detroit’s Upcoming Cannabis Business Licensing Process a Path Through the Clouds or an Echo of 2021?

Despite litigation and pending hearing on a request for injunction, the city of Detroit recently announced that on Aug. 1 it will begin accepting online license applications for adult use marijuana retailers, micro-business and consumption lounges.

On July 12, the Detroit City Council voted to open Phase 1 of limited licensing applications, which cover applications for adult use marijuana retailers, micro-businesses and consumption lounges pursuant to the city's Adult-Use Marijuana Ordinance, which went into effect on April 20. The ordinance was drafted after a federal lawsuit was filed in the U.S. District Court for the Eastern District of Michigan challenging the city’s prior adult use recreational cannabis ordinance and Judge Bernard Friedman, in granting a temporary restraining order blocking the city from processing recreational cannabis licenses, found that the prior ordinance was “likely unconstitutional.” 

There are currently two separate lawsuits challenging various aspects of the ordinance, and a scheduled hearing on the plaintiffs’ request for preliminary injunction set to take place on July 28. Despite this litigation, the application process is currently scheduled to open on Aug. 1 with applications being accepted through August 31. The application is expected to be available beginning on Aug. 1 at the following website:

City officials intend to award up to a total of 100 retailer licenses, 30 microbusiness licenses and 30 consumption lounge licenses over the course of three separate phases, although a potential injunction could delay any application process as it did in 2021. During the first phase of the application process, the following licenses would be awarded:

Limited Licenses Awarded During First Round of Application Process  
Social Equity Retailer 20
General Retailer 20
Micro-Business – Equity License 5
Micro-Business – General 5
Consumption Lounge – Equity License 5
Consumption Lounge – General 5

Applicant Scoring Process

Applications will be scored on a 100-point system detailed in a table based on the following categories and criteria: 1) Business Plan; 2) Site Control; 3) Due Diligence; 4) Community Investment; and 5) an opportunity to score additional points through Social Equity Scoring Criteria [27 points maximum].

Licenses are to be granted in order of applicant scores, with tiebreaker lotteries used for applicants who 1) have received the same score; and 2) have earned a minimum of 100 points of the General Scoring Criteria and a minimum of 5 points of the Social Equity Scoring Criteria.

Pending Litigation and Motions for Injunction

At least two lawsuits are pending against the city, challenging the ordinance and requesting judicial intervention to halt the issuance of adult-use licenses under it. House of Dank, a dispensary with several medical cannabis dispensaries located within the city, acting as lead plaintiff along with several other dispensaries, and Jars Cannabis, which also owns and operates two medical cannabis dispensaries in Detroit, have each filed separate lawsuits, challenging a provision in the ordinance which has been interpreted to delay the issuance of adult use retailer licenses to existing medical marijuana dispensaries until 2027.

On July 28, in a scenario with substantial parallels to the events in 2021, Wayne County Circuit Court Judge Leslie Kim Smith will hear arguments on House of Dank’s request for preliminary injunction. If granted, an injunction could stop the city from accepting applications or issuing licenses under the ordinance indefinitely, just as the June 2021 order issued by  Judge Bernard Friedman of the U.S. District Court for the Eastern District of Michigan halted the application process.

While the city plans to open its application process on Aug. 1, further delays from the pending litigation are possible. In an industry where its participants have become accustomed to uncertainty, potential applicants should gear up for an Aug. 1 application process, but also understand that history may repeat itself just a little over a year later.

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