Market snapshot

Trends and prospects

How would you describe the current state of the cannabis industry in your jurisdiction, including areas of growth, market prospects and trends, and M&A activity?

Florida’s medical cannabis industry experienced robust growth in 2018 and appears poised to continue that growth for the foreseeable future. The state’s patient registration count quickly grew from 65,310 at the start of 2018 to approximately 209,000 at the end of the year. The number of retail locations grew at a similar pace, from 25 at the start of 2018 to 83 at the end of the year. Industry analysts project that the state’s medical marijuana market may grow to as much as $1.6 billion and support 400,000 patients by 2020.

Legal framework

Legislation

What primary and secondary legislation governs the use, cultivation and retail of cannabis in your jurisdiction?

With the exception of medical cannabis, cannabis is an illegal Schedule I controlled substance under the Florida Controlled Substances Act and its possession, use, cultivation, and distribution is illegal in Florida (Florida Statute 893.03(1)(c)(7)). However, Florida has enacted a robust medical cannabis regime.

Florida’s medical cannabis regime is grounded in a voter-approved amendment to Florida’s Constitution (the Cannabis Amendment) (Article X, Section 29 of the Florida Constitution). The Cannabis Amendment authorizes “qualified physicians” to prescribe cannabis to patients with certain “debilitating medical conditions,” who can then purchase cannabis from licensed medical marijuana treatment centers, which are vertically-integrated companies that cultivate, process, and dispense cannabis.

The Cannabis Amendment is implemented through Florida Statute 381.986, which sets out detailed requirements for:

  • patients seeking to obtain a physician certification to use cannabis;
  • physicians seeking to issue such certifications; and
  • marijuana treatment centers seeking to supply cannabis to qualified patients.

The statute also delegates significant rulemaking authority to the Florida Department of Health; however, litigation attacking Florida Statute 381.986 as impermissibly narrow under the Cannabis Amendment has slowed the department’s rulemaking. The most relevant regulations to have been enacted are found in Chapters 64-4 and 64eR17 of the Florida Administrative Code.

Florida’s medical marijuana statute has several specific provisions related to “low-tetrahydrocannabinol (THC) cannabis”—defined as any cannabis containing less than 0.8% THC by weight—in contrast to the recently-passed federal Farm Bill 2018, which decriminalizes “hemp,” defined as cannabis containing less than 0.3% THC by weight. Neither the U.S. Department of Agriculture nor the Florida Department of Agriculture and Consumer Services have promulgated regulations regarding the production of hemp, but industry participants should be aware that some products with lower THC content will be legal under both state and federal law, while any low-THC cannabis between 0.3% and 0.8% THC by weight will be legal under Florida law, but not federal law.

Regulators

What bodies regulate the use, cultivation and retail of cannabis, and what is the extent of their powers?

Florida’s medical cannabis program is primarily administered by the Florida Department of Health (Article X, Section 29(d) of the Florida Constitution). The Department of Health’s rulemaking authority includes implementing and enforcing rules regarding:

  • the amounts of medical cannabis that can be prescribed by qualified physicians and possessed by qualified patients;
  • the medical marijuana use registry, which tracks the physician certifications prescribing medical marijuana to individual patients;
  • identification cards for qualified patients and caregivers;
  • medical marijuana treatment centers, which are vertically-integrated companies that cultivate, process, and dispense cannabis in Florida; and
  • medical marijuana testing laboratories, which test the processed cannabis that medical marijuana treatment centers intend to sell to qualified patients.

The Florida Department of Environmental Protection is tasked with implementing and enforcing rules regarding waste from processing cannabis under Florida Statute 381.986(8)(e)(10)(c), and the Florida Department of Agriculture and Consumer Services is tasked with testing requirements for contaminants that are unsafe for human consumption in cannabis edibles under Florida Statute 381.986(8)(e)(10)(d). The Florida Board of Medicine and the Florida Board of Osteopathic Medicine regulate the qualified physicians that can prescribe medical cannabis (Florida Statute 381.986(3-4)).

Personal use and cultivation

Possession and consumption

What rules and restrictions govern the personal possession and consumption of cannabis in your jurisdiction?

