Florida Amendment 2 Rolls at the Polls: Getting into the Weeds of Medical Marijuana

By an overwhelming 71% of voters saying “yes” to Amendment 2 on Election Day, Floridians successfully made Florida the first Southern state to legalize medical marijuana.

While the full effects of Amendment 2 are still developing, here are some key takeaways concerning the implications:

1. Commercial real estate may see marked growth. Because indoor medical marijuana cultivation requires enough space and a consistent climate necessary for the growing cycles, the sale and leasing of industrial spaces could see a boom.  Marijuana sales in Colorado were said to have reached over $900 million in 2015 alone, with warehouse vacancy rates falling from 7.6% in 2011 to 3.1% in early 2015.  In addition, the asking lease rates in northern Colorado were on average $2.00 more per square foot than the nationwide average in 2016.  Thus, if Florida’s market follows those real estate trends , the marijuana industry could positively impact real estate sales and leasing.
2. Be aware of local codes and ordinances. Under Chapter 381.986, local governments can regulate the number, location and other permitting requirements for medical marijuana dispensaries.  Many local governments have enacted moratoria or land use regulations on where medical marijuana activities can be conducted.  Some jurisdictions have used that power to relegate medical marijuana related activities to areas that permit retail and commercial activity or medical offices and pharmacies.  Other jurisdictions, however, have outright banned the use or severely curtailed the number and location of medical marijuana dispensaries.  When looking at properties for medical marijuana related activities, a close review of existing and pending ordinances in that jurisdiction regarding medical marijuana will be necessary.
3. IP issues remain sticky. In the marijuana industry, trademark registration is a thorny issue as the United States Patent and Trademark Office has denied applications because the applicant cannot demonstrate that it has made “legal use” of the mark in commerce due to its illegality under federal law. As a result, many medical marijuana businesses are relegated to seeking more limited protection afforded by the state trademark registration process. Also, due to the difficulty (or legal impossibility) of operating marijuana businesses across state lines, participants often employ intellectual property (IP) licensing agreements to extend their brands and/or monetize their know-how beyond their home states. It is imperative to structure these deals correctly to protect your IP and avoid potentially placing yourself at criminal risk.
4. Employers should employ caution. Beyond not requiring to accommodate any “on-site medical use of marijuana” in any place of employment, Amendment 2 provides little guidance about employer rights and responsibilities with respect to medical marijuana. Amendment 2 fails to address whether employers need to extend reasonable accommodations to medical-marijuana-using applicants or employees submitting to a drug test. While courts in several states have issued decisions upholding an employer’s right to enforce their zero-tolerance drug policy in the face of the state’s medical marijuana law, employers should nonetheless review and evaluate their current employment practices and policies concerning drug testing, workplace conduct, and drug/alcohol use.
5. Entrepreneurs are igniting informed investments. While MMTCs will be the “entities” that cultivate, process, and dispense marijuana to qualified patients, Amendment 2 fails to define whether MMTC “entities” will be for-profit or not-for-profit.  Though some states have previously required marijuana business to be formed as nonprofits, the trend is to allow marijuana businesses to be formed as for-profit companies. Entrepreneurs should assess the various available corporate structures in order to be ready to file once the Department further defines an “MMTC applicant.” For investors, there is already a  robust landscape of marijuana-related companies making private securities offerings, and with the recent filing of an SEC registration statement by a Real Estate Investment Trust  solely purposed on acquiring, managing, and leasing medical-use cannabis facilities, we are on the precipice of seeing publicly-traded marijuana-related companies. Prior to making an investment decision in such companies, when performing due diligence investors should verify compliance with applicable state or municipal licensing requirements and scrutinize the company’s cash management structure to ensure conformance to federal anti-money laundering statutes.

Though Florida voters sent a clear message of support for Amendment 2, all the details are still being ironed out.  In the coming weeks, we will expand on theses takeaways and  provide updates on other  implications of Amendment 2 and updates on how your business may be affected.