Florida’s governor calls for charging significantly higher licensing fees for cannabis operators in the state.
During a recent press conference, Florida Gov. Ron DeSantis mulled pushing for a steep hike in business license fees in the next round of applications from those vying to enter one of the fastest growing cannabis markets in the country.
“I mean, these are very valuable licenses,” the governor said. “I would charge them an arm and a leg. I mean, everybody wants these licenses.”
While DeSantis told reporters that the state “should charge these people more,” the governor did not specify whether he was referring to medical cannabis companies currently active in Florida or newcomers trying to enter the fold.
Since then, the cannabis industry in Florida has been trying to decipher just how much the next round of licenses might cost. Some rumors place that figure at $1 million, according to industry sources.
DeSantis’ office declined to provide more detail on the comment, instead pointed to the governor’s comments during the Aug. 23 press conference.
Those with awareness of private discussions that have taken place behind closed doors said that the governor is contemplating making the price to play in the limited market one of the most expensive in the world.
But making a change likely won’t be as easy as the governor just saying it will be so.
“I think it would have to be done legislatively,” said Sally Kent Peebles, a Jacksonville-based partner at the national cannabis law firm Vicente Sederberg LLP and co-chair of the state’s Medical Cannabis Advisory Committee. “But I mean, I hope it doesn’t happen. That would really cut out the mom and pops.”
A Closer Look At Florida’s Cannabis Market
Legislative approval of rules is mandatory under Florida law if regulatory costs for companies participating in the program eclipse $200,000 in one year or $1 million over five-year span, according to the News Service of Florida.
Peebles confirmed that she had heard the million-dollar rumor prior to speaking with Green Market Report, but added “I never heard him say that, nor can I verify that is something he said. That’s just what people told me.”
Medical cannabis companies operating in Florida each paid a nonrefundable fee of $61,000 during the first round of licensing and have to renew their licenses every two years for around the same price.
However, Florida licenses have traded for as much as $67 million, which Acreage Holdings paid for Nature’s Way’s MMTC license in 2019.
The resale value for the coveted licenses reflects the lucrative potential of the nascent market, especially if a constitutional amendment for adult-use cannabis receives approval in 2024. The measure is backed by the state’s largest operator, Trulieve Cannabis.
Previous efforts to legalize recreational use have hit a number of roadblocks, the most recent of which was the Florida Supreme Court rejecting a citizen initiative for the 2022 ballot on the grounds that the summary was “misleading.”
The Florida medical cannabis industry alone generated more than $1.5 billion in 2021, according to Leafly’s annual jobs report published earlier this year. With the medical cannabis patient population currently representing only 3% of the state’s 21 million residents – the third most populous in the U.S. – the report found that opening up adult-use consumption could yield $4 billion annually and support more than 70,000 jobs.
The state also has high tourist activity and is home to the largest elderly community in the nation.
“Why wouldn’t we take the opportunity to make money for the state based off those?” DeSantis said during the press conference. “But I do think that would require a statutory change, and I don’t think that’s something we could just do through administrative rule.”
Limits On License Changes
Provisions in a 2017 law limit how much the Department of Health can charge for licensing and renewal fees to cover the cost of administering the medical cannabis program, a research program and a public health campaign, the News Service of Florida reported.
That same law also granted state officials the authority to create “supplemental licensure fees” to help cover the cost of the program. The Department of Health has never authorized additional fees.
From a regulatory standpoint, Florida’s vertical integration requirement saves the state money versus other markets because it only has to oversee 22 licensees instead of hundreds, according to Peebles.
Since 2015, the nonrefundable application fee has risen to $146,000 and preparing to apply for one can cost up to $400,000 – with another $10 million to $15 million likely needed after securing a license, the Miami Herald reported.
The DeSantis administration has delayed compliance with a state law that requires the Department of Health to double the number of medical cannabis operators in the state to account for the rising MMTC patient population, according to the News Service of Florida. His office attributed the delay to litigation over the 2017 law despite the Florida Supreme Court last year affirming its decision to uphold the statute.
The governor made his public comment the same week that MedMen completed its Florida exodus by closing the $63-million-dollar sale of its stores and greenhouse to Green Sentry Holdings.
While Florida’s vertical model has received its fair share of criticism from those who think the ship has sailed for small operators, Green Sentry CEO Brady Cobb pointed to varying results across different market regulatory rollouts throughout the country, particularly California and Oregon “where everybody gets a license.”
“Well, now the value of the licenses are almost nothing, and there’s over saturation of product that’s being sold largely in black markets on the East Coast just as much as it’s being sold in the legal markets in its home state,” he said. “So, that maybe isn’t the answer.”
He added that California’s problem has been limited retail amid unlimited cultivation, with companies beginning to pack their bags in search of profit. Other legacy states such as Colorado have faced similar headwinds from a congested supply side.
“There’s a happy medium in there somewhere, and as frustrating as it is for people to look at – myself included – we’re in the second inning of undoing 75-80 years of bad cannabis policy in this country,” Cobb said.
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