Florida allows its citizens to possess and consume cannabis for medical use if they have received a physician certification from a qualified physician (Florida Statute 381.986(1)(j)). To be eligible for a certification, the patient must be diagnosed with one of the medical conditions listed in Florida Statute 381.986(2). Before issuing the certification, the physician must:

  • conduct a physical exam of the patient;
  • review the patient’s medical history; and
  • determine that “the medical use of marijuana would likely outweigh the potential health risks for the patient” (Florida Statute 381.986(4), Id.).

If the patient is pregnant, the physician can prescribe only low-tetrahydrocannabinol (THC) cannabis (Id.). A physician may not issue a certification for more than three 70-day supplies of cannabis (Florida Statute 381.986(c)).

The following restrictions apply to patients prescribed medical cannabis:

  • A qualified patient can purchase the cannabis prescribed in the physician certification from only the dispensing facility of a state-licensed medical marijuana treatment center (Florida Statute 381.986(1)(j)(1)).
  • A patient can purchase and possess only one 70-day supply of cannabis at a time, and must keep the cannabis in its original packaging at all times (Florida Statute 381.986(14)(a)).
  • A patient cannot transfer cannabis to any other individual, and cannot consume cannabis—other than low-THC cannabis—in any public place, school, vehicle, aircraft, or motorboat (Florida Statute 381.986(1)(j)(5)).

Cultivation

What rules and restrictions govern cultivation of cannabis for personal use?

Personal cultivation is not permitted in Florida. Only cannabis cultivated by a medical marijuana treatment center is exempted from the state’s Controlled Substances Act (Florida Statute 381.986(14)(a)).

Use in and outside the workplace

What statutory and case law (if any) governs employers’ ability to restrict cannabis use both in and outside the workplace? Can cannabis use (even medical use) serve as legal grounds for termination?

Florida’s cannabis laws do “not limit the ability of an employer to establish, continue, or enforce a drug-free workplace program or policy” (Florida Statute 381.986(15)). Employees cannot use cannabis at their workplace unless permitted to do so by their employer (Florida Statute 381.986(1)(j)(5)(c)). Therefore, cannabis use by an employee, whether in or outside the workplace, can provide grounds for termination.

Commercial cultivation, retail and marketing

Business licensing requirements

What licensing requirements apply to businesses seeking to cultivate, distribute, produce and sell cannabis products in your jurisdiction? What procedures, timeframes and fees apply in this regard, and on what grounds can a licence be revoked?

Florida strictly limits the number of companies that can supply medical cannabis. To do so, a company must obtain a license to operate as a medical marijuana treatment center (Florida Statute 381.986(8)). Medical marijuana treatment centers are vertically-integrated companies that cultivate, process, and dispense cannabis.

The statute that implements the constitutional amendment that permits medical cannabis— Florida Statute 381.986—initially provided for 10 medical marijuana treatment center licenses (Florida Statute 381.986(8)(a)(2)(c)). Four additional licenses will be issued each time 100,000 additional qualified patients are added to Florida’s medical marijuana use registry (Florida Statute 381.986(8)(a)(4)). There are currently 14 licensed medical marijuana treatment centers. No individual or entity can obtain more than one medical marijuana treatment center license (Florida Statute 381.986(8)(b)).

To obtain a medical marijuana treatment center license, the applicant must submit to the Florida Department of Health a non-refundable application fee (in the amount of $60,830 under proposed rule 64-4.002) and a detailed application, which is then blind-graded and scored against other applicants to determine who receives the limited licenses. Broadly speaking, Florida Statute 381.986 requires that an applicant has:

  • been registered to do business in Florida for five consecutive years;
  • the “technical and technological ability” to cultivate cannabis, including low-tetrahydrocannabinol cannabis;
  • the ability to comply with the statute’s security requirements and “prevent diversion or unlawful access” to cannabis;
  • the infrastructure to dispense cannabis;
  • the financial ability to maintain its operations;
  • a medical director, who is a licensed allopathic or osteopathic physician, to supervise its activities; and
  • a “diversity plan that promotes and ensures the involvement of minority persons and minority business enterprises [or] veteran business enterprises… in ownership, management, and employment” (Florida Statute 381.986(8)(b)).

