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Chef Nigel Douglas of Michigan Cannabis Chefs LLC says marijuana has many possible uses in cooking. The company is offering ticketed events in the Muskegon area and private catering featuring marijuana-infused foods. Chef Nigel Douglas of Michigan Cannabis Chefs LLC says marijuana has many possible uses in cooking. The company is offering ticketed events in the Muskegon area and private catering featuring marijuana-infused foods. COURTESY PHOTO

Legal questions surround recreational pot entrepreneurs

BY Sunday, March 03, 2019 09:47pm

On a recent night in February, around 50 people attended a private dinner in Muskegon Heights featuring a 10-course tasting meal. The fine-dining plates included mussels and crab cakes made with fresh crab sourced from Fish Lads of Grand Rapids Inc.

Michigan Cannabis Chefs LLC hosted the $35-per-person event, offering dishes infused with marijuana throughout the night.

The company — led by Cory and Lynette Roberts and chef Nigel Douglas — formed in the weeks after Michigan’s recreational marijuana law took effect in early December. It hosts private dinners at a facility in the Muskegon area and also caters private parties, offering standard meals and dishes infused with marijuana.

“My wife has been cooking with cannabis for a long time. We’re able to come out in the open with it now,” Roberts said.

The partners say the possibilities of cooking with marijuana are limitless.

“It’s pretty much anything you could think of that’s edible,” Douglas said. “Anything is fuse-able nowadays — butters, oils. We’re using distillate to gauge the dosage to know the intake. You can break that down into water, alcohol, marinating meat.”

Cory Roberts says the fee charged at the latest tasting meal was below the market rate for the food, meaning they were effectively giving away the marijuana.

The team is among the growing number of entrepreneurs who are breaking into the recreational weed market in Michigan even though retail stores likely won’t open until December. In West Michigan, businesses also are “gifting” marijuana with the purchase of used books and turning their bars into private marijuana clubs during certain hours.

However, attorneys say these businesses are taking a significant risk in some instances, jeopardizing their ability to gain a state marijuana license as well as keep state-issued liquor licenses. The legal gray area of whether they’re truly gifting pot or hosting private events may require a test case in the courts — if local law enforcement and prosecutors choose to take action.

“Gray areas are not good places to be,” said Ben Wrigley, an attorney with Cannalex Law in Grand Rapids. “It’s one of those things where you weigh the risk. Do you want to be the test case in the gray area?”

Wrigley noted “we’re seeing everything” when it comes to ways of profiting, albeit indirectly, from recreational marijuana.

“Everybody’s going to skirt the line, get as close to the line as they can or go over the line, realizing the penalties may not be that great the first time around,” Wrigley said. “As lawyers, we tell them it’s against the law.”

Gifting gray area?

Multiple companies gifting marijuana in Southeast Michigan have surfaced in recent months. Smoke’s Chocolate in Ann Arbor sells chocolate for a certain amount based on how much marijuana comes with it. Ypsilanti-based BlazeMichigan sells used books — priced from $65 to $400 — and gifts edibles, concentrate or flower. As of last week, BlazeMichigan was offering delivery to Grand Rapids.

Wrigley and others say there isn’t much of a gray area when it comes to these businesses — it all depends on how proactive local policy and prosecutors decide to be. The South Bend Tribune reported in February that Berrien County Prosecutor Michael Sepic is willing to challenge a gifting company in court.

“It’s called a tie-in. You can’t get one without the other,” Wrigley said.

He also pointed to a section in the Michigan Regulation and Taxation of Marihuana Act (MRTMA) that says marijuana can’t be bundled in a single transaction with a product or service that’s not subject to taxation in the law.

“Giving it away with something else tied to it, we believe, is remuneration,” Wrigley said. “Whether the local law enforcement agencies are going to pursue it is still to be seen.”

The penalty under state law for selling less than 2.5 ounces is a civil infraction and $100 fine.

Members only

Meanwhile, at least two bars in West Michigan have allowed private smoking clubs during certain hours and days of the week.

Rupert’s Brew House LLC in Kalamazoo has been hosting Cannabis Club nights at its downtown bar since early January. Starting at one night a week, the brewery now hosts events four nights a week to avoid a “bottleneck” of people, said owner Mark Rupert. One hundred to 200 people show up at each event.

Rupert has formed a cooperative to host the event, which charges a membership fee for the night. Members aren’t allowed to sell marijuana or bring in tobacco products. They are able to purchase beer from the bar, though, similar to a wedding or birthday party renting out the space for a private event.

“It does generate a lot more interest in people wanting to come in (to the bar),” Rupert said. “We’ve only seen the beginning of it.”

Rupert said Curve Inn Inc., a bar and restaurant in South Haven, essentially used his same idea.

While Rupert maintains the club is legal, and has had local law enforcement and health officials OK the operation, state officials disagree.

David Harns, a spokesperson with the state Department of Licensing and Regulatory Affairs, said bars and breweries that offer private smoking clubs risk losing their liquor licenses.

“From the (Michigan Liquor Control Commission) perspective, a brewery may not act as a private club unless they surrender their liquor license to the Commission or put it into escrow,” Harns said. “A licensee could be held responsible for violations, and would be subject to penalties including fines, suspension, or revocation, depending on the activity that resulted in the violation.”

As of late February, Rupert said the “MLCC has not said a word to me. I don’t see it being a risk. We’re not selling anything, and no one in here is doing anything against the law.”

Pushing boundaries

Tami VandenBerg, who helped organize the West Michigan Cannabis Guild and co-owns Grand Rapids bars The Meanwhile and Pyramid Scheme, said she considered hosting a private club at one of her bars, but “we didn’t even want to think about putting our liquor license in jeopardy.”

“Grand Rapids is not a hands-off type of city,” VandenBerg said. “We are waiting to see what happens with the brewery in Kalamazoo. I admire them to no end to be willing to be that test case.”

She added: “I would love to see some people on the west side push the boundaries.”

Harns said the agency is not commenting on the gifting companies.

“The Bureau (of Marijuana Regulation) is reviewing the provisions of the MRTMA as we begin to work toward implementing the facility regulatory program,” Harns said.

On Feb. 25, LARA announced it would gather information from the public as it starts the formal administrative rulemaking process. Applications are required to be available by Dec. 6, 2019.

Elsewhere in the state, black market companies are reportedly thriving. The Detroit Metro Times reported in late February that more than 100 illicit delivery services exist across the state, clearly in violation of state law. The problem is black-market services aren’t subject to the taxes and fees of regulated medical marijuana businesses and can undercut their prices.

Josh Hovey, spokesperson for the Michigan Cannabis Industry Association, says the recreational law gives LARA leeway to create a new license level for something like a social club. He added that it’s “fairly clear under the law that a gift with the expectation of some kind of compensation isn’t truly a gift. It’s a very gray area of the law, and people are being very risky with those types of business endeavors.”

However, Hovey believes the illicit and gray-area businesses will fade out as the regulated market takes hold in early 2020.

“There’s the risk that someone who’s brazenly flaunting the law in a county with a more conservative prosecutor is likely to run into trouble,” he said. “I do think these businesses will be short-lived.”

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