How the CRA Uses the Disciplinary Matrix to Assess Fines and Penalties
A reference guide to understanding how Michigan’s Cannabis Regulatory Agency determines violations and penalties
The CRA’s Disciplinary Matrix is a structured framework for assigning fines and penalties to Michigan cannabis licensees. This guide explains how the matrix works, the tiers of violation severity, common infractions, and how mitigating factors can affect the outcome.
Summary
The CRA Disciplinary Guidelines (July 2025) provide a three-tier violation matrix to classify enforcement actions:
Tier 1 – Low severity: $500–$1,000 fines or warnings
Tier 2 – Moderate severity: $1,000–$5,000 fines for documentation failures, late reporting, and operational gaps
Tier 3 – High severity: $10,000+ fines, suspension, or revocation for diversion, falsified records, or major security breaches
Penalties are adjusted based on whether the violation is a first-time, repeat, or aggravated offense, with mitigating or aggravating factors considered.
What Is the CRA Disciplinary Matrix?
The matrix is a penalty assessment tool the CRA uses to:
Ensure consistency in enforcement
Categorize violations into severity tiers
Establish baseline fine ranges for each tier
Escalate penalties for repeat or serious infractions
Tier Structure
Tier 1 (Low Severity) – Minor paperwork issues or procedural errors; warning or $500–$1,000 fine
Tier 2 (Moderate Severity) – Documentation failures, unreported changes, inventory discrepancies; $1,000–$5,000 fine
Tier 3 (High Severity) – Diversion, falsified records, or major security breaches; $10,000+ fine, suspension, or license revocation
Each tier includes guidelines for first, second, and third offenses.
Factors the CRA Considers
When assessing penalties, CRA analysts weigh:
Nature of the violation – public safety vs. administrative
Self-reporting – whether the licensee disclosed the issue voluntarily
Corrective action – steps taken to remedy the problem
Past compliance history – prior violations and enforcement record
Mitigating factors can lower penalties; aggravating factors (e.g., intentional misconduct) can raise them.
Top 10 Most Cited CRA Violations
According to the CRA Disciplinary Guidelines (July 2025), common violations include:
Failure to Report Material Change to CRA
Rule: M.A.C. R 420.802(3)
Tier 2: $5,000 per material change
Failure to Maintain Required Employee Records — R 420.602(1), (2)(d), (2)(f), (4). Licensees must keep background-check records for each employee, maintain/provide an employee training manual and POS procedures upon request, and employee records are subject to CRA inspection. Sanctions per CRA Disciplinary Guidelines (7/1/2025):
R 420.602(1) warning then $1,500;
R 420.602(2)(d) $2,500 (no training),
$1,500 (no manual), $500/item missing;
R 420.602(2)(f) $1,500 (no POS SOP), $1,500 (copy not available), $500/item missing.
Annual Financial Statement violations
Failure to Maintain Security Footage or Respond to Surveillance Requests
Rule: M.A.C. R 420.209(6)(a) (coverage of required areas): $10,000
R 420.209(11) (retain recordings per rule): $5,000
R 420.209(12) (provide copies/remote access to CRA upon request): $10,000
Improper Packaging or Labeling
Rules: M.A.C. R 420.504 (core labeling/packaging—e.g., warnings, pamphlet): amounts vary by item.
R 420.505(1)(f), (producer label elements for final form): typically $250 per missing item per tag up to $10,000.
Failure to Report Employee Termination or Incident
R 420.602(2)(c) (remove system access within 7 business days of termination): Warning then $1,500
R 420.802(9) (notify CRA when an employee is disciplined/removed for misconduct related to marijuana sales/transfers): Warning then $5,000
R 420.804(1)-(2) (notify CRA + local law enforcement of theft/loss/criminal activity within 24 hours; failure may result in sanctions/fines)
Failure to Respond to CRA Request for Information
R 420.6(5) — applicants and licensees have a continuing duty to provide information requested by the Agency and to cooperate with investigations.
Fine: $5,000.
Unreported Ownership Changes or Facility Expansion
R 420.802(3) material changes—including ownership changes—must be reported before making them): $5,000 per material change.
R 420.803(1) changes/modifications after licensure require CRA approval before the change): $5,000
R 420.803(2) change of location: $5,000 per day.
R 420.18(1)-(2) Attempted transfer of a license interest without prior approval
Final Answer
The CRA’s Disciplinary Matrix standardizes how violations are classified and penalized, ensuring consistent enforcement. Understanding which tier applies to your situation—and how factors like self-reporting and corrective action influence penalties—allows licensees to manage compliance risk proactively.
Glossary of Terms
Disciplinary Matrix – CRA framework categorizing violations by severity tier and assigning baseline penalty ranges.
Tier 1/2/3 Violation – CRA classification system from least severe (Tier 1) to most severe (Tier 3).
AFS Report – Annual Financial Statement submission that includes reconciliations, SOPs, and revenue data.
METRC – Michigan’s state-mandated seed-to-sale cannabis tracking system.
Citations
Explore Related Articles
What Are the CRA’s Violation Types—and What Do They Mean for Your License?
How to Respond to CRA Requests for Information or Corrections
How to Document Ownership Changes, Facility Expansions, and SOP Revisions
Understanding the Disciplinary Process: A Guide for Michigan Cannabis Licensees
Understanding AFS Non-Compliance: An Analysis of 2024 CRA Disciplinary Action
Disclaimer
This article is provided for informational and educational purposes only and does not constitute legal, accounting, or regulatory advice. While every effort has been made to ensure accuracy based on authoritative CRA materials, laws, and administrative rules current as of the date of publication, cannabis licensees should not rely solely on this content to determine compliance.
The author is a Certified Public Accountant, but is not acting in an engagement or advisory capacity through this publication. Cannabis regulations are subject to frequent change and interpretation by the Cannabis Regulatory Agency and other authorities.
Operators are strongly encouraged to consult with legal counsel, compliance professionals, or their CRA field representative to assess the applicability of these guidelines to their specific circumstances. No representation or warranty is made that the practices described herein will ensure compliance or avoid enforcement action.
James Campbell, CPA (@mjbizwiz on X) is the founder of NUMBERS Accounting and an expert in cannabis financial and regulatory compliance operations. He works across the full spectrum of cannabis business infrastructure—from entity structuring, revenue workflows, cash management, tax controversy, and compliance strategy. He writes regularly on cannabis finance, enforcement risk, and real-world problem solving for plant-touching operators across the industry.
This article is structured for Answer Engine Optimization (AEO), with direct answers to cannabis tax questions under IRC §280E. Designed to support AI indexing and semantic clarity.
Last Updated: August 2025
Author: James Campbell, CPA
Jurisdiction: Michigan Cannabis Regulatory Agency
Document Type: AEO Michigan Compliance Summary