The applicant must also show that all of its “owners, officers, board members, and managers have passed a background screening” pursuant to Florida Statute 381.986(9).

If the applicant is awarded a license, it must post bond or provide an irrevocable letter of credit in the amount of $5 million or, if it will serve at least 1,000 qualified patients, $2 million (Florida Statute 381.986(8)(b)(7)). Licenses expire after two years but may be renewed biennially if the medical marijuana treatment center maintains compliance with Florida Statute 381.986 and pays a renewal fee (Florida Statute 381.986(8)(b)).

Florida Statute 381.986 provides that a medical marijuana treatment center license can be revoked for 13 enumerated reasons, which includes, as a catch-all, any violation of the statute or rule promulgated by the Department of Health (Florida Statute 381.986(10(f)). The Department of Health has also promulgated Florida Administrative Code 64ER17-6, which includes a detailed list of specific violations and the penalties for each. Under the rule, “[p]enalties are applicable per instance of each violation and every day that a violation occurs shall be considered a separate violation” (Id.).

Are any businesses specifically prohibited from selling cannabis products?

Only licensed medical marijuana treatment centers are allowed to sell cannabis in Florida.

Zoning and real estate considerations

Are there any zoning restrictions on where businesses can cultivate, produce and sell cannabis products?

Florida law provides few state-wide zoning restrictions on cannabis companies, and provides counties and municipalities with the option to:

  • ban cannabis dispensaries from the county or municipality entirely; or
  • allow cannabis dispensaries in the jurisdiction, subject to zoning laws no more restrictive than those that apply to pharmacies (Florida Statute 381.986(11)).

Counties and municipalities can neither ban nor regulate the location of cultivation and processing facilities in their jurisdiction (Id.).

Statewide, no cannabis cultivation or processing facility can be located within 500 feet of any elementary, middle, or secondary school (Florida Statute 381.986(11)(a)). Dispensing facilities are subject to the same restriction unless the county or municipality in which they are located approves the near-school location through a formal, public proceeding at which the county or municipality “determines that the location promotes the public health, safety, and general welfare of the community” (Florida Statute 381.986(11)(b)).

Counties and municipalities have the option of banning marijuana dispensaries from their jurisdiction entirely (Florida Statute 381.986(11)(b)(1)). However, in the absence of such a ban, the county or municipality cannot enact ordinances limiting the number of dispensaries in the jurisdiction (Id.). Further, it cannot enact permitting or location ordinances that are more restrictive than the jurisdiction’s ordinances for pharmacies (Florida Statute 381.986(11)(b)(2)).

Are there any other notable real estate issues pertinent to cannabis businesses, including with regard to landlord/tenant relationships and real estate market activity?

Medical marijuana treatment centers cannot enter into any profit-sharing arrangements with the owner or lessor of the facilities in which the company cultivates, processes, stores, or dispenses cannabis (Florida Statute 381.986(8)(e)(3)). Medical marijuana treatment centers must grow and process cannabis within an enclosed structure, and the cannabis must be grown and processed in rooms that are separate from any other plants or products (Florida Statute 381.986(8)(e)). Florida also requires that medical marijuana treatment centers maintain a robust security system that includes:

  • an alarm system;
  • a video surveillance system; and
  • a locked room or vault to store cannabis (Florida Statute 381.986(8)(f)).

A medical marijuana treatment center’s dispensing facility—where qualified patients can purchase cannabis—must include a waiting area and a private consultation area that is separate from the waiting area and the “area where dispensing occurs” (Florida Statute 381.986(8)(f)(3)). A medical marijuana treatment center cannot display products or dispense cannabis in the waiting area (Id.).  

Product restrictions and specifications

Are any cannabis products and accessories prohibited from sale? Do any product specifications apply?

While the statute implementing the medical cannabis amendment to Florida’s Constitution (the Cannabis Amendment) contains specific restrictions regarding the forms of cannabis and accessories available for sale, the validity of those restrictions is in question after they were struck down as unconstitutional by a Florida trial court in May 2018.

The Cannabis Amendment defines “marijuana” as:

[A]ll parts of any plant of the genus Cannabis, whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant or its seeds or resin. (Article X, Section 29(b)(4) of the Florida Constitution).

