Arizona tightens social equity rules in advance of cannabis licensing

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Arizona regulators finalized rules for the 26 social equity licenses to be issued as part of the state’s adult-use cannabis program, adding language that prevents an applicant from entering into a prior agreement to sell or transfer the license to a nonqualifying operator.

The Arizona Department of Health Services issued the final rules last week, with applications scheduled to be accepted during the first two weeks of December, the Arizona Daily Star in Tucson reported.

The licenses are to be selected by a random drawing in early 2022.

The adult-use measure passed by voters in November 2020 requires Arizona to issue licenses to applicants “from communities disproportionately impacted by the enforcement of previous marijuana laws.”

As previously reported, applicants must live in one of 87 ZIP codes for at least three of the five past years. Those are areas deemed to have been disproportionately impacted by the war on drugs.

Licensing also factors in household income criteria and whether the applicant or family member has marijuana convictions.

Critics said the final draft is better because it will prevent applicants from making deals now to sell out to large operators once they win a license.

“But there’s still some things that are missing,” such as a point-based application system and more controls on transferring social equity licenses, Zsa Zsa Simone Brown, a potential applicant, told the Daily Star.

The social equity licensing could mark the end of available retail store permits at least in the short term, based on a store-to-pharmacy formula.

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But Arizona could continue to see merger and acquisition activity.

Most notably, Florida-based Trulieve Cannabis recently acquired Arizona’s leading marijuana operator, Harvest Health & Recreation.