No, Florida’s marijuana measure won’t create a cannabis monopoly—as long as lawmakers don’t screw it up

Floridians are voting on a ballot initiative that, if passed, would fully decriminalize marijuana and create a marketplace for recreational consumption. Opponents of the initiative warn that it might lead to a monopoly benefiting a very small number of existing cannabis companies. However, whether such an outcome happens depends entirely on what regulatory framework lawmakers put together.

Should Florida Amendment 3 pass with at least 60% of the vote, it would decriminalize marijuana possession for adults and allow existing medical marijuana dispensaries to sell non-medical marijuana temporarily until new licensure rules are established. Trulieve, one of Florida’s major existing medical marijuana vendors, is a supporter and one of the major financial contributors trying to get Amendment 3 passed. Trulieve’s involvement has prompted an ad campaign against Amendment 3 that claims that the measure would only benefit “Big Weed” and would not allow others to join the market or grow their own marijuana. Trulieve has filed suit over the ad, calling it “demonstrably false.”

The monopoly fears highlight the crucial role regulations play in creating competitive or monopolistic markets. If Florida lawmakers create a regulatory framework encouraging competition, keeping barriers low, and avoiding burdensome taxes and fees, industry consolidation risks remain minimal. On the other hand, restrictive rules—like limited licenses or excessive costs—could indeed lead to market concentration favoring large companies.

Any market can become monopolized if new competitors are blocked or unable to compete effectively. In government-granted monopolies, the state grants itself or a private intermediary exclusive access to a given market. For instance, some states operate alcohol “monopolies,” where hard liquor can only be legally purchased through state-run stores. In lottery monopolies, only the state or a company contracted by the state may offer lottery ticket sales. But, even when private actors can enter a market, a restrictive regulatory regime can make it nearly impossible for smaller companies to succeed, consolidating power among the largest players.

Poorly constructed regulatory schemes can artificially reduce the competitiveness of a given market, for example, by severely restricting the number of available licenses. This reduces the number of firms competing, ensures only those with the greatest resources or connections can get licensed, and then protects them from prospective new competitors who cannot procure licenses.

Excessive application and licensing fees can have a similar effect when they are prohibitively high for smaller, independent firms. For example, Gov. Ron DeSantis’ administration last year raised the two-year fee for a medical marijuana license from about $60,000 to $1.33 million. It’s rather ironic, then, that Gov. DeSantis is campaigning against the amendment using this monopoly argument when his own administration is responsible for making it harder for competitors to enter the market.

Overly complicated regulatory processes that take months or years can also prevent new or smaller firms from market success. Some marijuana farmers in New York, for example, had to sit on millions of dollars worth of perishable crops they could not sell because the state’s sluggish process for licensing marijuana retailers caused several years of delays. Only the most well-capitalized businesses could bear such costs and uncertainty resulting from this delay, forcing smaller firms to sell their businesses out to larger companies.

Excessive taxes and compliance costs can also make it challenging for companies to succeed, reducing their profits and limiting their ability to set retail prices low enough to attract customers from larger or illicit operators–an issue that California cannabis companies and regulators have struggled for years to resolve.

Fortunately for Floridians, if voters approve Amendment 3, their legislators will have a chance to avoid these mistakes by adopting a framework that promotes a competitive market. Preventing monopolization in Florida’s marijuana market requires focusing on creating accessible and fair conditions for all businesses, regardless of size.

Another important step is to streamline regulations. Heavy-handed rules that only big corporations can afford to navigate stifle innovation and growth among smaller businesses. Instead, regulations should be designed to protect consumers without placing an undue burden on any market participant. For instance, state rules with overly prescriptive testing requirements or that require testing at state-run laboratories can stifle innovation and lead to costly delays that raise the final cost of products. Basing testing requirements on objective third-party standards and allowing testing to be performed by accredited independent laboratories would afford businesses more flexibility and reduce costs.

Expanding market access by encouraging local businesses, small-scale growers, and cooperatives to participate will help prevent the concentration of power in a few hands. Policies that reduce compliance costs and support local ownership can lead to a more resilient and diverse marketplace. A few examples of such policies include making sure there are enough licenses to meet demand, such as offering a separate micro-license for small businesses and low application costs. Policies such as these will help Florida avoid the pitfalls experienced by other states and build a fair and open market for adult-use marijuana.

Monopolies almost never result from open competition but instead due to legal advantages enjoyed by one or more market participants. If Florida’s marijuana market were to operate under similar conditions, where only a few well-connected companies could navigate the complexities of the law, then the fears of monopolization might indeed come true.

The key to preventing monopolies in the marijuana industry is not to limit the market or impose heavy restrictions but to create a regulatory environment that encourages competition and innovation. This means setting clear, fair rules that apply to all market participants while minimizing unnecessary barriers to entry for new businesses.

The argument for regulated markets is not to stifle growth but to ensure that all players—large and small—have an equal opportunity to compete. If voters approve Amendment 3, it will be up to Florida lawmakers to embrace these lessons and safeguard consumers from monopolistic market concentration.

The post No, Florida’s marijuana measure won’t create a cannabis monopoly—as long as lawmakers don’t screw it up appeared first on Reason Foundation.

Source: https://reason.org/commentary/no-floridas-marijuana-measure-wont-create-a-cannabis-monopoly-as-long-as-lawmakers-dont-screw-it-up/