2020 Elections and Cannabis: Focus on Arizona

By Jerrico Perez and Jason Adelstone

Oct 29, 2020

This is part 4 of our series of articles exploring the impact of the 2020 elections on the cannabis industry. On November 3, in addition to presidential and congressional elections that will have a major impact, five states have ballot measures that will legalize marijuana in some form. Arizona is one of those states.

On November 3, 2020, Arizona voters will again vote to legalize an adult-use marijuana program, four years after rejecting a similar initiative. Arizona’s Marijuana Legalization Initiative, Proposition 207, would:

  • Legalize the use of marijuana for adults
  • Allow the possession of up to one ounce
  • Permit individuals to grow up to six marijuana plants at their residence

The approval of adult-use legalization in a state considered by many to be “conservative-leaning” is an exciting win for the industry, and a move that may encourage similarly situated states to follow suit.

The passing of Proposition 207 could have far-reaching effects on restorative justice for those Arizonans adversely affected by the war on drugs. It allows individuals with prior Arizona marijuana convictions to petition the courts for expungement, and provides measures aiming to benefit “communities disproportionately impacted by the enforcement of previous marijuana laws.” In this pursuit, the program also establishes a social equity ownership program to set aside 26 licenses for qualifying businesses. While the initiative lays a well-intentioned foundation, the implementation of the restorative justice measures will ultimately lie in the hands of Arizona legislators, the Governor, and non-profits who help fund expungement clinics.  

Proposition 207 also requires the Department of Health Services to first offer adult-use licenses to existing medical marijuana operators before setting up a process to offer licenses to businesses wanting to enter the market—except for prospective businesses seeking to locate in counties with one or zero not-for-profit medical marijuana dispensaries. While this system will likely expedite adult-use sales, it also limits opportunities for many small businesses, at least in the near term.

Many multi-state operators began entering the Arizona market or expanded their operations, in anticipation of Proposition 207 passing this November. While this may seem like a drawback to many industry hopefuls, there will be future opportunities as the program is not merit-based and only limits the number of licenses based on population. After licenses are granted to all qualified medical marijuana operators, the DOHS will conduct a random selection of qualified applicants for the remainder of the available licenses.  

Proposition 207 does allow for a dual-licensing system, permitting municipalities to ban or regulate marijuana businesses through zoning and licensing. It also imposes a 16% excise tax on marijuana sales and outlines where the collected funds will go. Arizona legislature budget analysts estimate that adult-use marijuana legalization could bring an estimated $255 million in annual tax revenue to the state. Early sales may lead to early tax revenue that the state greatly needs, especially facing COVID-19 revenue shortfalls.

Proposition 207 is a great attempt at implementing an adult-use program in Arizona that provides restorative justice opportunities, proper regulation, and much-needed tax revenue to Arizona. This is definitely one to watch on Election Day!

Join us on November 19 for a post-election discussion with members of the Vicente Sederberg LLP and VS Strategies team. Learn more and register here for this timely event!

Take a look at South Dakota in the next part of the series. 


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