LANSING — Michigan’s cannabis industry is pressing forward with a constitutional lawsuit against the state’s 24% wholesale marijuana tax, arguing the levy was imposed illegally and is already triggering layoffs, facility closures, and real-world economic pain across the state’s expanding legal marijuana market.

The case, filed by the Michigan Cannabis Industry Association (MiCIA) and several licensees in the Michigan Court of Claims, challenges the tax as an unlawful amendment to a voter-approved initiative. Meanwhile, cannabis businesses and labor advocates are sounding the alarm about its impact on jobs.

Layoffs and Closures Hit Employers and Workers

Among the most visible impacts is the announced closure of C3 Industries’ cultivation facility in Webberville, which will lay off 62 workers as of mid-February, according to company statements. C3’s CEO Ankur Rungta told local media his company could no longer run the Michigan production site profitably under the new tax regime.

In the Upper Peninsula, Higher Love Cannabis reported layoffs affecting roughly 30% of its workforce, with owner Steven Eckley saying lawmakers “turned their backs on the jobs and economic growth we were creating here.” Eckley warned that quality jobs with benefits are at risk across Michigan if the tax remains in place.

“These decisions aren’t abstract,” Rungta said in a recent interview. “They ripple out to families, landlords, suppliers, and communities that counted on these jobs.” Added Eckley: “If Michigan is going to be unfriendly to small businesses like ours, then we’ll invest and create those same high-paying jobs elsewhere.”

Labor Groups Raise Concerns on Worker Impact

Workers and labor advocates have echoed the industry’s concerns. United Food and Commercial Workers (UFCW) Local 951, which represents cannabis workers in Michigan, said the layoffs reflect mounting instability.

“Cannabis jobs once offered secure, middle-class opportunities,” said UFCW spokesperson Maria Torres. “Now workers are seeing schedules cut, benefits erode, and layoffs across multiple operations — not because demand fell, but because a poorly structured tax has squeezed the economic foundation of the entire supply chain.”

UFCW data indicate that unionization efforts in parts of the state, including Ann Arbor, have gained traction as employees seek stability and protections amid the market downturn.

Michigan’s Cannabis Workforce: Growth, Then Contraction

Until recently, Michigan’s cannabis industry was a national job-creation leader. According to a 2024 Vangst and Whitney Economics report, the state’s legal cannabis market supported 46,746 full-time equivalent jobs as of March 2024, placing it second only to California nationwide. Detroit alone accounted for more than 11,000 jobs.

State regulatory agency data show that direct cannabis employment — from cultivation and manufacturing to retail — stood at roughly 35,688 licensed positions as of the same period.

But employment trends are shifting. Industry analysts point to early contraction in 2025, with workforce counts dropping as operators close facilities or trim payrolls amid oversupply, price pressures, and now the new wholesale levy.

Regional job impacts vary:

  • Detroit metropolitan area remains the largest employment hub, with thousands of dispensaries, growers, and processors.

  • West Michigan and Grand Rapids have seen moderating growth as wholesale pricing stress intensifies.

  • Upper Peninsula operations, such as those owned by Higher Love, have reported layoffs and reduced activity.

Legal Challenge: Constitutional Authority Meets Economic Consequences

At the core of the industry’s lawsuit is the Michigan Regulation and Taxation of Marihuana Act, a voter-approved law that legalized adult-use cannabis and established a limited tax framework intended to grow the legal market and suppress illicit sales.

Under the Michigan Constitution, modifications to a voter-initiated law require a three-quarters vote in both legislative chambers. MiCIA contends the wholesale tax, adopted as part of a broader budget bill passed with simple majorities, effectively rewrites that framework without the supermajority required. The industry argues this tax shifts the economic structure in a way voters never authorized.

State attorneys counter that the original law explicitly allowed for “other taxes,” and that the wholesale levy does not technically amend the initiative.

In December, Sima Patel declined to issue a preliminary injunction to block the tax, finding plaintiffs had not yet shown a likelihood of success on the merits, but allowed the case to proceed toward trial. MiCIA has appealed that ruling to the Michigan Court of Appeals and signaled it may seek review by the Michigan Supreme Court if necessary.

Broader Implications for Jobs and the Market

Industry leaders and labor advocates warn that continued workforce contraction could ultimately undercut both jobs and tax revenues.

Michigan’s cannabis industry once accounted for more than half of the state’s private-sector job growth in a recent period, according to a Crain’s analysis of federal and state data.

“If licensed businesses fail, the state loses jobs, compliance, and the stable tax base voters were promised,” said MiCIA Executive Director Robin Schneider.

As the legal battle unfolds, courts may have to balance constitutional process with tangible economic consequences already unfolding in factories, dispensaries, and workers’ paychecks across Michigan.