Florida medical marijuana deal has some questioning ‘5 percent’ rule
TALLAHASSEE — Florida has a law to prevent the medical marijuana business from being dominated by a few wealthy players.
According to that law, anyone who owns more than 5 percent of a company licensed to sell medical marijuana may not buy any part of any other medical marijuana company in the state.
Regulators at the Florida Department of Health — which oversees the state’s medical marijuana program — are now mulling approval of a potential sale that some fear could violate that law.
If the sale were to be approved by regulators, the hedge fund Gotham Green Partners could, in theory, wield power over GrowHealthy and MedMen Enterprises Inc., two licensed medical marijuana treatment centers in Florida. That means Gotham Green could have significant influence over two of the 22 companies approved by the state to sell marijuana. GrowHealthy has 17 dispensing locations in the state, and MedMen has 11. (Florida is home to 352 dispensaries in total.)
According to a December 2020 filing with the federal Securities and Exchange Commission, Gotham Green Partners already owns a substantial share in MedMen — so much so that Gotham is able to “approve the nomination of a majority of the Company’s Board of Directors,” according to the filing.
Now the hedge fund wants to acquire iAnthus Capital Holdings Inc., which owns GrowHealthy.
The Florida Department of Health’s ruling on the Gotham Green purchase of iAnthus will come at a time when the structure of Florida’s marijuana industry is being hotly debated.
The Florida Supreme Court in May upheld a law that capped the number of licenses in the state and that required any company hoping to sell medical marijuana to be vertically integrated. In practice, that law has meant that only companies that can afford to grow, harvest, package, distribute and sell medical cannabis can enter the market.
“That’s been the frustration of people for a long time, that this (market) is controlled by a monopolistic cartel, so to speak,” said Taylor Biehl, a lobbyist and the co-founder of the Medical Marijuana Business Association of Florida.
Biehl said he did not know the specifics of Gotham Green Partners’ potential deal. But generally, he said the five percent rule was in place to avoid even further consolidation of the market.
In a November filing with the state, GrowHealthy asked regulators to recognize the company’s change in ownership, saying regulators’ approval was key to Gotham buying GrowHealthy’s parent company, iAnthus. Even if the sale were to be approved, GrowHealthy would still be run by the same people as before the transaction, the company said.
“There will be no change among the individuals who exercise direct control of the day to day operations of Grow Healthy,” the filing read.
But some worry that if Gotham Green owns both entities, that would be a violation of Florida’s rules.
Michael Weisser, a cannabis entrepreneur from Aventura, said he tried to strike a deal with MedMen last year that would have given Weisser’s business a way into the Florida market. Because Gotham Green Partners did not ultimately approve of 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 firm shouldn’t be allowed the opportunity to buy another cannabis company.
“At least from my perspective, what they’re trying to do is own two of them,” Weisser said. “I don’t think that comports with the law.”
Representatives of Gotham Green Partners declined to comment for this story. A MedMen spokesperson did not respond to email requests for comment on Monday and Tuesday. Attempts on Monday and Tuesday to reach spokespeople for GrowHealthy and iAnthus were unsuccessful.
State records show that Gotham Green spent $60,000 lobbying Florida’s executive branch in the first quarter of 2021. And Florida’s not 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 seen some success. In Massachusetts, for example, state regulators allowed the sale to go through despite state laws that limit the number of cannabis licenses an individual can own. According to a June story published in the Boston Business Journal, regulators in Massachusetts found, in part, that Gotham Green did not “control” MedMen.
It’s unclear when the Department of Health will decide the fate of Gotham Green Partners’ sale. A spokesperson did not respond to two emails in the past week asking whether the state planned to approve the deal.