Should recreational marijuana be legalized in the state of Florida? That's the question that many are hoping will be placed on the 2020 ballot for Florida voters to decide. Ballot initiatives require a lot of money, but two cannabis companies are placing big bets that the Sunshine State could follow in the footsteps of 11 other states that have legalized recreational pot.

MedMen Enterprises (OTC:MMNFF) and privately held Surterra Wellness have each contributed $545,000 to Make It Legal Florida, an organization formed to work toward placing a constitutional amendment on Florida's 2020 ballot to legalize recreational marijuana. Will these companies' big bets pay off?  

Now entering Florida sign with a marijuana leaf painted on it

Image source: Getty Images.

Florida's legalization push

Make It Legal Florida isn't the only group working to legalize recreational pot in the state. Marijuana advocacy group Regulate Florida has collected the minimum number of valid signatures required to submit proposed ballot language for a judicial review by the Florida Supreme Court and a financial impact review. There are also three other proposed constitutional amendments for legalizing recreational marijuana in Florida.

However, the constitutional amendment proposed by Make It Legal Florida probably has the best chances of success. Why? Money. It's expensive to mount a campaign to place an amendment on the ballot in Florida. The state requires proponents of an amendment to collect valid signatures equal to 8% of the total votes cast in Florida in the most recent presidential election -- over 76,000 signatures based on Florida's vote in 2016. 

Make It Legal Florida reported close to $1.1 million raised on its September financial filing with Florida's Division of Elections. That total is well above all of the other marijuana legalization advocacy groups' funding so far.

It's not surprising that MedMen kicked in a big amount to fund Make It Legal Florida. MedMen's southeastern director of government affairs, Nick Hansen, serves as chair of the organization. The California-based cannabis retailer opened its first medical cannabis dispensary in West Palm Beach, Florida, in June. MedMen plans to open an additional 11 medical cannabis stores in Florida by the end of this year.

Atlanta-based Surterra Wellness also has a motive for its big contribution to efforts to legalize recreational pot in Florida. The company operates 31 medical cannabis stores throughout the Sunshine State. Surterra currently ranks in second place behind Trulieve Cannabis (OTC:TCNNF) for total THC and CBD sales in the state and is in sixth place for total smokeable flower sales.

A huge opportunity

How big of a prize is a legal recreational marijuana market in Florida? Huge. Based only on medical cannabis sales, the state is on track to become the third-largest legal cannabis market in the U.S. within the next three years. ArcView Market Research and BDS Analytics have projected that Florida's medical cannabis sales will exceed $1.7 billion by 2022.

The market for recreational pot in Florida would almost certainly be much bigger. Florida claims the third-largest population in the U.S., behind only California and Texas. California's legal marijuana market should approach $7.7 billion by 2022. Florida's market size could be close to half that level.

But using California as a benchmark could be overly pessimistic. The state botched its rollout of legalized recreational pot last year by imposing high taxes and burdensome regulations that stifled growth.

Colorado might provide a better comparison. The legal marijuana market in Colorado should grow to around $2.5 billion by 2022. Florida's population is around 3.7 times larger than Colorado's, which implies that the legal pot market in Florida could be more than $9 billion down the road if recreational marijuana legalization efforts succeed. 

Will the bets pay off?

Although MedMen and Surterra have made big bets on legalizing recreational pot in Florida, there's no guarantee those bets will pay off. Attorney John Morgan, founding partner of the Morgan & Morgan law firm, estimates that it could cost at least $10 million and perhaps up to $15 million to fund the effort to gather all of the required signatures to put a constitutional amendment to legalize recreational marijuana on Florida's ballot in 2020.

Morgan has personal experience on this front. He contributed close to $7 million toward the 2016 Florida initiative to legalize medical marijuana.

Remember also that getting an amendment on the ballot isn't the end of the battle. At least 60% of the total votes cast is required to pass the initiative. That level should be attainable, though, with a recent poll finding that 67% of Floridians support legalizing recreational marijuana. 

It's still an uphill battle for legalizing recreational pot in Florida at this point. But it's not an unwinnable battle. Regardless of exactly how large the market could be in Florida, several marijuana stocks could enjoy a major catalyst should the state legalize recreational pot next year. The marijuana stocks that would likely experience the biggest boosts are those like MedMen and Trulieve that already have a presence in Florida.