Florida’s high court upholds medical marijuana vertical licensing and caps

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The Florida Supreme Court on Thursday left the state’s medical marijuana licensing system intact, deciding that a constitutional challenge to vertical integration and license caps isn’t likely to succeed on its merits and handing a defeat to small businesses hoping to break into the market.

The 6-1 decision means that state regulators of Florida’s $1 billion medical marijuana industry won’t be required to develop a new licensing structure that includes stand-alone licenses and thus opportunities for smaller companies and entrepreneurs.

The current industry is dominated by a small group of vertically integrated multistate operators.

The highest court’s ruling “validates the legislature’s interpretation of the constitutional amendment” passed by voters in 2016, Taylor Biehl, a Tallahassee lobbyist and co-founder of the Medical Marijuana Business Association of Florida, wrote in an email to MJBizDaily.

But, in the meantime, the industry’s growth to nearly 600,000 patients has triggered provisions that call for 15 additional vertical licenses to be issued, Biehl wrote.

This is the second major marijuana decision by Florida’s conservative highest court in the last few weeks – with both decisions in effect maintaining an industry status quo.

In April, the Florida Supreme Court delivered a crushing blow to adult-use legalization efforts when it rejected the language of an initiative aimed for the 2022 ballot.

Thursday’s decision, however, wasn’t a complete surprise.

In an October hearing, the Supreme Court justices seemed to be leaning toward agreeing with the state that it had met its constitutional obligations in enacting a limited-license, vertically integrated structure.

The Supreme Court’s sentiment runs counter to a 2018 lower court ruling by Leon County Circuit Judge Charles Dodson that Florida’s MMJ licensing limits imposed by a 2017 law violated the intent of the constitutional amendment approved by Florida voters.

At one point, Dodson told Florida regulators to quit stalling and issue additional MMJ licenses, but the state instead decided to appeal his ruling.

Biehl noted that the 54-page ruling by Florida’s highest court weighed in on a lower-court injunction, so the litigation could resume in that court on the merits of the claims, which were filed by a Tampa-based company called Florigrown.

“But the Court’s ruling indicates they don’t think Florigrown should win,” Biehl noted. “The case could likely end up being litigated back up (to) the (Supreme) Court again with the same end result, Florigrown loses.”

In its decision Thursday, the Supreme Court said “Florigrown does not have a substantial likelihood of success on the merits of its constitutional challenges.”

In the meantime, Biehl wrote that he hopes Florida MMJ regulators will move quickly to develop rules for issuing additional vertical licenses triggered by the astounding growth in MMJ patients in the state.

The number of registered patients stood at 561,177, as of the state’s May 21 weekly update.

Florida has licensed 22 medical marijuana vertical operators to date.

But three multistate operators – Florida-based Trulieve, Atlanta-based Parallel/Surterra Wellness and Massachusetts-based Curaleaf – control more than two-thirds of the market, according to the latest weekly update.

Trulieve itself has a 52% market share of smokable flower sales and a 42% share of MMJ milligram sales.

At the October Supreme Court hearing, Katherine Giddings, the attorney for Florigrown, said: “This is anything but a free market; it’s created a monopoly of a few entities.”

“The whole thing smells bad,” she said.

The 2021 MJBizFactbook projects that Florida MMJ sales will reach $1 billion to $1.3 billion in 2021.

Jeff Smith can be reached at jeff.smith@mjbizdaily.com.