A lawsuit filed by Greater Phoenix Urban League and Acre 41 in Maricopa County Superior Court brought Arizona’s social equity cannabis program into sharp light. The lawsuit names the State of Arizona, Governor Doug Ducey, the Arizona Department of Health Services (ADHS), and the ADHS’s director Don Herrington and alleges that the wording and loopholes in the program allow for big businesses to swoop in instead of providing opportunities for communities disproportionately affected by previous marijuana laws.
Despite this suit and the concerns it raises, last week, Judge Randall Warner decided against ordering the health department to halt applications. Arizona is still accepting applications for 26 slots in the social equity program, and the effects of the lawsuit are yet to be seen in the process.
In 2020, Arizona residents voted to legalize recreational marijuana use, with 60% approving Proposition 207. This proposition included a social equity program to uplift and give the opportunity to those disproportionately impacted by marijuana laws before legalization. In Arizona, these laws often targeted the Black and Latino and poor communities. The social equity program in Proposition 207 was written by the ADHS (which is why they are included in the lawsuit) and stipulates that there are 26 open slots for minority-owned recreational dispensaries that sell bags of cannabis. At least 51% of the business must be minority-owned, and potential owners must fall under three out of four specific criteria: a lower income bracket, a previous marijuana charge, or a zipcode in a neighborhood severely affected by previous cannabis laws.
The filed lawsuit alleges that while the parameters set by the state are clear on initial ownership and operation, there are no investor requirements and too many loopholes for ownership changing hands. Greater Phoenix Urban League and Acre 41 filed the lawsuit because they claim the relaxed parameters allow big businesses owned by primarily white men to come in as investors and then take over dispensaries.
Once Proposition 207 was voted on, large cannabis companies began vying for investment opportunities in minority-owned dispensaries. Arizona residents received flyers with “Own a cannabis company at no cost to you” printed in bold font, a transparent ploy for big businesses to come in and fund dispensaries. There is a $4,000 fee for the social equity program applications, and large companies are offering to foot the bill.
These companies also partner with minority-owned dispensaries for the 49% that do not have to be minority-owned and therefore become a powerful partner. One such company is a multi-state conglomerate, Justice Cannabis Co., and they confirmed that this is a technique they use when expanding into other states. With large businesses potentially entering into these partnerships, large operators might actually trump applications that are genuinely owned, operated, and invested in by minorities that fit the program’s parameters. These big businesses, mostly white-owned investors, then have the chance to control the dispensaries with minorities as just the name behind the dispensary.
Celestia Rodriguez of plaintiff Acre 41 said, “These [investors] are coming in, selling them the dream…They want to buy them out for pennies, and add it to the portfolios that they are building right now.” The complaint in the lawsuit also adds, “The final rules promulgated by the ADHS permit owners who qualify under the Social Equity Program to enter an agreement to sell or transfer their ownership interest in the licensed entity at any point after the license is allocated, which defeats the purpose of the Social Equity Program.” This lawsuit highlights the fear that a program voted in with the best intentions is not structured enough to provide continuous support to minorities disparaged by old cannabis laws.
There is little doubt that large companies are endeavoring to get a piece of the limited dispensary market in Arizona. What is in doubt is if the lawsuit will change the trajectory of Proposition 207’s social equity program. Judge Warner’s decision to allow applications has created a sense of frustration for groups fighting for dispensary equality and highlights that the impending legal battle might be long and messy. With potentially thousands of applications being combed through during December, big businesses, justice groups, and minorities will likely be holding their collective breath to see the outcome of the lawsuit. The ruling has the potential to affect the future of minority-owned dispensaries in Arizona for decades to come, and voters in favor of Proposition 207 can only hope that the social equity program will be able to flourish.