A Promising Proposition in Arizona for Adult-Use Cannabis

Multiple states are leaving cannabis legalization up to the people this November, and one of the most promising is Arizona’s bid for adult-use with Proposition 207. 

As part of the ballot initiative, the Smart and Safe Arizona Act (or the “Act”), the Arizona Department of Health Services (ADHS) is slated to accept cannabis business license applications from January 19, 2021 to March 9, 2021. 

Arizona’s Cannabis History

As early as 1996, Arizona attempted to allow doctors to write prescriptions for medical marijuana, but that was quickly invalidated as federally impermissible. Over a decade later, in 2010, Arizonians legalized cannabis for medical use and established a regulated market. Today, Arizona has 122 operating “nonprofit dispensaries” throughout the state that can grow, process, and sell medical marijuana. After narrowly being defeated in 2016, full legalization of adult-use cannabis makes its way to the ballot again in 2020. 

Contrary to the 2016 results, this year’s polls show that adult-use legalization is highly supported by voters, with over two-thirds favoring Prop 207, and it only needs a simple majority to pass. Smart and Safe Arizona is the group behind the act, and they collected 420,000 signatures for the initiative despite difficulties posed by pandemic restrictions—a meaningful number that far exceeds the 237,645 required. In August, the Proposition overcame opposition by prohibitionists in state court arguing the summary misled voters by omitting certain provisions. Ultimately, the Arizona Supreme Court unanimously found the summary to be accurate.  

Prop 207 Details

A few of the most notable provisions of the proposed Act, especially for potential market entrants, include a restrictive license cap by county, early consideration of particular applicants, and a later round of social equity licensure.

1. The Act would implement a restrictive license cap on “marijuana establishments,” which are vertically integrated operations that can grow, process, and sell adult-use marijuana. 
2. The Act limits ADHS to issuing adult-use licenses equal to 10% of the number of registered pharmacies in the state (or about 145 licenses).
3. It only allows ADHS to issue a marijuana establishment license to two establishments per county with no medical marijuana dispensaries, or one establishment per county with one medical marijuana dispensary. 
4. “Qualified early applicants” can apply for an adult-use license with ADHS from January 19, 2021 to March 9, 2021. 
5. In order to be an early applicant, the entity must be an existing medical dispensary in good standing or else be seeking to operate in a county with less than two registered medical dispensaries. 
6. The Act directs ADHS to provide rules by June 1, 2021, so expect to rely on industry standards and the medical rules for early application submission. 
7. After issuance of licenses to qualified early applicants, the department will issue licenses by random selection up to the limit.
8. After the establishment of social equity rules, the department would issue 26 more licenses for entities that qualify under the social equity ownership program. 
9. The initiative also allows individuals with prior marijuana convictions to petition the courts for expungement. 

What We Expect

The likelihood of passage is real, and the adult-use program is set for a swift, though uncertain, roll out. Early adult-use operators will likely be operating without rules from the department for several months and applicants are subject to random selection. With mere months before possible legalization, successful teams are already starting to analyze promising points of entry in preparation for the impending application period.