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Jax Daily Record Tuesday, Jul. 23, 201905:10 AM EST

Court declares marijuana regulations unconstitutional

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Appellate ruling could open more opportunities for businesses.

By Sally Kent Peebles, Special to The Jacksonville Daily Record

I receive calls almost daily from hopeful canna-curious people interested in opening a medical marijuana business in Florida.

Usually just back from a trip out West where the industry is thriving, they are considering the prospect of opening their own dispensary, or maybe a small craft cultivation, back home.

I have had to curb their enthusiasm as Florida’s current medical marijuana laws are restrictive, providing little entry to new players. Even if they could obtain a medical marijuana treatment center license, the endeavor would be incredibly expensive as the state currently requires operators to be vertically integrated, operating the entire process from cultivation to distribution. 

However, on July 9, in a move that shocked Florida’s cannabis community, the 1st District Court of Appeal issued its long-awaited opinion in Department of Health v. Florigrown, which could have a substantial impact on the state’s medical marijuana program.

The DCA upheld, in part, a decision issued by 2nd Judicial Circuit Judge Charles Dodson, agreeing with the trial court’s ruling that two critical aspects of Florida’s medical marijuana statute required vertical integration and that the cap on the number of licenses allowed, are unconstitutional. 

The appellate court examined the conflicting use of the words “or” and “and” in the constitutional amendment and the medical marijuana statute, respectively, and determined that it was intended for a medical marijuana treatment center to be permitted to handle just one component of the operations process, if desired.

The number of dispensaries in Florida has grown from 34 in April 2018 to 119 a year later.

Further, the DCA found that allowing only a handful of licenses to serve the entire state simply is not reasonable.

Notably, the DCA did not agree with the trial court that the state Department of Health must begin “registering” licenses to  anyone who wants one. The amendment specifically directs the department to “establish standards…to ensure proper security, record keeping, testing, labeling, inspection, and safety,” giving the department gatekeeping discretion to regulate the treatment centers to ensure that certain standards in these noted areas are met. 

The immediate effects of the ruling are unclear, but I predict that the state will appeal this decision, perhaps just to bide time to determine next steps.

Whether or not the state appeals, they likely will begin strategizing how best to adjust the industry’s regulatory scheme so it is in line with the opinion, creating a horizontal license structure and coming up with a reasonable number of licenses to issue that would adequately support patient demand, yet not place Florida in the same over-production scenario that states like Oregon are experiencing.

If the state appeals and chooses not to issue new rules, it will be up to the Legislature to create its own fix next session. 

What is clear, to quote Bob Dylan, is that “the times, they are a-changin’.”

To those interested in entering this new and growing industry, this opinion signals a welcome change and promise for a more open capitalistic program.

With more licenses, competition may force businesses to create better and more innovative products and prices may fall, benefiting some of our most vulnerable residents, the patients.

On the other side of the issue, the existing 22 medical marijuana licensees, many of whom spent several years and millions of dollars to enter the industry, may feel compelled to fight this change.

“It is their golden geese that may be killed – or at least be devalued – if the oligopolistic statutory scheme established by the Legislature to implement the [Amendment] is ultimately invalidated,” the DCA opined.

Sally Kent Peebles is a partner with Vicente Sederburg and manages the Colorado-based cannabis law firm’s Jacksonville office. She is a member of the Florida Medical Cannabis Advisory Committee.

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