Michigan’s cannabis industry is facing a sobering reckoning in 2026 that could have lasting ramifications for legal weed.
Since recreational cannabis sales began in December 2019, prices have plummeted, more than 550 dispensaries and cultivators have closed, and thousands of employees have been laid off.
And for the first time, the recreational market saw a decline in annual sales, according to new figures released by the Michigan Cannabis Regulatory Agency (CRA). Adult-use dispensaries rang up $3.17 billion in sales in 2025, down from $3.27 billion in 2024, a decline of about $100 million, or 3.1%.
Prior to 2025, year-over-year growth helped turn Michigan into one of the nation’s largest legal cannabis markets. But beneath that growth was an industry struggling with declining prices from an oversaturated supply.
The dream of a green rush, it turns out, has given way to a cutthroat market where most businesses are fighting to survive.
During the six years of recreational sales, the industry has generated a remarkable $13.23 billion in purchases and $2.2 billion in state and excise taxes that go to local governments, schools, and roads.
But those figures are expected to continue falling this year.
Despite the mounting problems facing the industry, Gov. Gretchen Whitmer and state lawmakers approved a measure late last year to impose a 24% wholesale tax on cannabis in 2026. Desperate to deliver on her aging pledge to “fix the damn roads,” Whitmer teamed up with the state House to sneak in the tax proposal before the industry and consumers could respond.
Whitmer signed the bill in October, nearly two weeks after the Michigan Department of Treasury estimated the new tax will shrink the wholesale market by 14%, according to records obtained by Metro Times. In other words, the state anticipates that its wholesale tax will chase away customers and cause a significant decline in excise and sales tax revenue.
Meanwhile, legislators have not touched the 4% liquor tax since it was set in 1985. That may be because the liquor industry has one of the most powerful lobbies and has donated heavily to Whitmer and other lawmakers.
“They took advantage of a fledgling industry that isn’t organized, and they did it without any public discussion and punched it through,” Stuart Carter, who owns Detroit dispensary Utopia Gardens and a cultivation facility, tells Metro Times. “Now everyone is scrambling to figure out what to do.”
Carter and other business owners say the new tax will deepen the downturn, forcing more dispensaries, processors, and cultivators to close and giving an upper hand to the larger corporate retailers and grow operations that provide mediocre product.
“The multi-chain operators are in the best position to weather this because they are buying in bulk and they can diffuse losses at some of their stores,” Carter says. “It’s the smaller entrepreneurs who are going to be the most affected.”
Tom Farrell, owner of the Refinery dispensaries in New Buffalo and Kalamazoo and Growing Pains, a cultivator, says the tax is already taking a toll on the industry. He says sales at his New Buffalo dispensary “have been very, very slow,” in part because many consumers mistakenly believe they are responsible for paying the 24% wholesale tax beginning on Jan. 1.
“It’s slower than it has ever been,” Farrell says, adding that the same store saw record sales in December.
Dispensaries stocked up on a lot of weed in December to avoid the tax’s impact. While growers and processors are legally responsible for paying the tax, their options for recouping at least a portion of the extra costs are limited to raising prices or negotiating with dispensaries to absorb some of the increase. In an industry already hanging on by razor-thin margins, those costs are likely to raise prices for consumers, many of whom are already squeezed by inflation and other rising prices.
“There isn’t that much action in early 2026,” Brian Farah, CEO of Hello Farms in Au Gres Township, says. “Everyone bought up in anticipation of the tax.”
Farah isn’t optimistic about this year, saying “2026 is set to be even worse than 2025.”
“We always look out for the Michigan consumer by offering a quality product, but it’s becoming more and more challenging because sales numbers are starting to decline,” Farah says.
Even before the wholesale tax, the industry has been struggling. Prices are a major factor. The average retail price for an ounce of recreational flower fell to $58.20 in December 2025, down from $69.20 a year earlier, and $95.08 in December 2023, according to CRA data. The state has become one of the cheapest legal cannabis markets in the country, which is a win for consumers, but it’s a tough reality for businesses trying to stay afloat.
