💰 Michigan’s Tax Shock • 🍺 Ohio’s Hemp Divide • 🎧 The Hybrid: Pamela Epstein on Hemp’s High Stakes

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Michigan’s 24% wholesale cannabis tax brings the state’s total rate to 40%, ending its cross-border price edge and setting the stage for black-market revival. Ohio’s legislature, meanwhile, plans to legalize THC beverages while banning everything else, a carveout that shows who really shapes hemp law when panic meets lobbying.

A new episode of The Hybrid podcast dropped last week with Pamela Epstein of Terpene Belt - one of the industry’s sharpest legal minds - on hemp’s high-stakes legal future. Listen, like, and subscribe wherever you get your podcasts.

And as always, thanks to the reporters and editors covering this beat. They sit through hearings, read the bills, and surface the stories that make this intelligence possible. Support their work, subscribe, and share it forward.

💰 Michigan’s 40% Cannabis Tax Hits Border Towns
🍺 Ohio Carves Out THC Drinks, Bans Everything Else
🎧 Pamela Epstein on Hemp’s High Stakes

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📌 What Happened: Michigan lawmakers passed a budget avoiding state shutdown by adding a 24% wholesale cannabis tax that takes effect in January, bringing total state tax burden to 40% and making Michigan the second-highest wholesale cannabis tax jurisdiction nationally. Governor Gretchen Whitmer originally proposed 32% but House Republicans negotiated down to 24%, projected to generate $420 million annually for road infrastructure while Senate Democrats embraced the levy to avoid restarting budget negotiations during federal shutdown chaos. Naturally, the Michigan Cannabis Industry Association immediately followed suit same day budget passed, arguing the tax requires supermajority legislative approval because original legalization came through 2018 ballot initiative. Legal experts doubt the lawsuit will prevail, but the optics of the industry resisting are still important. Michigan's cannabis market is vulnerable to market pressures, locally and regionally. Price per ounce has cratered 90% since legalization, and 37 dispensaries failed state reapproval this year due to tax payment delays. Border towns rely on out-of-state customers from Ohio, Minnesota, Indiana and Wisconsin for one-third of Michigan's cannabis revenue, and the price advantage driving that cross-state commerce evaporates when Michigan's tax rate approaches other legal markets.

💡 Why It Matters: This new tax will ripple beyond Michigan. It is likely to reshape Midwest cannabis economics by eliminating the price dynamic that drove regional consumer behavior and border town prosperity. Michigan cultivators sitting on oversupply with plummeting wholesale prices now face further margin compression, making diversion to Illinois and Ohio illicit markets more economically rational even factoring in enforcement risk. Illinois dispensaries will gain competitive positioning as Michigan's rock-bottom pricing disappears, while Ohio's struggling first-year adult-use market gets breathing room against cross-border competition. The constitutional challenge from MCIA at least creates implementation anxiety that likely freezes business planning and capital allocation, with some operators already exploiting federal tax loopholes to preserve cash while awaiting legal resolution. New Senate bills pending to cap licenses and increase municipal veto power over dispensary locations compound the market consolidation pressure, benefiting large MSOs while crushing independent operators who survived oversupply only to face tax burden they can't pass to price-sensitive consumers.

🍺 Ohio House Carves Out Hemp Beverages While Banning Other THC Products

Ohio House Republicans will introduce legislation this week allowing stores and breweries to sell THC-infused beverages while prohibiting all other intoxicating hemp products, following a judge's temporary block of Governor Mike DeWine's executive order banning hemp sales at gas stations and smoke shops. House marijuana expert Jamie Callender told News 5 Cleveland the bill creates a "pretty complete ban other than the beverages" with temporary restrictions while regulators develop rules, bundled with municipal tax revenue distribution from adult-use dispensaries that cities haven't received despite voter-approved legalization as leverage against Senate President Rob McColley who wants to redirect where tax dollars flow. The beverage exemption reveals sophisticated lobbying by legitimate beverage manufacturers who want separation from unregulated gas station gummies that prompted DeWine's emergency action, while the Toledo Blade editorial board explicitly connected hemp to impaired driving deaths and called for complete bans rather than regulation. Cultivators sitting on worthless inventory don't shut down cleanly when you ban their products - they divert to Illinois and Ohio black markets where prices are triple what legal hemp fetched, and the beverage carveout recognizes that THC drinks operate more like alcohol than supplements when properly regulated with age-gating, lab testing, and advertising restrictions. (News 5 Cleveland / Toledo Blade)

🏛️ Pennsylvania Senate Committee Votes Tomorrow on Cannabis Control Board Creation

