Ariz. accepting applications for new marijuana licenses
The Arizona Department of Health Services has started accepting applications for “social-equity” marijuana shop licenses despite lawsuits seeking to stop the program and make it more inclusive.
The new licenses are intended to help people harmed by previous marijuana laws before the drug was legalized for recreational use last year by giving 26 individuals licenses to run lucrative marijuana shops.
But as with social-equity programs in other states, Arizona’s program run by ADHS is facing headwinds from people who don’t think the rules are fair to everyone who should have a chance to apply for them.
Maricopa County Superior Court Judge Randall Warner on Wednesday heard from plaintiffs in one of those lawsuits but declined to order ADHS to stop taking applications.
People who want to apply for the program have until Dec. 14 to submit the required paperwork. Those applicants are required to have begun a mandatory business training from ADHS.
The lawsuit filed last month seeks to stop the program and prevent big dispensaries from snapping up the 26 lucrative licenses.
The complaint says the rules as written don’t meet the requirements set out in Proposition 207 for creating a program for new marijuana shops to benefit the communities negatively affected by the enforcement of previous marijuana laws.
The challenge was filed by Greater Phoenix Urban League, a nonprofit aimed at helping minority communities, and Acre 41, a group of women entrepreneurs who planned to apply for a marijuana shop license through the program.
Defendants are the state, ADHS and its director, and Gov. Doug Ducey, although Warner released the governor from the case Wednesday.
Another group of potential applicants sued Nov. 24, also seeking to stop the department from taking applications. That group, called Black Seed,
initially asked that the cases be consolidated, but said Wednesday they prefer to have their case remain separate and heard by a different judge.
Warner said Wednesday he was not inclined to consolidate the cases.
What the arguments in lawsuits say
The Greater Phoenix Urban League/ Acre 41 lawsuit is asking the judge to declare the rules invalid, order ADHS to rewrite the rules to meet the requirements of the ballot initiative and prevent the state from accepting applications until that is done.
The primary concern is big dispensaries could use “straw men” who qualify for the program to serve as the applicants, and then buy out those people if they win a license, leaving the new dispensaries in the hands of existing dispensaries rather than entrepreneurs from communities harmed by old marijuana laws, as the law intended.
As a voter-approved initiative, state lawmakers and the governor are bound to the measure and cannot change it unless the change furthers its original purpose, but ADHS was directed to write the specific rules for the program, which the lawsuits are challenging.
Dispensaries have sought people who qualify for the licenses, which includes having a prior marijuana offense that could be expunged, and have offered to pay the $4,000 application fee for those people and enter a business arrangement with them.
About 2,700 people completed the required business training from ADHS for applicants, according to the agency, hinting at how many people might apply. Applicants were to have finished the ADHS training by Nov. 24.
Because marijuana dispensary licenses are limited in Arizona and include the rights to grow and process marijuana products, they are worth upwards of $10 million. They’re worth even more once the dispensaries and other businesses are operating.
Warner set a tentative hearing in late January for oral arguments in the case after an ADHS lawyer said the department would not issue the licenses before then.
When will ADHS pick winners?
Once ADHS gets all of the applications this month, the plan is to review them for completeness, give applicants a chance to fix any problems, and eventually put all the qualified applicants in a lottery and draw 26 winners.
“That clearly will not happen in December. I’m almost certain it will not happen in January. Some time in February is likely. We won’t know until we know how many applications are received,” said Gregory Falls, an attorney representing ADHS.
James Cool, an attorney for the plaintiffs, said Warner should stop ADHS from taking applications because some potential applicants could be confused by news reports of the lawsuit and think the program was delayed.
Others, he said, would pay the $4,000 fee, providing what he called an “interest-free loan to the state” that could sit idle until the litigation is settled.
He also said that the litigation could effectively change the rules, allowing more people to apply, and ADHS could need to reopen for applications if that happens.
But Warner declined to issue such an order to “enjoin” or stop applications for now.
The defendants said they will file a motion to dismiss the case within two weeks.