Michigan Cannabis Industry Sues State Over New 24% Tax

Michigan’s cannabis industry isn’t taking the state’s latest move lying down. After lawmakers slipped a massive new 24% wholesale tax on marijuana into the recently passed state budget, the Michigan Cannabis Industry Association (MCIA) has officially filed a lawsuit to stop it.

If you haven’t heard, this new tax is set to kick in on January 1, 2026, and state officials estimate it’ll bring in around $420 million a year, most of which is supposed to go toward road repairs.

Sounds great for the roads, right? Maybe not so great for the cannabis businesses who say they’re already struggling under the weight of heavy regulation and existing taxes.

Why Michigan’s Cannabis Industry Is Furious

In a lawsuit filed Tuesday in the Michigan Court of Claims, the MCIA argues that this tax doesn’t just sting financially, it’s also unconstitutional.

Michigan voters approved recreational marijuana back in 2018 through a ballot proposal, which became the Michigan Regulation and Taxation of Marihuana Act.

Because that law came directly from voters, our state constitution says it can’t be changed or amended unless lawmakers pass it with a three-fourths majority vote, or if voters approve it themselves.

That didn’t happen. The budget, which included the new tax, passed with a simple majority vote instead.

In their statement, the MCIA didn’t mince words:

“The lawsuit details multiple ways in which the legislators acted unconstitutionally in the passage of this tax. Notably, Article 2 Section 9 of the Michigan Constitution requires a three-quarters vote, rather than a simple majority vote, to amend any law enacted by citizen initiative… The Association is asking the Court to strike the tax in its entirety.”

What’s at Stake for Michigan’s Cannabis Market?

A 24% wholesale tax would likely hit smaller cannabis businesses the hardest — the mom-and-pop growers, retailers, and processors who’ve already seen margins shrink in the past few years. Industry advocates say it could lead to layoffs, higher prices for consumers, or even drive people back to the black market.

And while $420 million a year for Michigan’s infrastructure sounds impressive, cannabis business owners argue it’s not worth destabilizing an entire industry that voters fought to legalize in the first place.

Now, the case will now move through the Michigan Court of Claims, where judges will decide whether the new tax holds up under the state constitution. Until then, the cannabis community is holding its breath (and preparing for a long legal battle.)

If the MCIA wins, it could set a precedent that protects voter-approved initiatives across Michigan from being altered by late-night budget votes. If it loses, cannabis businesses will need to brace for a major financial hit starting in 2026.