On the surface, Florida doesn’t seem like it would boast the third-largest cannabis market in the United States. With a history of strict marijuana regulations and continued pushback against adult use legislation, it comes as a surprise to outsiders that the Sunshine State has become a billion-dollar hub for licensed cannabis businesses and entrepreneurs. But Florida has managed to maintain the perfect storm for such industry growth—becoming the country’s largest medical-only cannabis market—and shows no signs of slowing anytime soon.

Since Florida’s initial legalization of medical cannabis in 2016, the number of individuals who both prescribe and use marijuana has steadily increased. As of March 25, there are 699,334 registered medical marijuana patients and 2,677 qualified physicians in the state. Thanks in part to broad qualifying conditions, as well as Florida’s population size, these numbers will only continue to grow.

But how is it that Florida—a state where recreational marijuana is still illegal—has achieved such success in the business of cannabis? There are several factors that work together to create this profitable, highly competitive environment. The state’s limited number of medical marijuana treatment center (MMTC) licenses, forced vertical integration, and favorable taxes have lured in the country’s top cannabis entrepreneurs.

Currently, there are only 22 MMTC licenses in Florida. Last year, the Florida Department of Health’s Office of Medical Marijuana Use (OMMU) announced that it would award 19 more licenses in 2022. However, the application has yet to be released, and additional information remains unavailable.

MMTCs were originally only able to open and operate 25 dispensaries per license. But in 2020, all limits were removed. Consequently, the 22 MMTC license holders are able to run an unlimited number of dispensaries. The OMMU’s website currently houses a directory that lists 414 dispensaries across Florida.

One of the state’s most controversial requirements for an MMTC is that it must be vertically integrated. This means that each MMTC must cultivate, process, and dispense its own medical cannabis, managing everything from seed-to-sale. And since no part of the process can be outsourced, Florida doesn’t have a wholesale cannabis market. An undertaking of this magnitude is nearly impossible for all but multi-state operators (MSOs), who alone have the resources to justify the amount of effort and cash it takes to apply for an MMTC license.

Many cannabis businesses are also moving to Florida to take advantage of the state’s pro-business tax policies. Medical marijuana isn’t subject to an excise tax, allowing businesses to operate with high profit margins. And while the legalization of adult use marijuana won’t appear on ballots until 2024, the prospect of getting an early foothold in a state known for tourism—coupled with the anticipation of recreational legislation—is too good for many companies to pass up.

Florida’s meteoric rise in the cannabis market is projected to continue; the state closed 2021 with an estimated $1.6 billion in cannabis sales. Jefferies analyst Owen Bennett predicts that by 2025, the market will nearly double. Whether that happens or not, one thing is certain: Florida is quickly becoming the country’s unofficial center of the cannabis industry.