LANSING — In early October, Governor Whitmer and state lawmakers turned to the state’s booming marijuana industry as a way to finalize the state budget and avert a government shutdown, approving a steep new wholesale tax on marijuana sales beginning in early 2026. The tax is intended to generate new revenue for repairing Michigan’s deteriorating roads and bridges.

But the marijuana sector pushed back forcefully. The Michigan Cannabis Industry Association (MiCIA) filed a lawsuit against the state seeking to block implementation of the new 24 percent wholesale tax, arguing that it violates the voter-approved 2018 recreational marijuana initiative and would fuel illegal growing and black market activity by making licensed operators uncompetitive, leading to significant financial harm.

The lawsuit faced an early setback on Monday, when Michigan Court of Claims Judge Sima Patel denied the MiCIA’s request for a preliminary injunction to stop the tax from taking effect on January 1.

The MiCIA argued that because the tax effectively amends the 2018 referendum, which set a 10 percent excise tax on retail marijuana sales, the legislation should have required support from three-quarters of the legislature. The bill received only 19 votes out of 37 in the Senate, far short of that requirement.

In her 28-page ruling, Judge Patel wrote that the new wholesale tax is “consistent” with the referendum, which included language allowing for “other taxes.”

While Patel declined to halt the tax from taking effect, she also left open the possibility that it could ultimately be struck down. She rejected the state’s request for summary judgment, keeping the case alive.

Patel, appointed by Governor Whitmer in 2022, noted that serious questions remain about whether a 24 percent wholesale tax undermines the purpose of the 2018 initiative. Marijuana businesses, she said, argued that voters intentionally set the 10 percent retail tax to keep prices reasonable and discourage black market activity.

Patel scheduled the next hearing for January 13, writing that a full evidentiary review will be necessary and acknowledging that either side is “highly likely” to appeal to the Michigan Court of Appeals.

In an initial response, Rose Tantraphol, spokesperson for the MiCIA, said the association will file a “quick appeal.”

“We do not believe the court reached the correct decision,” she said. “While we are extremely disappointed, the fight is far from over.”

The wholesale marijuana tax was the centerpiece of a budget agreement that ended months of gridlock between Democrats and Republicans in Lansing.

According to the Michigan House Fiscal Agency, the new tax is projected to generate approximately $420 million annually for road repairs.