EXCLUSIVE: Awarding recreational marijuana licenses under the Smart & Safe Arizona Act, by RLG attorney Jonathan Udell.

By Jonathan Udell | Attorney at Rose Law Group

As the wheels of commerce ground to a halt in March, starry-eyed entrepreneurs geared up for an election that could bring about the legalization of marijuana in Arizona. The Smart & Safe Arizona Act [SSAA] needed 237,645 signatures to be on the ballot. It now has more than 300,000, and if the most recent polling proves accurate, it will pass.

As the election grows closer, this raises an important question: How will the government award licenses if the Act passes? Judging by the Act’s language, the answer should depend on (1) whether a business already operates a medical marijuana dispensary, (2) where it proposes to open a recreational marijuana establishment, and (3) whether it can take advantage of the Act’s Social Equity Ownership Program.

Before offering licenses to the general public, Arizona’s Department of Health Services will first accept applications from “early applicants,” assuming the Act passes. To qualify as an early applicant, an entity would need to have a dispensary registration certificate or plan to open a recreational establishment in a county with fewer than two dispensaries. The application period will begin on January 19, 2021 and continue through March 9, 2021.

Once ADHS is finished issuing licenses to early applicants, it will accept applications from other entities seeking to enter the marijuana industry. As with the medical marijuana program, ADHS will generally only be able to issue one license for every ten registered pharmacies in Arizona.

Four years have now passed since ADHS issued its last dispensary registration certificates. The first batch was issued in 2012, and a second batch was issued in 2016. Assuming the number of Arizona pharmacies increased at a relatively steady pace between 2012 and 2020, ADHS is probably due to issue more dispensary registration certificates this year. If that occurs, and every medical marijuana dispensary seeks a recreational license, years could pass before new licenses become available to entities that (1) do not have approval to operate a dispensary when the election is held and (2) cannot qualify for participation in the Act’s Social Equity Ownership Program.

Although the Act generally limits marijuana establishment licenses in accordance with the number of registered pharmacies in the state, it creates an exception for its Social Equity Ownership Program. The SSAA’s explanation of the program is vague. It merely requires “[t]he creation and implementation of a social equity ownership program to promote the ownership and operating of marijuana establishments and marijuana testing facilities by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws.” Entities who qualify under ADHS’ rules will be eligible to receive one of the twenty-six licenses allocated for this program. The Social Equity Ownership Program will begin accepting applications no later than six months after ADHS adopts rules implementing the program.

Of course, this all hinges on the Smart & Safe Arizona Act passing in November, so remember to get out and vote.

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