By the end of 2025, Michigan had 2,171 active cannabis licenses, down 85 from the prior year, marking the first year-over-year decline in active licenses since adult-use began. The CRA’s licensing records show 940 licenses are no longer active.
Growers are feeling the pressure the most. Michigan currently has 430 active grow operations, but 191 have closed since the industry began. That means about 30.8% of growers have gone out of business over the past six years.
In Detroit, at least 14 cannabis businesses have closed since the city began issuing licenses in late 2022.
Even with the closures, the market is still crowded. New growers and processors continue to enter the industry nearly as fast as those leaving it. Cannabis operators say oversupply is going to continue to eat away at the industry this year.
“There is way too much supply. There’s too much product,” Farrell says.
As an example of how bad it has gotten, Farrell points to one brand that is making just a 25-cent profit off of a vape cartridge.
Whitmer’s office won’t responds to Metro Times’s questions about the cannabis industry or how the wholesale tax is impacting the market. Instead, they referred us to the CRA, which had nothing to do with the tax and isn’t implementing it.
CRA spokesman David Harns says changes in a new industry are normal and are similar to the challenges facing other cannabis markets.
“Since legalization, Michigan’s cannabis industry has experienced significant growth, making the state one of the top producers in the country,” Harns says. “As the market continues to mature, fluctuations in supply and demand are expected and consistent with patterns seen in other states that legalized earlier.”
After voting in favor of the wholesale tax, the state Senate introduced a set of bills on Oct. 2 that would limit competition in hopes of reducing the oversupply.
Senate Bill 597, introduced by Sens. Sam Singh, D-East Lansing, and Jeremy Moss, D-Southfield, would limit each municipality to one dispensary for every 10,000 residents. If approved, the legislation would prevent the CRA from approving new dispensary licenses in municipalities that already exceed the limit. Municipalities with fewer than 10,000 residents would be limited to one retail license.
While many in the industry support the legislation, it threatens smaller cities like Hazel Park (pop. 19,431), Ferndale (pop. 19,431), and Inkster (pop. 25,108), which have become cannabis hubs and rely on the tax revenue. Hazel Park has nine dispensaries, Ferndale has six, and Inkster has seven, according to CRA records. The new legislation would limit Hazel Park and Ferndale to one dispensary each and Inkster to two.
The legislation wouldn’t force existing dispensaries to close, but once one shuts down, it can’t be replaced until the number of retailers fall below the proposed cap.
For cannabis workers, this is a nerve-racking year. Michigan’s regulated cannabis industry remains a major employer, with 41,248 workers counted in December 2025. Those jobs include dispensary employees, cultivation and processing staff, delivery drivers, compliance specialists, security teams, and others.
“People are really scared,” Farrell says. “I have employees asking me if they are going to still have a job.”
Municipal budgets are also at risk. Michigan shares adult-use cannabis excise tax revenue with communities that allow dispensaries and other cannabis marijuana businesses to operate, and the payments have become an important revenue stream in those cash-strapped cities and townships. In fiscal year 2024, Michigan distributed nearly $100 million to communities, with each eligible municipality, county, and tribe receiving more than $58,200 per licensed retail store and microbusiness within its borders.
If more retailers shut down and sales weaken, local distributions will shrink.
“The state is going to lose excise and sales taxes because of the wholesale tax,” Stewart says.
As frustration grows over the legal industry, business owners are worried more consumers will go back to an illicit market that doesn’t face steep tax rates. If that happens, operators say, the legal market will continue to shrink, and the state will have less revenue in the future.
For now, dispensaries, growers, processors, and other cannabis businesses will have to find a way to adapt, and it won’t be easy.
“We want to have a sustainable Michigan business that gives back to the customers,” Farah says. “But with these changes, it will be difficult to navigate these waters.”
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Steve Neavling
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