In about 15 years, marijuana has quickly gone from the underground to the social mainstream — and while it’s still more potent than your average herb, it just got a lot more legal a few weeks ago.
The Department of Justice officially reclassified FDA-approved marijuana and state-approved medical marijuana as a Schedule III substance last month, dropping it into the same box as prescription-allowed drugs like ketamine and some weight-loss stimulants.
But what does that mean for the robust marijuana industry in Arizona — and for the consumers and patients who use it?
We spoke with a number of insiders and state power players to get a better grip on the outlook.
As noted by Ann Torrez — the executive director of the powerful Arizona Dispensaries Association — it’s a milestone decision. But in the two weeks following the decision, cannabis industry experts have come to realize there are a ton of unanswered questions and unclear implications as federal and state regulators just begin to grapple with the historic change.
Ann Torrez of the Arizona Dispensaries Association
“To have the federal government acknowledge in such a resounding way that marijuana is medicine is an enormous achievement for the industry across the country and all the advocacy work that’s been done for many years,” Torrez told us. “It’s going to take some time for all agencies at the federal level to unfold all the pieces of this and provide guidance. There are probably more questions than answers right now.”
Some of those unanswered questions include:
Can you fly with your medical marijuana? The Transportation Security Administration (TSA) hasn’t issued any guidance yet, but with marijuana in the same regulatory category as prescription drugs, a change in policy is likely around the corner.
Will it be legal to use marijuana on federal lands? If you’re going camping in federal parks, you’re technically not allowed to consume cannabis — and more than 38% of Arizona’s land mass is federal land.
Will cannabis users and patients now be able to more easily get affordable housing? It’s notoriously difficult to qualify for affordable housing vouchers or programs if you are a marijuana user.
What will rescheduling mean for interstate commerce rules?
Rules related to firearm ownership, the immigration system and drug-testing for federal workers and contractors are all prime for a shakeup, too.
But while marijuana companies have their eye on those forthcoming new rules, it’s not their focus. The biggest concern for businesses is about the future of a dual license system — and what it will mean for companies that want to operate as both medical providers and recreational sellers.
To Jon Udell, a lawyer and communications director for Arizona’s chapter of the National Organization for the Reform of Marijuana Laws (or NORML), that’s the million-dollar question. He framed the issue by analyzing established drug sales regulations.
“Think about a pharmacy that’s authorized to dispense Schedule III, IV and V substances. And then the DEA finds out that they’re actually also selling a Schedule I substance like heroin, LSD, or marijuana — which, unless it’s subject to a state medical marijuana license, is still a Schedule I substance,” Udell explained. “Presumably they can’t keep their DEA registration if they’re selling heroin out the door. So how is that going to work here for the dual licensees?”
At this point, that’s unclear. But lots of industry experts — like Udell and Torrez — do expect there to be at least some renewed focus on Arizona’s medical marijuana program after the industry put much of its energy toward expanding recreational sales when they became legal statewide in 2021.
Udell also thinks licenses are simply more valuable than they were previously because of the reduced risk of federal illegality, and that could tee up more mergers and acquisitions cross the Arizona market.
“This is less a moment of uncertainty and more a moment of strategic evolution for the industry,” said Sara Gullickson, the founder & CEO of The Cannabis Business Advisors. “We have entered a period of regulatory duality that leaves unanswered questions, most notably, how the federal government intends to reconcile a legal medical framework with the robust, state-legal recreational markets that drive the majority of current industry revenue.”
Perhaps the most interesting element of the announcement is what surprised a lot of experts.
After President Donald Trump issued an executive order in December to speed up the process of rescheduling medical marijuana, the widespread expectation was for a quick and narrow change that would allow businesses to get out from under the burden of Section 280E of the Internal Revenue Code — which prohibits businesses “trafficking” illegal drugs from deducting regular expenses.
But the Justice Department went beyond that and caught many off guard with the decision to create a new federal registration system for marijuana, separate from the regulatory framework of the states where the plant is legal.
That allows dispensaries to register directly with the DEA. Reportedly, they’re already trying to sign up in droves, with some of the country’s biggest operators — like Trulieve and Curaleaf — applying for hundreds of DEA applications.
The forthcoming system highlights an existing issue in Arizona’s market — one that a bipartisan group of lawmakers is working to solve.
In Arizona, retail dispensaries run the industry because they control the limited licenses — of which there are about 170. If you don’t have one (they are worth an estimated $7-12 million and likely increasing in value) and you want to do anything in the marijuana business — like grow it, make products with it or organize wholesaling — you have to get the approval of a license holder.
That’s not cheap. Many of the brands operating under dispensary contracts pay dispensaries roughly $40,000 a month just for the right to manufacture, according to Udell.
And even at that price, they don’t own the products they grow, can’t directly enforce the contracts they’re working under and risk being blackballed if they advocate for themselves at the Capitol or in the press.