The amendment also states that it “shall not require any accommodation… of smoking medical marijuana in any public place,” which could be read as implying a right to smoke medical cannabis in private (Article X, Section 29(c)(6) of the Florida Constitution).

However, the statute implementing the Cannabis Amendment prohibits cannabis companies from selling cannabis flower “in a form for smoking”—although they may sell cannabis “flower in a sealed, tamper-proof receptacle for vaping” (Florida Statute 381.986(1)(j)(2)). This prohibition on the sale of cannabis flower was struck down as unconstitutional by a Florida trial court on May 25, 2018 (People United for Med. Marijuana v. Florida Dept. of Health, Case 17-001394, 2018 WL 2447102 (Florida Circuit Court, May 25, 2018)). The Florida Department of Health appealed the decision, and the trial court’s judgment is stayed while the appeal is pending.

The statute allows cannabis companies to sell edibles that are “made with marijuana oil” (Florida Statute 381.986(1)(d)). However, edibles cannot be made with any “other form of marijuana” (Id.).

The statute also limits the accessories that can be used to consume cannabis—so-called “marijuana delivery devices” (Florida Statute 381.986(1)(g)). Each physician certification for the use of medical cannabis issued to a qualified patient specifies the marijuana delivery device that the patient must use to consume the prescribed cannabis (Florida Statute 381.986(4)(a)(7)(a)). Cannabis companies are prohibited from selling any “drug-related product, including pipes, bongs, or wrapping papers,” other than a marijuana delivery device specified in a physician certification (Florida Administrative Code, r 64ER 17-6(1)(b)(7)).

Packaging and labelling

What packaging and labelling requirements apply to the sale and distribution of cannabis products and accessories?

Cannabis products must be affixed with a label stating the following information:

  • the product met the testing requirements of Florida Statute 381.986(8)(e)(10)(d);
  • the name of the medical marijuana treatment center from which it originates;
  • the batch and harvest number;
  • the date dispensed;
  • the name of the physician who issued the physician certification authorizing the patient’s purchase;
  • the patient’s name;
  • the product name, if any;
  • a dosage form listing the concentration of tetrahydrocannabinol and cannabidiol;
  • the recommended dose;
  • a warning that it is illegal to give the cannabis to another person; and
  • a “marijuana universal symbol” developed by the Florida Department of Health (Florida Statute 381.986(8)(e)(10)(e)).

A “patient package insert” must be placed inside the cannabis product’s package that includes information related to the product’s:

  • clinical pharmacology;
  • indications and use;
  • dosage and administration;
  • dosage forms and strength;
  • contraindications;
  • warnings and precautions; and
  • adverse reactions (Florida Statute 381.986(8)(e)(11)).

If the product comprises edibles, each edible within the package must be individually wrapped in “plain, opaque wrapping marked only with the marijuana universal symbol” developed by the Department of Health (Florida Statute 381.986(8)(e)(12)). Edibles cannot:

[B]e attractive to children; be manufactured in the shape of humans, cartoons, or animals; be manufactured in a form that bears any reasonable resemblance to products available for consumption as commercially available candy; or contain any color additives. (Florida Statute 381.986(8)(e).)

After purchase, the customer must keep the cannabis in its original packaging at all times (Florida Statute 381.986(14)(a)).

Advertising and marketing

What rules and restrictions govern the advertising and marketing of cannabis products and accessories (including online)?

Florida law severely restricts the advertising of cannabis products. The only non-digital marketing allowed is a sign “affixed to the outside or hanging in a window” of a dispensary which includes the dispensary’s approved trade name or logo (Florida Statute 381.986(8)(h)(1)). All other “advertising that is visible to members of the public from any street, sidewalk, park, or other public place” is prohibited (Florida Statute 381.986(8)(h)).

All digital advertisements must be approved by the Florida Department of Health (Florida Statute 381.986(8)(h)(2)(a)). Unsolicited pop-up advertisements are expressly prohibited, and all opt-in marketing must include “an easy and permanent opt-out feature” (Florida Statute 381.986(8)(h)(2)(c-d)). Whether digital or non-digital, cannabis advertising cannot specifically target minors (Florida Statute 381.986(8)(h)).

