TALLAHASSEE — In what was jokingly called a “green rush,” investors not long ago stampeded into Florida to gain entry to what was expected to be one of the nation’s most lucrative marijuana markets.
But even as the possibility of legal recreational pot looms on the horizon, the bidding war for medical-marijuana licenses in the Sunshine State has fizzled.
“There’s nothing wrong with the market in Florida. It’s just that nobody wants to put millions and millions of dollars into the ground,” said Alan Brochstein, managing partner at New Cannabis Investors.
The buzzkill stems from a variety of factors. According to many industry experts, pending litigation that could upend Florida’s cannabis industry is at the top of the list.
The Florida Supreme Court is poised to consider an appeal court decision that found the state’s “vertical integration” system requiring medical marijuana operators to grow, process and sell cannabis and derivative products ran afoul of a 2016 constitutional amendment that backed legal medical marijuana.
Other lawsuits in the pipeline are challenging eight licenses handed out in April by Florida health officials to resolve litigation by a pool of applicants that lost out in the first round of licensing in 2015, after the state authorized low-THC marijuana. Lawmakers in 2014 approved the non-euphoric version in anticipation of the 2016 constitutional amendment allowing full-blown medical marijuana.
The legal challenges have injected a chill into sales of the newest licenses, but investors also are reluctant to plunk down tens of millions of dollars to purchase licenses that will require as much or more of an investment to build out new operations that will vie against established, branded competitors with existing and loyal customer bases.
For example, Quincy-based Trulieve, the largest of the state’s 22 licensed medical marijuana operators, is responsible for more than half of the state’s medical cannabis sales. Last week, Trulieve sold nearly 600 pounds of whole flower marijuana for smoking, more than three times its nearest competitor.
A sharp downturn in cannabis stocks on the Canadian stock exchange, where many of the U.S.’s largest marijuana companies trade, including those doing business in Florida, has also helped to stamp out sales of the state’s marijuana’s licenses.
“The capital situation has nothing to do with Florida. It’s just what’s going on, and it’s just unfortunate for these paper holders in Florida,” said Brochstein, a national marijuana industry investment analyst based in Texas.
Despite the halted sales of licenses, Florida’s market is “viewed very positively,” according to Brochstein.
Nearly 300,000 patients have been authorized for medical marijuana, and the number of patients keeps climbing.
“It’s been improved. It’s been growing very rapidly. There’s a reasonable chance that it’s moving towards legalization [of recreational marijuana]. So everything’s good,” Brochstein said.
Companies linked to two of the state’s medical marijuana operators, MedMen and Surterra, which does business under the name Parallel, are backing a proposed constitutional amendment that would legalize recreational marijuana. They are seeking to get their measure on the November 2020 ballot.
