Take a closer look at Arizona’s draft social equality statute (comments due today!)

Take a closer look at Arizona’s draft social equality statute (comments due today!)



Arizona’s cannabis regulatory agency, the Arizona Department of Health Services (hereinafter referred to as the “department”), has issued draft regulations for the Social Equitable Opportunity Program (“SEOP”). click here View the draft regulations. Comments on the draft regulations should be closed on May 16, 2021 (Sunday).

According to SEOP, Arizona will issue an additional 26 licenses. According to the Arizona Amendment Regulations (“ARS”), the SEOP regulations apply to:

Establish and implement a socially fair ownership plan to promote the ownership and operation of cannabis establishments… Community residents have a disproportionate influence on the enforcement of cannabis laws. ARS§36-2854(A)(9).

In addition to the above regulations, there is not much information about SEOP in the regulations. So, did the draft regulations promote the stated goals approved by voters in Arizona? It seems that there are other ways to promote SEOP’s expected goals.

Reduce license fees

Let’s start with the good news. According to the adult usage plan, the initial license fee is US$25,000. However, the US Department of Commerce now recommends SEOP’s initial license fee of $5,000. The reduction in costs undoubtedly promotes the goal of “social justice”.

Who might be the owner, chief officer and/or board member?

The next question is who might be the owner, chief officer and/or Member of the board SEOP licensee? Before answering this question, the draft regulations require at least one or more key officials or board members to own at least 51% of SEOP licensees. AAC§R9-18-303(B)(1) (draft). It seems very simple.

Not so fast. There are two additional requirements for each principal official or board member belonging to the 51% ownership group. First, these people must petition the court to exempt them from any previous marijuana convictions. AAC§R9-18-303(B)(2)(a) (draft). Second, the household income of these people in 2019 must be “not more than 200% of the Federal Poverty Guidelines.” AAC§R9-18-303(B)(2)(b) (draft).

Does the draft regulation require the chief officer or board member of a group with 51% ownership to be convicted of marijuana in advance? Since this part of the draft regulation is used in combination (Look AAC§R9-18-303(B)(2)(a) and (b) (draft)), each element must be met. Therefore, it seems that only key officials and board members who have previously applied for marijuana conviction may belong to the 51% ownership group.

Can you remove the chief officer or board member?

The next interesting question is whether the chief officer or board member who is a member of the 51% ownership group can also be removed. Usually, the entity’s organizational documents (for example, articles of association, operating agreement, etc.) specify when the chief officer or board member can be removed. However, as part of the SEOP application process, the proposed licensee must provide documents to the U.S. Department of Commerce to confirm that the principal officials or board members who are also part of the 51% ownership group must be removed from office if: the person’s written consent, Or (b) The court ordered the person to be removed from his post. AAC§R9-18-303(B)(2)(a) and (b) (draft).

Although there are other requirements in SEOP, the preceding article summarizes the substantive changes in adult use procedures.

How will this work?

To help clarify how the above works, a hypothesis may be helpful. Suppose Paul, Otto, and Tom founded a company called POT, Inc. in Arizona. In addition, it is further assumed that Paul, Otto and Tom each own 33.3% of POT, Inc. and will serve as chief officer and board member, respectively. . Both Paul and Otto have had marijuana convictions, Paul and Tom are millionaires, and Otto has been unemployed since 2017. Will POT, Inc. obtain a SEOP license? According to the draft regulations, the answer is “no”. Because only Otto meets the Federal Poverty Guidelines and its ownership interest (33.3%) is less than 51%, POT, Inc. will not qualify as a SEOP licensee.

If we change the assumption, then Paul has been convicted of marijuana and has not worked since 2017, then POT, Inc. will be eligible to become a licensee of SEOP. Under this revised assumption, Paul and Otto jointly own 66.6% of the shares in POT, Inc., which meets the requirements of the draft regulations because (a) they have a previous conviction for marijuana and can seek a reduced sentence, and (b) they both have income The level specified in the Federal Poverty Guidelines.


The Bill provides a starting point for discussions on whether to promote “social justice”. There is no doubt that many people will comment on the draft regulations. It is hoped that the Department of Defense will consider the various comments made and find ways to enhance “social justice” to the Arizonans who deserve it. Come and join you!


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