Those smaller businesses are in a tight space, and it could get even tighter. Since DEA registration hinges on having a state-approved license, only dispensaries would be able to obtain them.
And if the DEA’s rules are too strict, dispensaries can cut off businesses that operate under their licenses. In that scenario, a smaller business is shit out of luck.
“You’re out of sight, potentially overnight. You can’t take your product with you easily because you can’t lawfully possess it,” Udell explained. “The people who built the industry — who poured their heart and soul into making all of our products — might not have anywhere else to go. They’re boxed out.”
But Republican and Democratic lawmakers at the Arizona Capitol are working on changing that.
SB1641 — which was introduced by GOP Sen. Kevin Payne — would create a new marijuana producer license by 2029 that exists separately from the dispensary licenses. Those licenses would allow producers to operate outside the dispensaries’ purview.
For advocates like Udell, that bill has become essential in the aftermath of rescheduling. It would authorize cultivation, manufacturing, and wholesale transactions, but not retail sales, giving smaller producers and growers a path to independent licensure rather than depending on a dispensary that could cancel their contract on a whim or force them out because of new federal rules.
While it passed the Senate in a 23-5 vote, it’s being held up (along with plenty of other bills) in the Senate Rules Committee, chaired by Republican Sen. David Farnsworth, one of its few opponents in the Legislature.
If it passes, it’s likely to pull some power back from Arizona’s dispensaries — which have kept a tight grip and consistently held lobbying sway at the Capitol in years past — and delegate it to the smaller producers so they can operate independently.
Seemingly, it’s a populist economic proposal that could garner support from both Dems (it helps the less-wealthy entrepreneurs get more opportunities) and Republicans (it makes the market more free for smaller businesses) as the reality of marijuana rescheduling comes to fruition.
Dueling op-eds: Gov. Katie Hobbs and House Speaker Steve Montenegro took their budget battle to the opinion pages of the Republic, where Hobbs slammed the GOP proposal as “reckless and unbalanced” and flatly said she won’t sign it into law. Still, the Senate passed the budget on a party-line vote yesterday. In his op-ed, Montenegro said the doomed proposal he championed “shows that responsible leadership is possible in divided government.”
Elections have consequences: As we all know, if you want to get legislation passed in Arizona, you better be in the majority party. That’s the general rule for most states, a recent report card from the Center for Effective Lawmaking found, but it’s even more pronounced in Arizona (a trend we highlighted recently). Still, lawmakers can get more of their bills passed if they’ve been around the block a few times, even if they’re in the minority party, Mary Jo Pitzl reports for Capitol Media Services. But Arizona Democrats have a long way to go before they catch up with Republicans. The 2023-2024 legislative session saw 442 Republican-sponsored bills signed into law. Democrats had just 20.
Now that’s a cautious analysis: The head of Arizona’s Department of Economic Security doesn’t know how many of the 400,000 Arizonans (including 180,000 children) who lost their SNAP benefits were actually still eligible but were ensnared by new paperwork requirements, Capitol scribe Howie Fischer reports. While GOP lawmakers like Sen. John Kavanagh contend the decline in enrollment is the result of “massive fraud” being rooted out, DES Director Michael Wisehart attributed it at least partially to last summer’s federal HR1 and the fact that Arizona invests less than other states in determining whether someone is eligible (which sounds a lot like what we heard last month).
Picking a favorite: The Democratic Congressional Campaign Committee is throwing its weight behind Marlene Galán-Woods in the Dem primary for the Congressional District 1 seat being abdicated by Republican U.S. Rep. David Schweikert, per the Arizona Mirror’s Jerod MacDonald-Evoy. That backing could put Galán-Woods — a former Republican who left the party during the first Trump administration and the widow of former Arizona Attorney General Grant Woods — ahead of the five other Democrats vying for the party’s nomination.
Our model predicts roughly $1 kajillion will flow through the CD1 race. Give that money to local reporters and you’ll get a lot more than pandering ads and glossy mailers.
What, no jail time?: The Sackler family is now officially on the hook for $7.4 billion, including $108 million for Arizona, KGUN’s Don Davis reports. The owners of Purdue Pharma basically fast-tracked the country’s opioid crisis by pushing OxyContin and lying about how addictive it was.
“These settlement dollars can never undo the damage done to countless Arizona families because of the Sacklers’ deception and reckless disregard for the health and safety of our communities,” Arizona Attorney General Kris Mayes said. “But they can help fund the treatment and recovery resources that so many Arizonans still desperately need.”
Every once in a while, a silly social media moment catches our attention and bounces around the newsroom.
Today, it’s this pic of Tina Fey, Timothée Chalamet and Kylie Jenner at a basketball game, and all the comparisons to Arizona cities it spawned.
Whaddyathink? Is Fey giving Paradise Valley vibes?
To us, she’s clearly a Tucsonan (hold on, do Tucsonans and Paradise Valley residents share a vibe?), while Chalamet is as Tempe as it gets and Jenner can’t be from anywhere but Scottsdale.