LANSING – People with a small ownership stake in marijuana businesses wouldn’t have to go through an extensive background check under a bill that passed the House on Tuesday.
Currently, a person who wants to invest any amount of money into a marijuana business is subject to a criminal and financial background check by the state Department of Licensing and Regulatory Affairs.
Those background checks have resulted in 131 applicants getting denied either pre-qualification status or an actual license from the state's Medical Marijuana Licensing Board, a five-member body that is appointed by the governor from names recommended by the Senate Majority Leader and Speaker of the House.
Under the new bill — HB 6500, which passed on a 100-8 vote — anyone who has invested less than 5 percent in a business doesn’t have to go through the background checks, leaving some worried that shady characters could slide into the lucrative medical marijuana business without any scrutiny.
In addition, the licensing board can only look at criminal convictions of applicants when considering whether to award a license. Unlike current law, they won’t be able to use arrests, charges or expungements of criminal records of people trying to become marijuana entrepreneurs as a reason to deny a license.
But state Rep. Klint Kesto, R-Commerce Township, said the new relaxed rules will encourage investment in the state's fledgling marijuana industry. And LARA has signaled that the department also supports the bills.
“If you own less than 5 percent, then you don’t have to go through all the financial disclosures,” Kesto said. “If they own less than 5 percent, they’re not really decision makers, they’re really just investors. And rather than clog the system and create lag in issuing licenses, this allows investment to come into state more easily.”
Since the licensing board began awarding licenses in August, 91 licenses, including 45 dispensaries, have been approved and 178 businesses have been given pre-qualification status. Another 37 license applications and 94 pre-qualification applications — which generally are given before a marijuana business has approval from a community to locate their business there — have been denied.
On Nov. 6, voters approved a ballot proposal that legalizes marijuana for adult recreational use. The licensing process for recreational businesses will be handled by LARA, rather than the politically appointed board. After the state develops the rules and regulations for the new recreational market, marijuana is expected to become commercially available for sale in early 2020.
The bill now moves to the Senate for consideration.
Kathleen Gray covers the marijuana industry for the Detroit Free Press. Contact her: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.