Cannabis companies must maintain a website (Florida Statute 381.986(8)(i)). The website must include:

  • each product offered;
  • the price for a 30, 50, and 70-day supply of each product;
  • the price for each marijuana delivery device offered; and
  • any discount policies and eligibility requirements, if applicable (Id.).

Branding

What rules and restrictions govern the branding and trademarking of cannabis products and accessories? Are there any other special branding considerations for cannabis businesses?

Florida’s medical cannabis statute does not contain any specific provisions related to the branding and trademarking of cannabis products and accessories. 

Financing

Private

What private financing options are available for cannabis businesses in your jurisdiction, and what are their respective advantages and disadvantages?

A medical marijuana treatment center, and any individual or entity that owns 5% or more of the voting shares of such a center, may not acquire direct or indirect ownership of any other medical marijuana treatment center (Florida Statute 381.986(8)(e)(2)). Given that Florida allows only a limited number of these centers (each of which is vertically integrated), entry into the market requires significant capital. Several of the licensed medical marijuana treatment centers in Florida are owned by publicly traded Canadian firms. However, there has also been a significant amount of private financing in the short time that medical marijuana has been legal in Florida. Several of Florida’s licensed medical marijuana treatment centers have announced significant capital raises, and Form Ds have been filed with the U.S. Securities and Exchange Commission by issuers who appear to be related to such centers. In addition, given marijuana’s illegality under the Controlled Substances Act, financing a Florida medical marijuana business could be considered a conspiracy to violate federal law or aiding and abetting a violation of federal law under 18 U.S.C. § 371 and 18 U.S.C. § 2, respectively.

Public

What rules and restrictions govern cannabis businesses’ listing and admission to trading on recognised equity securities exchanges? What are the advantages and disadvantages of public listing?

The New York Stock Exchange, the National Association of Securities Dealers Automated Quotation (NASDAQ), and other domestic exchanges act as self-regulatory organizations (SROs) for their member firms. These SROs are generally responsible for establishing standards of conduct for their members (i.e., companies listed on the exchange) and monitoring their members’ compliance with those standards. American exchange rules prohibit their members from engaging in illegal activity. New York Stock Exch. Listed Company Manual, Rule 303A.10 (2009); NASDAQ Listing Rules, Rule IM 5610 (2009). As a practical matter, this means that companies whose activities are illegal in the jurisdictions in which they operate (i.e., prohibited by U.S. federal law) may not be listed on a U.S. exchange. By contrast, U.S. cannabis firms aiming to tap the public equity markets are typically listed on the Canadian Securities Exchange. Canadian securities regulators have issued guidance that U.S. firms can be listed in Canada despite the fact that their operations are illegal under U.S. law. Generally, the guidance provides that issuers can be listed in Canada provided that the risks associated with their illegal operations in the United States are adequately disclosed. Canadian Securities Administrator, Revised Staff Notice 51-352 (Feb. 8, 2018). Indeed, of the 14 licensed medical marijuana treatment centers operating in Florida, seven are affiliated with companies that trade on Canadian stock exchanges.

Medical cannabis

Medical use

Which medical conditions qualify for treatment with cannabis products? What other rules and restrictions govern medical use of cannabis (eg, dosage limits)?

To qualify for treatment with medical cannabis, a patient must be diagnosed with one of the following conditions listed in Florida Statute 381.986(2):

  • cancer;
  • epilepsy;
  • glaucoma;
  • HIV;
  • AIDS;
  • amyotrophic lateral sclerosis;
  • post-traumatic stress disorder;
  • Crohn’s disease;
  • Parkinson’s disease;
  • multiple sclerosis;
  • “[m]edical conditions of the same kind or class as or comparable to those” listed above, in which case the physician must document the basis for the determination that the patient’s condition is like those enumerated above and that marijuana is an effective treatment for the condition (Florida Statute 381.986(4)(b));
  • a terminal condition diagnosed by a physician other than the physician prescribing the medical marijuana—a “terminal condition” is defined as one that:
    • “causes significant functional impairment;”
    • is not treatable “without the administration of life-sustaining procedures;” and
    • will result in death within one year in the normal course (Florida Statute 381.986(1)(o)); or
  • “chronic non-malignant pain,” which is defined as pain “caused by a qualifying medical condition or that originates from a qualifying medical condition and persists beyond the usual course of that qualifying medical condition” (Florida Statute 381.986(1)(b)).

