MRTMA Gifting: Is it a Trap?
Creative marihuana gifting schemes are flourishing in Michigan, but at a substantial risk of prosecution. Budding entrepreneurs use variations on a common theme: charge a premium price for a non-marihuana item – everything from a painting to a pizza – and “throw in” some marihuana “as a free gift.” Of course, the marihuana isn’t actually free, and it isn’t really a gift.
The idea behind such schemes is to sidestep the more than one-year gap between passage of Michigan’s Proposal 1 and its implementation, which isn’t due to occur until early 2020. Currently, although adults can finally legal smoke, eat or drink marihuana in Michigan, they cannot legally buy it. So, creative marihuana entrepreneurs are betting that MCL 333.27955(1)(d), also known as “Section 5(1)(d)” of MRTMA (the “Michigan Regulation and Taxation of Marihuana Act”) offers them legal protection from prosecution. MCL 333.27955(1)(d) states, in pertinent part:
1. Notwithstanding any other law or provision of this act, and except as otherwise provided in section 4 of this act, the following acts by a person 21 years of age or older are not unlawful, are not an offense, are not grounds for seizing or forfeiting property, are not grounds for arrest, prosecution, or penalty in any manner, are not grounds for search or inspection, and are not grounds to deny any other right or privilege:
(d) giving away or otherwise transferring without remuneration up to 2.5 ounces of marihuana, except that not more than 15 grams of marihuana may be in the form of marihuana concentrate, to a person 21 years of age or older, as long as the transfer is not advertised or promoted to the public. Id. (emphasis added).
So, superficial compliance with Section 5(1)(d)’s “gifting workaround” requires, at minimum, the following:
- That both the gifter and the giftee are 21 years of age or older;
- That no money changes hands regarding the transfer, as to the marihuana; and
- That the quantify not exceed 2.5 ounces actual marihuana or 15 grams of marihuana concentrate;
- That the transfer is not advertised or promoted to the public.
In practical application, MCL 333.27955(1)(d) is a landmine for the unwary and unsavvy. At first blush, compliance with the 21-year-old bookend requirement appears to be a no-brainer – if you’re a gifter, be 21 or over, and don’t gift to anyone younger than 21. But since it’s legal to possess only 2.5 ounces of marihuana in Michigan, you’ll need a “straw man” to supply the marihuana, and some schemes are conscripting unsuspecting medical marihuana patients or caregivers (who can possess up to 72 plants) to essentially “gift off” their excess, such as “Blaze Michigan.” But if the straw man (who is often also tasked with accomplishing the actual delivery, via vehicle drop off at an agreed-upon location) is under 21, the entire transaction runs afoul of MCL 333.27955(1)(d)’s 21 year age mandate, exposing both the business itself and its drivers / suppliers to legal jeopardy.
The 2.5-ounce quantity limit presents another potentially serious problem for gifters and 10 ounces per household under MRTMA.. As with medical marihuana, “unusable” marihuana under Section 5(1)(d) is not “counted” towards the 2.5 ounce limit. But if a transaction garners the attention of the police for any reason whatsoever (e.g., bad vehicle taillight, flat tire, et cetera), and the delivered “gift” exceeds 2.5 ounces yet contains a substantial percentage of stems, seeds and root material, the gifter and its agents could all face felony charges – and be forced to convince a court that those stems, seeds and root material should not be “counted” towards their 2.5 ounce limit.
The transparency of the transaction stream would be easily exposed by a savvy prosecutor. Clearly, a cheap paperback book with a street value of ten cents isn’t going to command a sixty-five to four-hundred-dollar price point, and the intent of the parties in consummating such as purchase is palpably to accomplish the marihuana “gift.” Victor Fitz, Cass County Prosecutor, advises that prosecutors will “have to evaluate the reason for the purchase,” stating:
Certainly, when you’re gifting marijuana as part of the incentive of a transaction, that can very easily be interpreted that you are doing it for profit[.] See note 2, ante.
As if the above hurdles weren’t enough, perhaps the most difficult component of compliance with the “gifting workaround” is its ban on “promotion or advertising.” Inasmuch as the traditional, advertising industry definitions of “promotion” and “advertising” are plastic in the age of social media, many seemingly innocuous pursuits (e.g., a Girl Scout style bake sale) could be construed by a jury as comprising one or both of these verboten activities, especially in the hands of a skilled and convincing prosecutor.
Ann Arbor’s Smoke’s Chocolate is one such service. It employs medical marijuana patients as delivery drivers and gives them “the option to present a free gift (to customers), and most of them choose to gift cannabis[.]” Smoke’s Chocolate attempts to insulate itself from criminal prosecution, putting all the exposure and risk on its drivers. It freely admits:
We hire independent contractors who source their own cannabis, and they sell their own stuff. We don’t buy it; we don’t touch it. The only thing we buy or sell is chocolate.
Perhaps the biggest risk for enterprising marihuana gifters may be the rejection of their eventual license application by LARA due to their gifting activity. It’s a safe bet that the Michigan Legislature did not intend for marihuana caregivers to “gift” their marihuana allotment in this fashion. So, today’s marihuana gifting business will undoubtedly show up on LARA’s radar screen when the gifting business applies for one of the many types of adult-use licenses (transportation, growing, etc.) that LARA controls the outcome of. Legal or not, is potentially incurring LARA’s wrath worth the allure of short-term profit via a disappearing business model? How will LARA view the transportation license application of today’s marihuana gifter a year from now, when that very same business became well known for delivering a fake Picasso and some hash brownies for $350?
Cass County Prosecutor Victor Fitz advised entrepreneurs to tread cautiously:
Certainly, when you’re gifting marijuana as part of the incentive of a transaction, that can very easily be interpreted that you are doing it for profit …It’s wise for people to follow the law. Tread softly and be cautious. The step you make may end up in causing you to be in court resulting in a civil infraction, a misdemeanor, or even a felony conviction.
Michigan attorney Bernard A. Jocuns specializes in all aspects of marihuana law. He is available for consultation to prospective marihuana gifters and others involved in this nascent venture.