Four (4) Reasons Why Florida May Impose A Bottom-Line Investment Requirement For The Medical Marijuana Industry

Four (4) Reasons Why Florida May Impose A Bottom-Line Investment Requirement For The Medical Marijuana Industry

Medical marijuana investment in Florida? A bottom-line investment requirement is something the nationwide legal cannabis industry has not seen in the past. However, things have been changing lately. One example is Pennsylvania, the State that just opened up its market for the investments to flow in. In addition to wiping off the residency requirement for the business owners, Pennsylvania set out the monetary threshold to enter the market. For a medical marijuana dispensary license it is $150,000, and for cultivation/processing license it is $2,000,000.   Is this a new trend or an isolated experiment? Below are the four reasons why Florida may follow the Pennsylvania example.

 

  1. Florida Has Already Done Something Similar

Although Florida Compassionate Medical Cannabis Act did not provide any restrictions on the investment, yet it did set the number that would limit the pool of the potential investors. By having said this, I mean the performance bond in the amount of $5,000,000 that the law required a license awardee to post with the State within 10 days after obtaining the license.

 

Moreover, the Bill Senator Jeff Brandes filed for the 2017 legislative session also provides for $1,000,000 performance and compliance bond. Senator Rob Bradley filed another bill providing for $5,000,000 performance bond that decreases to $2,000,000 after 1,000 patients register with the business.  Chances are the same language will appear in the new bill.

 

  1. Florida May Want To Protect The Industry From Failures

Statistically, 2/3 of the legal cannabis enterprises fall out within the first three years after the market opens up. There are numerous reasons for this tendency. The most important one, however, is that many cannabis businesses are not financially ready to survive the competition and the initially slow pace of the developing markets. In other words, the businesses run out of money and have to shut down. The bottom-line investment requirement, thus, provides better chances for new businesses to survive the inception of the industry.

 

Without such requirement, many businesses will wind up leaving gaps in the market and promoting the monopoly or oligopoly, which in turn will negatively affect the pricing and the quality of medical cannabis.

 

  1. Florida May Want to Ensure The Validity Of The Investment

This reason is intertwined with the previous one. Serious investors with unlimited resources are not the ones that need validation. Businessmen with fewer resources are the suspect ones. A businessman who has invested the life savings into a medical cannabis project is in the highest risk zone as there are various variables that no one has control over. If things work out, the business will be a success; if not, that businessman loses everything.

 

An investment will be valid if an investor is aware of how much the State expects her to invest in order to survive the initial stages of the development. This measure, although limiting the pool of potential investors, may promote the safeguards of the industry in a long run. Protecting those investors that simply cannot afford to be a part of the industry is an important public policy consideration as well.

 

  1. Florida May Want to Protect The Patients

The last but not least is the protection of the medical cannabis consumers. Florida will want to make sure that patients will receive the highest quality of the medicine along with the most reasonable prices. This price-quality balance will only be possible if the industry is stable and develops gradually.

 

As the bottom-line investment requirement will provide better chances of survival for new business, the patients will get medical cannabis of greater quality and better prices. This is the result of more expensive equipment and sophisticated technology investors are capable of affording.

 

Plus, the industry that develops harmoniously and without shake-offs has a natural process of healthy competition for patients. More businesses means more competition for quality and prices. With lower prices and higher quality, the patients are better off.

 

Conclusion

Although there are more questions than answers, we may expect Florida to set the lowest investment requirement for the medical marijuana industry in the form of a performance bond.   To assess whether it is a good thing or not, more details needed on how exactly Florida will approach this issue. Nevertheless, the requirement will definitely leave a lot of smaller businesses out or at least push them to partner up and pool the resources in order to participate and survive.

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