Pennsylvania's Senate Law & Justice Committee votes Tuesday, October 21 on bipartisan legislation creating a Cannabis Control Board to oversee medical cannabis and intoxicating hemp before adult-use legalization passes, with GOP sponsor Dan Laughlin arguing the state should build regulatory infrastructure now rather than scrambling after legalization. The bill transfers medical program oversight from the Department of Health to the new CCB and establishes hemp product regulations, with Laughlin citing DOH's "glaringly inconsistent, inefficient and lacking transparency" oversight since 2016 medical launch. Pennsylvania remains gridlocked between House Democrats pushing state-run dispensaries and Senate Republicans demanding private licensing, but both chambers agree regulatory capacity needs building regardless of sales model. Creating the agency first is smart sequencing that other states botched by passing legalization then spending years standing up regulators, though Pennsylvania's advantage only matters if legislators actually pass adult-use rather than building infrastructure nobody uses. Unless House and Senate resolve whether Pennsylvania wants Virginia ABC-style monopoly or normal private market, this CCB becomes another agency regulating a program that doesn't exist. (Marijuana Moment)

⚖️ Florida Officials Try Invalidating 200K Signatures on 2026 Cannabis Initiative

Smart & Safe Florida sued the DeSantis administration last week after the Division of Elections directed local supervisors to throw out nearly 200,000 signatures on the 2026 legalization initiative, representing almost one-quarter of signatures needed for ballot qualification despite Trulieve already investing $26 million in the campaign. The lawsuit alleges Florida election officials issued an "unprecedented directive" changing signature verification rules retroactively, while Attorney General James Uthmeier claims he hasn't received official notice to petition the Supreme Court for ballot language review even though the signature threshold was crossed months ago. A grand jury appears to be investigating what steps the DeSantis administration took to defeat the 2024 initiative that failed with 56% support despite needing 60%, and the governor's agencies ran taxpayer-funded anti-legalization ads that prompted lawsuits alleging unconstitutional appropriation. The signature invalidation strategy reveals how hostile governors weaponize election administration to block ballot initiatives regardless of qualifying petition signatures, forcing sponsors into costly litigation while burning campaign funds on procedural fights rather than voter persuasion. (Politico)

⚖️ New Mexico Cannabis Company Files Opening Brief Challenging 280E in Tax Court

New Mexico Top Organics filed its opening brief last Friday in Tax Court arguing IRC Section 280E doesn't apply to state-legal medical cannabis operations and the company deserves refunds for tax overpayment, making it the first case to challenge 280E on statutory construction rather than constitutional grounds. The case proceeds on stipulated facts with no factual disputes, meaning Tax Court will decide purely legal questions about whether the Controlled Substances Act language matches Section 280E's "trafficking" requirement when applied to state-licensed medical programs. IRS response brief is due January 16th, with final reply by February 27th, creating a decision timeline that will either validate the growing trend of cannabis companies taking non-280E positions on tax returns or confirm IRS authority to disallow ordinary business deductions. Dozens of MSOs and private operators have already amended prior returns or filed current-year returns claiming 280E doesn't apply, backed by law firm opinions establishing "reasonable basis" to defend the position and avoid substantial underpayment penalties. The IRS has been issuing "No Consideration" letters on amended returns rather than outright rejections, creating longer appeal pathways while the Tax Court case develops the legal record that will determine whether state-legal cannabis businesses can deduct rent, salaries, and marketing like any other industry. (Law360)

⚖️ Connecticut Hemp Farmers Sue State Over THC Limits Crushing Industry

Connecticut hemp farmers filed federal lawsuit in August challenging state laws limiting hemp products to 0.5 milligrams of THC per serving that went into effect in January, arguing the restrictions contradict federal Farm Bill hemp definitions and devastated an industry where licenses plunged 80% since the crackdown began. Plaintiffs including Cheshire farmer Brant Smith and PuffCity smoke shop franchises claim Connecticut illegally redefined hemp to treat it like marijuana, protecting licensed dispensary monopolies while criminalizing federally compliant CBD products that major brands like Charlotte's Web can no longer sell in-state. Attorney Genevieve Park Taylor argues Connecticut's creation of "hemp squads" for smoke shop raids effectively re-criminalized hemp two years after the state encouraged farmers to enter the industry, with Governor Lamont having promoted hemp in 2019 as crop diversification and revenue opportunity before adult-use legalization shifted priorities. The lawsuit seeks injunction against enforcement of THC limits that Connecticut hemp businesses claim serves no public safety purpose beyond eliminating competition for licensed cannabis retailers who pay substantially higher fees and face social equity requirements. Connecticut's strategy reveals the post-legalization playbook other states are following: encourage hemp development until adult-use markets launch, then retroactively restrict hemp to eliminate lower-cost competition and funnel consumers into higher-taxed dispensary channels regardless of federal preemption concerns. (Hartford Business Journal / CT Insider)

