What would Prop. 207 do to Arizona’s medical marijuana program?

By Jonathan Udell, Rose Law Group Attorney

In recent weeks, some advocates for marijuana reform have voiced concerns about the taxes and potency limits set forth in Proposition 207, the Smart & Safe Arizona Act. These critics unwittingly base their arguments on the false assumption that Proposition 207 would dismantle the medical marijuana program.

Far from eliminating the program, the initiative would give each medical marijuana dispensary the chance to become a dual licensee, or in the words of Prop. 207, “an entity that holds both a nonprofit medical marijuana dispensary registration and a marijuana establishment license.” Presumably, all dispensaries will seize this opportunity if Prop. 207 passes, as Arizona’s medical marijuana program has a limited list of qualifying medical conditions, and obtaining a recreational license would allow dispensaries to dramatically expand their markets.

Dispensaries would also qualify as “early applicants” for recreational licenses, meaning 1:10 ratio of marijuana establishments to pharmacies will not stop them from getting a license. Further, A.R.S. § 36-2854(D)(9) would provide dispensaries with additional peace of mind by prohibiting the Arizona Department of Health Services (“ADHS”) from adopting any rule that “prohibits or interferes with the ability of a dual licensee to operate a marijuana establishment and a nonprofit medical marijuana dispensary at shared locations.”

That same section of Prop. 207 imposes potency limitations on recreational marijuana but makes clear they do not affect sales to medical marijuana patients. Under A.R.S. § 36-2854(A)(7), ADHS would be required to adopt rules “limit[ing] the strength of edible marijuana products to no more than ten milligrams of [THC] per serving or one hundred milligrams of [THC] per package.” ADHS could also limit edibles to a THC-content below that amount so long as the limit is “reasonable . . . upon consideration of industry standards . . . .”

Importantly, however, this obligation only affects “edible marijuana products that may be sold to consumers by marijuana establishments . . . .” Because dual licensees can operate both “a marijuana establishment and a nonprofit medical marijuana dispensary at shared locations,” and a broad reading of the potency limitation would interfere with dual licensees’ ability to operate both a dispensary and an establishment, the regulations will not apply to edibles sold by dispensaries (including dual licensees) to patients.

Likewise, just as the potency limits would not apply to medical marijuana, neither would the taxes imposed by Section 5 of the Act (to be codified at A.R.S. § 42-5452). Parroting the language in A.R.S. § 36-2854, Section 5 states, “There is levied and the Department shall collect an excise tax on all marijuana and marijuana products sold to a consumer by a marijuana establishment . . . .” Because patients would purchase marijuana from a dispensary and not from an establishment, they would not be subject to the tax that Prop. 207 establishes for recreational marijuana.

In sum, the fears of many “cannarchists” are overblown. To allay the concerns of moderate voters and collect much-needed revenue for the state, Proposition 207 establishes potency limits and taxes for recreational marijuana, but it leaves the medical marijuana program intact.

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