Week in Review: Florida cannabis lawsuits, NJ license expansions & Big Booze supports MJ legalization

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Florida opts to add four more medical marijuana businesses, New Jersey doubles the number of its vertically integrated MMJ licenses, and cannabis legalization gets some support from Big Alcohol.

Here’s a closer look at some notable developments in the cannabis industry over the past week.

The Lawsuit State

News that the Florida health department will issue four more MMJ business licenses didn’t send Miami-based cannabis consultant Rolando Vazquez over the moon.

Rather, he believes many of the yet-to-be-issued licenses will probably be doled out by courts, given that more than half of the 14 existing licenses are the result of lawsuits filed against the state. 

That includes the latest licensee, Nature’s Way Nursery, which was just granted a Florida MMJ permit after a judge ruled in the company’s favor.

“More people are just saying, ‘I’m going to sue … and try to get a license.’” Vazquez said.  “They’re inviting more litigation because of precedent.”

Vazquez predicted that’s going to leave less room in the licensing process for companies to win permits based on merit.

That’s because every licensing-lawsuit winner is issued a permit that would have otherwise gone to a cannabis business that submitted a competitive bid to the health department.

Not only that, but the number of licensed companies could climb into the mid-30, Vazquez said, if the registered patient pool continues to grow by leaps and bounds. State law requires regulators to issue another four licenses for every 100,000 patients that sign up.

“If they look at their state projections, they think we’re going to have just under 500,000 patients,” Vazquez added.

NJ ‘mad rush’

A cannabis attorney predicts there will be a “mad rush” of applications in response to New Jersey’s plans to double the number of its vertically integrated medical marijuana licenses from six to 12 to meet growing demand and some supply issues.

Steve Schain, senior attorney in the Hoban Law Group’s Philadelphia office, said new licensees should prosper in the underserved market.

Demand has been boosted by Gov. Phil Murphy signing off on such qualifying patient conditions as chronic pain and anxiety earlier this year.

Schain believes the expansion also should “kick-start the hopelessly moribund infighting that has bogged down New Jersey’s once-promising adult-use” legislative effort.

Murphy, a Democrat, has made it clear he wants lawmakers to legalize adult-use marijuana in part for revenue reasons, but they recently postponed that effort amid a squabble over the budget, which faced a June 30 deadline.

Here are the basics behind the situation:

  • Experts still believe the probability is high that New Jersey lawmakers will pass a recreational marijuana bill later this year.
  • The six additional MMJ licenses will be issued for defined regions of the state: two each in the northern, central and southern regions. But Schain said that in addition to geographic limitations, there are low barriers to entry, including only a $20,000 filing fee (the state will keep just $2,000 from unsuccessful applicants).
  • The applications are due at the end of August, with the licenses anticipated to be awarded Nov. 1.
  • The new licensees will be under pressure get their operations up and running as soon as possible. New Jersey already is experiencing intermittent supply shortages because of the rapid growth in patient numbers.
  • The state now has more than 25,000 registered patients, according to the state health department, up 10,000 since January. The state’s Health Commissioner has predicted the number could reach 40,000-50,000.

Big Booze dollars

A growing number of alcohol wholesalers and distributors are eyeing business opportunities around the growing adult-use cannabis industry, which could mean new sources of capital for marijuana businesses struggling in the absence of traditional funding from banks.

That’s a theory being kicked around by Jim Borghesani – former spokesman for the Massachusetts Yes on 4 campaign to legalize recreational marijuana – after one of the nation’s largest alcohol trade associations trumpeted its support for legalizing recreational marijuana.

The Wine and Spirits Wholesalers of America – formerly neutral on legalization – said the federal government should “respect the right of states to legalize cannabis if they adopt cannabis market regulations that meet a framework similar to that governing beverage alcohol.”

This development could simply be a further thaw in relations between adult-use cannabis advocates and alcohol trade associations. The latter have contributed to anti-legalization campaigns in states.

Or there could be another endgame for alcohol wholesalers and distributors, Borghesani said: a foot in the door at the ground level of an exploding industry.

Cannabis retail sales are poised to take in approximately $8 billion-$10 billion this year, according to Marijuana Business Factbook 2018 projections.

Now could be a good time to make ground-level moves, Borghesani said, before there’s federal action on rescheduling marijuana or allowing banks to do business with cannabis businesses in legal recreational markets.

Alcohol wholesalers and distributors with access to capital could invest in cannabis businesses in exchange for equity, he noted.

“This could be an effort by alcohol wholesalers to make sure they’re represented in a rapidly expanding new industry,” Borghesani concluded.

“And, from their perspective, it’s probably not a totally different model because they’re already dealing with a controlled substance in a regulated space.”

John Schroyer can be reached at johns@mjbizdaily.com

Jeff Smith can be reached at jeffs@mjbizdaily.com

Joey Peña can be reached at joeyp@mjbizdaily.com