As they try to balance public health concerns against an entrepreneurial spirit—and avoid a bevy of lawsuits—many states are struggling with how to give out potentially lucrative medical marijuana licenses.
Governing magazine reports many states want to ensure the businesses are well run and are supplying quality products. But competition for licenses can lead to a gold rush mentality and lawsuits as entrepreneurs eye a medical marijuana industry that boasted $4.2 billion in sales in 2014.
“There’s a lot of cash that goes through these businesses,” says Kris Krane with 4Front Ventures, a medical marijuana consulting firm. “As [marijuana] becomes more legitimate and more legal, it’s only going to be a growth industry. People are looking to get in now because as the industry grows and expands they’re positioned to be market leaders.”
Medical marijuana businesses often have between $1 million and $5 million in sales annually, Krane says, adding that he’s seen some that do more than $20 million.
Twenty-eight states have medical marijuana programs. The Louisiana Legislature gave the LSU and Southern University AgCenters the right of first refusal for production of medical marijuana, which would be taken orally in an oil form. Both universities are moving ahead with programs to cultivate medical marijuana.
The LSU Board of Supervisors voted in June to began taking steps to obtain a state license. LSU says its needs at least $11.3 million in capital for a seed-to-sale production facility to house the operations for its proposed medical marijuana program.
Arizona is rare in that it awards some licenses by a lottery. About a dozen states have strict merit-based systems that award a small set of licenses to businesses viewed as the most qualified.
Several have no limit on the number of licenses they give out and review companies through a rolling application process. Others are still developing their programs or have combined the licensing of medical marijuana with that of recreational marijuana businesses.