Although medical cannabis has been legalized in over 30 states for quite a while now, the industry still has plenty of growing pains. Aside from being denied access to banking services, players in the industry across the country have been at loggerheads with authorities over how licenses are awarded. In Florida, for instance, medical cannabis law requires that licensed companies must be able to handle all aspects of the business, including growing, processing, and distributing products.
Referred to as ‘vertical integration,’ the system locks out a large number of cannabis businesses and limits the licenses only to companies that can handle all aspects of the business from cultivation all the way to sales, says cannabis businesses. In 2018, Tampa-based cannabis company Florigrown sued the state, challenging the state law, passed in 2017 requiring licensed cannabis businesses to have a vertically integrated structure.
In May this year, Justices at the Florida Supreme Court heard arguments challenging the constitutionality of the state law that determines licensee’s eligibility. Later in July, the Supreme Court scheduled another round of arguments on whether the 2017 law is an unconstitutional “special’ law, with the arguments set for this week. ‘Special laws’ are policies that are generally intended to benefit specific entities and they are barred by the Florida Constitution.
According to the Florigrown lawsuit, parts of the 2017 law improperly limited firms that could take part in the nascent medical cannabis industry. “This Supreme Court has already held that the controlling question in evaluating whether a law is an unconstitutional special law is closed. Here, the classes are so clearly closed, the legislature might as well have named the licensees in the statute,” Florigrown lawyers wrote in a brief.
However, lawyers for the Florida Department of Health, which oversees the state’s medical cannabis industry responded in a brief that the 2017 law “ultimately establishes a comprehensive and unified statutory system for the statewide licensure and regulation of medical marijuana firms,” otherwise known as medical marijuana treatment centers (MMTCs). “The statute did not create a closed universe of licensed MMTCs. The MMTC licensure statute, viewed properly as a comprehensive and unified whole, does not provide a benefit to private corporations that others, like Florigrown, do not or cannot also receive,” the state brief said.
Florigrown, on the other hand, argues that that was not the intention of the constitutional amendment allowing medical marijuana sales. The firm contends that a vertical integration system limits the number of companies that can take part in the industry, with a better alternative being a “horizontal” structure where different firms could perform different aspects of the business.
Analysts say sector players like Pure Extract Technologies Inc. will be following this case closely as other jurisdictions could take cues from the outcome in Florida.
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