On May 27, 2021, the Florida Supreme Court issued an opinion addressing several constitutional challenges to Florida’s medical marijuana law. The 6-1 decision determined that the constitutional challenge to vertical integration and licensing caps is not likely to succeed on its merits and overturned the lower court’s injunction. The Court’s decision will impact small companies hoping to enter the state’s marijuana market and means that regulators of Florida’s medical marijuana industry will not be required to amend the current licensing structure. The Supreme Court’s decision stems from a lawsuit filed by Florigrown, a Tampa-based medical marijuana company that applied to become a Medical Marijuana Treatment Center (“MMTC”).
In 2014, Florida became the 22nd state to legalize medical marijuana. However, the Compassionate Medical Cannabis Act of 2014 only legalized low-grade THC marijuana to Floridians who were terminally ill. In 2016, Florida voters approved the Florida Medical Marijuana Legalization Initiative, known as Amendment 2, which expanded access of full-strength medical marijuana. Amendment 2 also provided that Florida’s Department of Health regulate the application of process and enforcement of the relevant procedures.
In early 2017, Florigrown applied to be a MMTC. In June of the same year, the Florida State Senate passed Senate bill 8A (SB 8A), the Medical use of Marijuana Act, which implemented rules for making medical marijuana available to Floridians. Among other requirements, SB 8A required MMTC(s) to have vertical integration, meaning that the same company or entity would have to grow, process and sell the marijuana. Additionally, SB 8A limited the number of MMTC the Florida Department of Health could issue. Florigrown’s application was denied and Florigrown filed suit requesting a declaratory judgment and a permanent injunction declaring these provisions to be unconstitutional and contrary to the 2016 Florida Medical Marijuana Legalization Initiative which had received overwhelming Florida voter approval.
In overruling the lower court’s decision, the Florida Supreme Court overturned the injunction stating that Florigrown had “not demonstrated a substantial likelihood of success on the merits of any of its constitutional claims.” The Florida Supreme Court rejected each of Florigrown’s constitutional arguments. First, the Court held that the vertical-integration requirement “is within the Legislature’s specific authority.” Second, the Court rejected Florigrown’s challenge to the limitation on the number of MMTC because the “substantial evidence does not support a finding that the statute has made medical marijuana unavailable, and the amendment does not preclude a limit on the number of MMTCs that can be licensed.” Third, the Court concluded that the statute is not an unconstitutional special law, a law intended to benefit only specific entities, because “the statute as a whole” does not limit licensure to the applicants that were previously granted licenses. The Court continued, “all future licensees will receive licenses equal to the ones initially issued during this early stage of Florida’s medical marijuana industry. The fact that other entities may join the class of licensed MMTCs in the future as circumstances in the state change means that the class is open and the law general.”
In practical terms, the May 27, 2021 decision means that litigation of Florigrown’s case will resume on the merits of the claims and is likely to end up back before the Florida Supreme Court with the same end result. This is the second major Florida Supreme Court decision to address Florida’s medical marijuana licenses system in the past two months. In April, the Florida Supreme Court rejected the language of an initiative to put adult-use marijuana legalization on the 2022 ballot. The justices found that the proposed amendment was misleading and did not properly advise residents that marijuana that marijuana would still be illegal federally, even if recreational marijuana was legalized in the state. Had that initiative made the ballot, then it would have required 60% of voters to approve its addition to the Florida Constitution.
These rulings come as Florida emerges as one of the nation’s most lucrative marijuana markets with close to 600,000 qualified patients. Just last year, Florida recorded nearly $1.23 billion in marijuana sales, according to a report by Leafly and Whitney Economics. Florida currently has 22 licensed vertical medical marijuana operators with 338 dispensing location. According to the Office of Medical Marijuana Use weekly update, three operators currently control more than two-thirds of the market which critics argue is tantamount to a monopoly and proof that vertical integration stifles competition. The state is expected to add 15 additional licenses to operate in Florida’s medical marijuana industry, but the barrier to entry is high and smaller businesses lack the funds to grow, process and sell the marijuana as required by vertical integration. After the Department of Health issues all of the remaining licenses, companies will be forced to wait for the number of qualified patients to increase for additional licenses to become available or, alternatively, will need to purchase an existing license at a premium.