Florida medical marijuana deal has “5%” rule questioned
TALLAHASSEE – Florida has a law to prevent the medical marijuana trade from being dominated by a few wealthy gamblers.
According to this law, anyone who owns more than 5% of a business licensed to sell medical marijuana cannot buy any part of another state medical marijuana business.
Regulators at the Florida Department of Health – which oversees the state’s medical marijuana program – are now considering approving a potential sale that some believe could violate that law.
If the sale were to be approved by regulators, hedge fund Gotham Green Partners could, in theory, wield power over GrowHealthy and MedMen Enterprises Inc., two licensed medical marijuana processing centers in Florida. This means Gotham Green could have significant influence over two of the 22 companies state-approved to sell marijuana. GrowHealthy has 17 dispensaries in the state, and MedMen has 11. (Florida has a total of 352 dispensaries.)
According to a December 2020 filing with the Federal Securities and Exchange Commission, Gotham Green Partners already owns a substantial stake in MedMen – so much so that Gotham is able to “approve the nomination of a majority to the board of directors. of the company ”, according to the filing.
Now the hedge fund wants to acquire iAnthus Capital Holdings Inc., which owns GrowHealthy.
The Florida Department of Health’s decision on Gotham Green’s purchase of iAnthus will come at a time when the structure of the Florida marijuana industry is hotly debated.
The Florida Supreme Court upheld a law in May limiting the number of licenses in the state and requiring any business wishing to sell medical marijuana be vertically integrated. In practice, this law means that only companies that can afford to grow, harvest, package, distribute and sell medical cannabis can enter the market.
“It’s been people’s frustration for a long time that this (market) is controlled by a monopoly cartel, so to speak,” said Taylor Biehl, lobbyist and co-founder of the Medical Marijuana Business Association of Florida.
Biehl said he did not know the details of the potential Gotham Green Partners deal. But in general, he said the five percent rule was in place to “avoid consolidation and monopoly approaches to the market.”
In a November filing to the state, GrowHealthy called on regulators to recognize the change in ownership of the business, saying approval from regulators was essential for Gotham to buy GrowHealthy’s parent company, iAnthus. Even if the sale were approved, GrowHealthy would still be run by the same people as before the transaction, the company said.
“There will be no change among those who have direct control over the day-to-day operations of Grow Healthy,” the file says.
But some fear that if Gotham Green owns both entities, it would be a violation of Florida rules.
Michael Weisser, an Aventura cannabis entrepreneur, said he tried to strike a deal with MedMen last year that would have allowed Weisser’s company to enter the Florida market. Because Gotham Green Partners ultimately did not approve the move, the deal fell apart, Weisser said.
If the hedge fund had the power to exert control over MedMen last year, Weisser argued, the company should not have the option of buying another cannabis company.
“At least from my perspective, what they’re trying to do is own two,” Weisser said. “I don’t think this is in accordance with the law.”
Representatives of Gotham Green Partners declined to comment for this story. A spokesperson for MedMen did not respond to email requests for comment on Monday and Tuesday. Attempts on Monday and Tuesday to reach spokespersons for GrowHealthy and iAnthus failed.
State records show Gotham Green spent $ 60,000 lobbying the Florida executive branch in the first quarter of 2021. And Florida isn’t the only state they’re lobbying. The hedge fund has sought regulatory approval for its purchase of iAnthus in several other states: Massachusetts, Maryland, New York, New Jersey and Vermont.
The fund has had some success. In Massachusetts, for example, state regulators have authorized the sale despite state laws that limit the number of cannabis licenses an individual can possess. According to a June article published in the Boston Business Journal, Massachusetts regulators discovered, in part, that Gotham Green did not “control” MedMen.
It is not known when the Department of Health will decide the fate of the Gotham Green Partners sale. A spokesperson did not respond to two emails last week asking if the state plans to approve the deal.