A Florida appellate court ruled on Tuesday that a law enacted to license cannabis providers in the state does not comply with the amendment that legalized medical marijuana and is therefore unconstitutional. The ruling by the 1st Court of Appeals in Tallahassee held that the law requiring cannabis businesses to be vertically integrated and handle all aspects of cannabis production from seed to sale created an oligopoly and should be struck down.

The court also upheld the lower court’s ruling that provisions of the medical marijuana regulations enacted by the state legislature that capped the number of licenses for providers also did not conform with the amendment passed by voters in 2016. The decision by a panel of three judges is expected to be further appealed to the Florida Supreme Court, according to media reports.

Suit Challenges Vertical Integration Requirements

A suit challenging the requirement that cannabis providers in the state be vertically integrated was filed by Florigrown, a company based in Tampa.

Leon Circuit Judge Charles Dodson, who heard the case, ruled in favor of the plaintiff, finding that the regulations passed by lawmakers in a 2017 legislative special session did not properly carry out the amendment. Dodson then issued a temporary injunction requiring the state health department to begin issuing licenses to Florigrown and other applicants for medical marijuana licenses, but that order was put on hold pending appeal.

Upholding the original court’s decision, appeals court judges Scott Makar, James Wolf, and T. Kent Wetherell wrote that the regulations create “a vertically integrated business model which amends the constitutional definition of MMTC (medical marijuana treatment centers) by requiring an entity to undertake several of the activities described in the amendment before the department can license it.”

Plaintiffs Pleased with Ruling

Joe Redner, one of the owners of Florigrown, said that Tuesday’s appeals court ruling is “a good thing for the state of Florida.”

“If the Legislature can create oligarchies in any field, it’s crony capitalism,” Redner said. “They’re picking winners and losers. And that’s not fair. It’s not right. It’s not constitutional.”

Adam Elend, the CEO of Florigrown, said that the appeals court ruling has the potential to shake up Florida’s medical marijuana program and the industry.

“It drops a bomb on the current licensing scheme. It’s just changing the whole regime,” Elend said. “People are not getting medicine. The dispensaries are out of stock all the time. The products are limited, and the prices are high. That’s what happens in an oligopoly and that’s what we have.”

The appeals court also found that regulating medical marijuana providers

“without applying the unconstitutional statutory provisions” is in the public interest, but the ruling “does not support requiring the department to immediately begin registering” new providers.

In a separate concurring and dissenting opinion, Weatherell noted that the majority opinion could cause the value of medical marijuana licenses, which can be up to $50 million or more, to drop significantly.

The majority opinion “will effectively mandate an immediate change in the entire structure of the medical marijuana industry in Florida,” Wetherell wrote.