🧬 Humboldt County Cultivator Goes Global as California Prices Crater

Jason Gellman's Ridgeline Farms sold cannabis for $5,000 per pound in 1990 Humboldt County, watched that drop to $250 today, and pivoted from commodity flower to genetics licensing across 20+ states through partnerships with Cookies and Heavy Hitters. Gellman now runs constant pheno-hunts testing 170 strains to identify award-winners, then licenses those genetics to cultivators in Thailand, Colombia, Australia and Germany while mega-farms supply California's flooded market. His Runtz strain won the 2019 Emerald Cup and became Leafly's 2020 strain of the year, proving Emerald Triangle genetics remain valuable even as the region's cultivation economy collapses. Garberville's storefronts are boarded up and growers are leaving monthly, but Ridgeline demonstrates how legacy cultivators can preserve their expertise as intellectual property rather than grinding out unprofitable harvests. Other collapsing cultivation markets should watch this playbook: when you can't compete on price, you compete on genetics and brand partnerships that export your reputation to markets where premium still commands premiums. (Cannabis Business Times)

🚧 BC Supply Collapse Shows Risks of Government Distribution

British Columbia’s seven-week public sector strike shut down the provincial Liquor Distribution Branch and all 40 BC Cannabis Stores, cutting off supply to private retailers dependent on weekly shipments. The province’s limited direct-delivery system became an emergency workaround, with small producers stretched to meet demand and regulators suspending reporting requirements to ease pressure. Retailers who stockpiled inventory ahead of the strike stayed afloat, but craft suppliers couldn’t fill mass-market gaps. The disruption exposed how fragile hybrid monopoly systems are when government-controlled distribution halts, proving that when the state stops working, so does the legal market. (StratCann)

💊 Federal Study Shows Cannabis Dispensaries Cut Cancer Patient Opioid Use

A federally funded study published in JAMA Health Forum analyzed 3 million patients annually from 2007-2020 and found both medical and adult-use dispensary openings drove significant opioid prescription reductions among cancer patients. Medical dispensaries reduced opioid prescription rates by 41 per 10,000 patients while adult-use reduced rates by 21 per 10,000, with the National Institute on Drug Abuse funding research that concludes cannabis substitutes for opioids in cancer pain management. The study found reductions happened when dispensaries actually opened rather than when laws passed, proving access matters more than statute. The research showed no demographic differences in substitution patterns, meaning cannabis availability helps patients manage pain equally across age, sex, and race categories. States fighting dispensary caps or delaying market launches now face federal evidence that restricted access keeps cancer patients on opioids longer than necessary. (Marijuana Moment)

🧾 Context: Andrej Babiš and his ANO party secured 34.7% of the vote in Czech Republic's parliamentary elections earlier this month, winning 81 seats but falling short of the majority needed to govern alone (NPR). The billionaire former prime minister now faces coalition negotiations with Freedom and Direct Democracy and Motorists for Themselves, two right-wing parties that traditionally oppose drug reform. Czech courts reopened EU subsidy fraud investigations against Babiš in June 2025 (Associated Press), and industry sources told Business of Cannabis that his personal legal strategy may shape how he structures coalition agreements. ANO's support proved essential for passing June's decriminalization bill legalizing three-plant home cultivation and possession of 25 grams in public starting in January (Business of Cannabis). Dr. Vaclav Trojan from the Czech Hemp Cluster won election as an ANO MP and operates the country's only medical cannabis cultivation facility inside a hospital. Before Babiš even formed his government, state attorneys leaked to media that they plan to interpret the new law restrictively and "continue enforcing it according to what they consider right" regardless of statutory changes, mirroring how Bavarian officials blocked German cannabis social clubs by refusing to allocate cultivation sites even after granting licenses (Business of Cannabis).

🔎 What It Signals: European cannabis operates under completely different rules than US state markets because you're betting on specific politicians staying in power and bureaucrats choosing cooperation, not regulatory competence or market fundamentals. Czech Republic just shifted from Europe's cannabis reform leader to a market driven entirely by Babiš's personal calculus: his elderly voter base needs medical access, his business empire may have cultivation interests, and coalition negotiations might provide legal cover from fraud prosecution. When the Pirate Party pushed full legalization in 2021, Babiš called for expanded medical access while rejecting adult-use (Radio Prague International), establishing his comfort zone around medical cannabis that serves his voters without threatening conservative coalition partners. Adult-use commercialization is dead with war-on-drugs coalition partners. The bureaucratic resistance matters more than the election results. Germany spent two years implementing cannabis legalization only to watch Bavaria grant eight social club licenses and then refuse to allocate cultivation sites through construction ministry zoning requirements, leaving operators with permits they physically couldn't use. Czech state attorneys announcing they'll enforce "what they consider right" regardless of statutory language follows the identical playbook. This is the European cannabis investment reality: statutory reform means nothing when bureaucrats at the implementation level decide to obstruct, and policy durability depends on one politician's current incentives rather than institutional infrastructure.