Competing Initiatives Raise Questions About 2020 Legalization

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In Arizona, the only state where an adult-use cannabis legalization initiative failed in 2016, there are now two competing efforts, which some worry may split the vote in 2020. A curveball could come through a legalization bill, too, as the legislature might want to avoid a ballot decision.

In August, around the same time the Arizona Dispensary Association was putting the final touches on its long-planned adult-use initiative, the Smart and Safe Arizona Act, a burgeoning cannabis industry group called the Arizona Cannabis Chamber of Commerce, or AZC3, was beginning to prepare its own adult-use proposal. If all goes according to the group’s plan, it would compete with the Smart and Safe Arizona Act on the November 2020 ballot.

An adult-use ballot initiative, Proposition 205, failed just three years ago in Arizona, while other states—such as Maine, Nevada, and Massachusetts—moved forward with legalization. But soon after Proposition 205 failed, the Arizona Dispensary Association—a group that includes national giants like Harvest Health & Recreation, Curaleaf, and MedMen, who have bankrolled much of the effort—quickly began preparations for another shot at statewide legalization in 2020. They called their initiative the Smart and Safe Arizona Act (read Cannabis Wire’s coverage of the campaign here). 

The campaign seems well financed. Its third quarter 2019 report, filed on October 12, shows a total of $423,500 in contributions from corporations between July 1 and September 30: 

$167,500 ($100,000 in cash and $67,500 in “goods/services”) came from Harvest Health & Recreation (which has contributed a total of $535,000 to date)

$100,000 in cash came from Curaleaf ($400,000 to date)

$100,000 in cash came from Medmen ($200,000 to date)

The Smart and Safe Arizona Act proposes legal adult-use for those age 21 and older, who would be allowed to possess up to one ounce of cannabis and home grow six plants (and up to twelve plants in a household with multiple adults). Smoking in public or open spaces would be prohibited and employers and property owners would have the right to ban use in workplaces or properties. Adult-use cannabis sales would have a 16 percent excise tax on top of city and state sales taxes (which total around eight to nine percent depending on the locality), that will go toward community colleges, public safety personnel costs, infrastructure, and public health programs.

The initiative has been an effort years in the making, according to Stacy Pearson, a spokesperson for the campaign who told Cannabis Wire that the language of the initiative has been developed with input from Arizona’s “Chamber of Commerce, the law enforcement community, the cannabis community, its activists, current license holders, criminal justice reform advocates, and really every imaginable stakeholder.” 

But the Arizona Cannabis Chamber of Commerce (AZC3), an organization of “companies and individuals that are part of the industry but not directly involved with the plants,” such as lawyers, accountants, and bankers, has some concerns with the Smart and Safe Arizona Act. Mason Cave, a board member of AZC3 who is a medical cannabis grower and accountant, outlined them for Cannabis Wire in an email:

First, the “limited number of licenses.” Under the Smart and Safe Arizona Act, medical dispensaries currently operating in the state would be able to submit “early applications” to Arizona’s Department of Health Services from Jan. 19, 2021 to Mar. 9, 2021. It is only “after issuing marijuana establishment licenses to qualified early applicants” that the department would issue remaining adult-use licenses to other applicants by “random selection.” Second, the Arizona Department of Health Services’ role in oversight of the industry, as the AZC3 believes the Board of Liquor Control as the regulatory body most equipped to ensure that dispensaries don’t sell to minors. And third, the 16 percent excise tax on adult-use cannabis products, which AZC3 argues is too high, and thus could “create a black market effect similar to that of California.”

In response to AZC3’s argument that the number of licenses would be limited under The Smart and Safe Arizona Act, Pearson pointed out that the language in the initiative allows for one “marijuana establishment license” per every ten pharmacies operating in the state, the same model that Arizona’s medical cannabis program uses. Currently there are 130 medical dispensary licenses issued in Arizona, according to the Arizona Department of Health Services. Medical dispensaries who also qualify for adult-use licenses would have to “co-locate,” meaning they would sell both medical and adult-use products in one location.

Cave, on the other hand, argues that the Smart and Safe initiative will “keep control of the market in too few hands,” namely in the hands of the medical dispensaries currently operating in the state. “We want these to be licenses that are available through a fair process to anyone,” said Cave, who believes that the proposed model would add virtually “zero licenses” over the current medical cannabis program, as medical dispensaries would have the advantage of applying earlier for the adult-use licenses. He conceded that his organization has “not completely defined” how licenses would be issued in their coming proposal, but says “the idea is that we open up opportunity to those that are not currently involved in the industry.” Out-of-state multi-state operators would be included in the group of people “that currently would find it very difficult to participate in the Arizona market,” according to Cave.

Attorney General Mark Brnovich, who supported the SAFE Banking Act in the US Congress, has encouraged the Republican-run Arizona legislature to create and pass an adult-use bill before any potential vote on a ballot initiative, which would make legislative changes difficult once passed. Governor Doug Ducey, who is against legalization, has also expressed concern over a ballot deciding adult-use in the state.

“I think my colleagues who identify as Republican are going to be highly aware that they may have to make some really tough decisions on how they’re going to move forward with legalization of adult-use cannabis,” Arizona Representative Isela Blanc, who supports adult-use legalization, but is opposed to the current Smart and Safe Arizona Act, told Cannabis Wire

The Smart and Safe Arizona Act has expanded its equity provisions since it filed its initiative for review with the Secretary of State’s Office in August. Its revisions provide more licenses to rural areas and for “social equity” purposes, and it allows record expungements for those charged with possessing 2.5 ounces of cannabis, compared to one ounce in the previous version. Blanc, however, believes that even with these revisions, the Smart and Safe Arizona Act doesn’t go far enough. The plan is “just not good for Arizona,” Blanc said, emphasizing that an adult-use bill is “an opportunity to set the record straight” for those who have been disproportionately affected by cannabis prohibition.

But she finds it difficult to side with AZC3, as the group has not laid out a tangible plan when it comes to details like the number of allowed dispensaries or expungement.

“The legislative session in relation to cannabis is going to be highly interesting,” Blanc said, pointing out that the competing interests will spark a lot of discussion both among voters and in the legislature. “It’s going to be a hot topic.”

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