As most of you know by now, Florida voters yesterday passed the “Use of Marijuana for Debilitating Medical Conditions” ballot measure commonly known as Amendment 2. As a Florida-licensed attorney, I want to give a big congrats to my home state for finally saying yes to comprehensive medical marijuana program that should (hopefully) expand the monopoly on MMJ currently held by the Charlotte’s Web nurseries and provide more and better access to a variety medical cannabis for patients.
Under the ballot measure, the Department of Health has no more than six months from the law’s effective date to create regulations for registering Medical Marijuana Treatment Centers (MMTCs). Under Florida’s Constitution, the ballot measure should take effect “on the first Tuesday after the first Monday in January following the election unless otherwise specified by the amendment.” Amendment 2 has no specific effective dates for its various provisions, so this should mean we will be seeing a complete set of MMTC rules by June 2017 (assuming there are no legal challenges to these rules, but it’s Florida so there will be). An overview of the initial Department of Health Charlotte’s Web rules can be found here.
Leading up to this vote, Floridians have been calling our cannabis lawyers asking what they can do now to get ready for Department of Health MMTC registration in the future. Given the timeline above, my response was and is, “a lot actually.” I tell them that they can and should be doing the following, starting now:
- Read the initiative and then read it again. The initiative is everything at this point and it’s imperative all prospective Florida MMJ operators read and thoroughly understand it because it provides the baselines for what’s going to be allowed for patients, physicians, and operators.
- Figure out where you might want to operate and learn about the local government there. The initiative is silent regarding whether local governments will be able to opt of the new law should it pass, which, in most states, has meant local governments are free to ban if they so wish. Some Florida cities have already prepared themselves for changing state marijuana laws by enacting municipal zoning and permitting laws. Other Florida cities and counties are (and will remain) opposed to MMJ businesses. Instead of spending dollars and time planning for a marijuana business in a Florida city that will never allow one, you should instead get a handle on friendly versus non-friendly local governments. As for those local governments without a clear idea on what to do about cannabis, this is your chance to step up and help educate the local authorities about what their local industry should look like. Our cannabis lawyers have done this in countless cities and counties in multiple states and believe me when I tell you that this can profoundly impact which way a city or county will go on cannabis commerce. I cannot stress enough the importance of your understanding the local situation where you will be locating.
- Study other state regulatory models, including the super strict ones. You can learn a lot about what to expect from Florida by looking at other states’ regulatory models. Look at states like New York, Illinois, Nevada, and Minnesota, all of which have fairly limited and heavily controlled MMJ regimes. If Florida’s 2014 Charlotte’s Web law tells us anything (and it does), Florida’s new medical cannabis regime is going to be a lot more like these states than, let’s say, California, where (until the implementation of the MCRSA) the “cannabis friendly doctor is always in.” Our cannabis licensing lawyers area constantly comparing laws in the older states to get a better feel for what is likely to go down in the newer states. If State A interprets X provision a certain way, there is a good chance State B will do the same.
- Review the Florida corporate structures available and figure out now which makes sense for you. MMTCs will be the “entities” that cultivate, process, and dispense cannabis to qualified patients. However, since MMTCs aren’t defined in the initiative beyond the term “entities,” that means we could be looking at either non-profits or for-profit entities. This means you should learn about the various corporate structures available to you, how they operate, and what you’ll need when you’re ready to file for your entity.
- Start figuring out your budget and pace yourself. In anticipation of a fee-laden, probably very expensive application process for registering an MMTC, you need to start thinking now about your budget and from where you are going to get your funding. In all of the states in which our cannabis business lawyers have operated, one thing always holds true: those with secure funding before the application process starts have always had a huge advantage in competing for a cannabis business license over those still patching together their funding when the application window opens. You should plan for more than just start-up costs such as inventory, employees, operational costs, etc. You should also have a good idea of the funding you will need for the application process itself, which will require legal oversight, expert advisory input, contracting with architects for floor plans, and all sorts of other expert assistance. And again, speaking from experience, those with the best and most experienced team in place are the ones that get the licenses. And speaking just for lawyers, the best lawyers will charge a lot but not take on many clients. All of this means that you must budget accordingly and pace yourself. Just because the initiative mandates Florida’s Department of Health come up with all of the MMJ rules within six months of the effective date of the law doesn’t mean it will actually issue licenses or register MMTCs by that time. It’s Florida, people, and, that means there will likely be a whole host of lawsuits to delay this process. Get your budget in sufficient shape to weather these inevitable delays.
- Choose your partners wisely. Consultants and so-called cannabis experts are a dime a dozen. Take your time in choosing who you will be using to help you navigate what is sure to be a complicated application process. Ask lots of questions, especially about whether they will require you to give them equity in your company and whether their relationship with you will be exclusive. For more on why this choice can be so important, check out Buyer Beware: Pot Colleges and Canna Consultants.
- Choose your legal counsel wisely. Lawyers claiming to be marijuana business attorneys are also a dime a dozen and you need to proceed with caution in choosing your legal counsel as well. Make sure you choose a law firm with extensive experience in navigating robustly regulated application processes, the more states the better. Make sure your law firm also has corporate lawyers experienced in forming cannabis businesses and in dealing with state cannabis laws and regulations. Make sure to get clear on whether your law firm will be representing just you in seeking a particular license, or ten of your potential competitors as well. Make sure your law firm also has experience with commercial leaseholds for the cannabis industry. For why this matters, read Marijuana Commercial Leases: This Industry Is Different, You Know. And, given the wild west nature of this industry, no matter how regulated it is by a given state, make double-sure your attorney is an ethical one. And to put it bluntly, ethical lawyers do not take equity in cannabis businesses; they just don’t.
- Don’t forget about federal illegality and get comfortable now with what that means. Those of us with years of experience in the state-regulated marijuana industry know all too well how the federal illegality of marijuana makes day to day business difficult and you need to start educating yourself on this as well. It’s not too early for you to start figuring out how you will deal with the difficulties of opening a bank account due to federal anti-money laundering laws or protecting your trade name and your brands without being able to register trademarks with the USPTO. It also makes sense to start navigating how you can best mitigate against federal income tax laws that prohibit all normal business deductions under IRC 280e, and that bankruptcy isn’t a likely option in the event of failure. And, finally, how will you advertise your new cannabis business when Google and most major social media platforms will not allow you to do so?
Florida has legalized. Now get cracking.
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