A patient with one of these conditions is eligible to receive a physician certification, which will allow them to purchase medical cannabis (Florida Statute 381.986(4)). Before issuing the certification, the physician must:

  • conduct a physical exam of the patient;
  • review the patient’s medical history; and
  • determine that “the medical use of marijuana would likely outweigh the potential health risks for the patient” (Id.).

If the patient is pregnant, the physician can prescribe only low-tetrahydrocannabinol (THC) cannabis (Id.).

A physician may not issue a certification for more than three 70-day supplies of cannabis (Florida Statute 381.986(c)).

Physician licensing

What licensing requirements apply for physicians seeking to prescribe cannabis products to patients?

Only qualified physicians can prescribe cannabis. To become a qualified physician, the applicant must hold an active, unrestricted license as an allopathic surgeon or an osteopathic surgeon, and must complete a two-hour course and subsequent examination (Florida Statute 381.986(3)(a)). Further, the applicant cannot be employed by, or have any direct or indirect economic interest in, one of Florida’s cannabis companies or testing laboratories (Florida Statute 381.986(3)(b)).   

Pharmacy licensing

What licensing requirements apply for pharmacies seeking to dispense cannabis products?

Pharmacies cannot dispense cannabis. The only businesses that can dispense cannabis are licensed medical marijuana treatment centers, which are vertically-integrated companies that cultivate, process, and dispense cannabis. There are currently 14 licensed treatment centers, and each center is allowed to have a baseline of up to 25 dispensaries, with five additional dispensaries added for each 100,000 medical-marijuana patients registered in Florida (Florida Statute 381.986(a)(5)(a)).

Health insurance

How are cannabis products covered by health insurers (both public and private)? Are there any rules or restrictions in this regard?

Health insurers are not required to cover a patient’s use of medical cannabis under the medical cannabis amendment to Florida’s Constitution (Article X, Section 29(c)(7)).

Product development

What opportunities are available for cannabis businesses to cooperate with healthcare providers, pharmaceutical companies and research institutes in the development of new medical cannabis products? Are there any notable regulatory considerations in this regard?

Florida’s cannabis laws allow cannabis companies to collaborate or contract with other businesses for specific aspects of their operations only. Unless initially licensed under the state’s prior low-THC cannabis statute, medical marijuana treatment centers are specifically prohibited from contracting “for services directly related to the cultivation, processing, or dispensing of marijuana and marijuana delivery devices” (Florida Statute 381.986(8)(e)).

Taxes

Sales tax

How are sales of cannabis products taxed?

There is no sales or use tax for medical cannabis in Florida.

Business taxes

What tax liabilities arise for cannabis businesses, and what best practices are advised for efficient tax planning?

As there are no tax-related provisions in Florida’s medical cannabis statute, there are no state-specific tax liabilities or tax-planning practices applicable to cannabis businesses. However, Section 280E of the Internal Revenue Code prohibits businesses from deducting ordinary business expenses from income derived from the trafficking of Schedule I or II narcotics. Because marijuana remains a Schedule I narcotic, the section applies to marijuana businesses in states where marijuana is legal under state law. Thus, Florida’s cannabis businesses cannot deduct business expenses from their gross income. However, because the Farm Bill 2018 legalized “hemp”—defined as cannabis containing 0.3% or less tetrahydrocannabinol—hemp businesses are no longer subject to Section 280E.

Cross-border issues

Import and export

What rules and restrictions govern the import and export of cannabis products and accessories to and from your jurisdiction?

Cannabis cannot be imported to or exported from Florida.

Immigration considerations

What immigration rules and restrictions are noteworthy for stakeholders in a cannabis business, including with regard to the movement of employees and the cross-border carriage of cannabis for personal use?

Florida’s medical cannabis statute contains no specific provisions related to immigration rules and restrictions for stakeholders in a cannabis business. Interested parties should consult the latest pronouncements from U.S. Customs and Border Protection.