Equity Project State Briefing
Is Cannabis Legal in Arizona?
Date of Legalization
Arizona legalized cannabis for medical use in 2010 by passing Proposition 203. The first licensed sales occurred in December 2012. On November 30, 2020, Arizona legalized cannabis for adult use, with the first state-licensed sales occurring on January 22, 2021.
View the full text here: Arizona’s Adult Use Regulations
Within Arizona’s adult use frameworks, individuals 21+ may possess up to one ounce of cannabis flower or 5 grams of THC concentrate and up to six residential plants. Within the medical framework patients can buy up to 2.5 ounces of medical cannabis, of which no more than 12.5 grams is in the form of cannabis concentrate, every two weeks. Medical card holders that live more than about 25 miles from the nearest dispensary are able to grow at an enclosed location at their own house if they have the right kind of security, however they’d only be able to grow 12 Cannabis plants at any given time.
Other Licensing Provisions
- License Caps:
Arizona is a limited license state and only allows for a total of 169 adult use cannabis establishment licenses, including 26 social equity licenses. Additionally, Arizona allows for municipalities to opt out of participating in the adult use market. The following limitations exist regarding the distribution of adult use licenses.
The Arizona Department of Health Services may not issue more than one license for every ten registered (traditional) pharmacies in the state of Arizona. The department may only issue a marijuana establishment license to two marijuana establishments per county that contain no registered nonprofit medical marijuana dispensaries, or one marijuana establishment license per county that contains one registered nonprofit medical marijuana dispensary.
Application Selection Process
- Selection System:
Arizona distributes its adult use cannabis licenses through a hybrid compliance and lottery system. The department shall issue a marijuana establishment license to each qualified early applicant who applies for a license between January 19 and March 9, 2021. After early applications, the remaining licenses will be granted randomly through a lottery system.
All applications received will be reviewed for administrative and substantive completeness. Applications deemed substantially complete will be entered into a random selection, which will be used to issue the 26 available social equity licenses. The random selection will likely take place in Spring 2022.
Ownership Exclusion for Individuals with Felony Convictions
- Ownership Exclusion for Felony Convictions:
- Exemption for Cannabis Offenses:
Arizona’s adult use framework disqualifies applicants for cannabis licensure on the basis of certain convictions. In Arizona, licensure applicants must submit an affidavit that none of the principal officers or board members of the company have an “excluded felony offense.”
“Excluded felony offense” has the same meaning within the state’s medical cannabis context. “Excluded felony” means a violent felony as defined by Arizona law or a controlled substance conviction. There is a carve out for Individuals with controlled substance felony convictions who completed their sentence at least 10 years ago, as well as a carve out for individuals with certain qualified cannabis convictions for activity that would now be immune from prosecution.
Employee Conviction Restrictions
- Conviction Restrictions for Employees:
- Exemption for Cannabis Offenses:
The Arizona adult use sector has restrictions disqualifying potential employees with certain convictions. Marijuana facility agents (employees) must have a current level I fingerprint clearance card. (Ariz. Rev. Stat. §36-2855.) 116 excluded offenses prohibited from level 1 clearance are listed in Ariz. Rev. Stat. § 41-1758.07.
Cannabis-related felonies are listed under a class of felonies which can ask the board for a good cause exception to obtain level 1 clearance.
Arizona offers record cleaning remedies for certain cannabis convictions, however, this process is not automatic and requires action from the individual. As of July 12, 2021, an individual may petition the court to expunge a conviction that occurred before July 12, 2021.
Cannabis-related activity that can be expunged includes: Transporting, consuming, or possessing 2.5 ounces or less of marijuana. Cultivating, transporting, or processing no more than six home marijuana plants. Transporting, using, or possessing marijuana related paraphernalia.
Social Equity Definition / Criteria
Arizona’s Social Equity Ownership Program is intended to promote the ownership and operation of licensed marijuana establishments by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws. Twenty-six adult-use Marijuana Establishment licenses will be issued to applicants who qualify under the Program.
Arizona offers a social equity program within its adult use framework. In order to be eligible to participate in Arizona’s social equity program, a person holding at least least 51% ownership in the business must meet three (3) of the following four (4) criteria:
1. Had an annual household income in at least three of the years 2016 through 2020 that was less than 400% of the poverty level.
2. Has been adversely affected by the enforcement of previous marijuana laws as demonstrated by an eligible cannabis conviction or expungement.
3. Has been adversely affected by the enforcement of previous marijuana laws because the individual is immediately related to another individual who was convicted of or received an expungement for an eligible federal or Arizona state cannabis conviction.
4. Has lived for at least three of the years 2016 through 2020 at a physical address in an area that has been identified by the Department as being disproportionately affected by the enforcement of Arizona’s previous marijuana laws.
Social Equity Provisions
The Social Equity Ownership Program is intended to promote the ownership and operation of licensed marijuana establishments by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws. Arizona accepted applications for 26 adult use establishment licenses from social equity applicants from December 1, 2021 through December 14, 2021. All applications received will be reviewed for administrative and substantive completeness. Applications deemed substantially complete will be entered into a random selection, which will be used to issue the 26 available licenses. The random selection will likely take place in Spring 2022.
All principal officers and board members of the applying business must complete each module of the Arizona Department of Health Services provided training which covers (1) corporate entity formation (2) compliance and regulations (3) branding and marketing (4) fundraising (5) legal (6) community and industry panels. Additionally, social equity license holders will be required to develop and implement policies to document how the Marijuana Establishment will provide a benefit to one or more communities disproportionately affected by the enforcement of Arizona’s previous marijuana laws.
License Priorities and Set Asides
Arizona does have specific licenses set aside for social equity licensees. Twenty-six adult-use Marijuana Establishment licenses will be issued to applicants who qualify under the social equity ownership program.
Fee Waivers and Reductions
Arizona does offer fee waivers and reductions to social equity applicants. In Arizona, the normal application fee for an initial license is $25,000 this price includes both the application fee and initial licensing fee together. The cost to subsequently renew a license is $5,000.
Social Equity applicants submitting an application for an initial marijuana establishment license have a reduced nonrefundable application fee of $4,000 which also includes the initial license.
Direct Funding for Social Equity Applicants and Licensees
Arizona does appropriate money to support its social equity program. Arizona law designates $2,000,000 from the Medical Marijuana Fund to be transferred by November 30, 2020, to the Department of Health Services to develop and implement a social equity ownership program. It is unclear what amount will be given to the program annually.