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As Arizona’s remaining social equity license holders scramble to open marijuana dispensaries before a looming October deadline, private investors and major cannabis corporations have continued to wrest control away from the individuals the program was designed to benefit.
In at least four recent cases, AZCIR found, licensees wound up on the losing end of legal battles, ultimately cutting short their prospects of long-term profits in a budding industry.
One social equity license holder signed an operating agreement that would put his business in up to $3 million in debt before it opened. Another believed she entered into a contract with a dispensary owner, only to find herself partnered with a stranger.
A pair of friends disagreed about whether to sell their license, prompting another big dispensary to get involved. When one woman refused to sign an operating agreement with the investor who backed her application, he later obtained the license through arbitration.
The shifts in ownership offer the most recent glimpse into how powerful entities dominated Arizona’s social equity program in a way that some argue was by design, ultimately enriching those who helped craft the voter-approved initiative. Even as court records reveal facets of each case, sealed settlements largely shield voters from knowing who ultimately benefits from a program they approved.
The state’s social equity program was supposed to “promote the ownership and operation of marijuana establishments and marijuana testing facilities by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws,” according to Proposition 207, the voter initiative that legalized recreational marijuana.
As AZCIR reported in July, well-funded dispensaries sought applicants from marginalized communities early on, funding hundreds of applications for a potential stake in their businesses. When the health department livestreamed the lottery selection from more than 1,300 applicants, three major dispensaries landed partnerships with 10 of the 26 winners. None of the original licensees are still connected to those partnerships today.
In fact, just four of the original 26 social equity lottery winners still have an equity stake in the lucrative licenses. Existing corporate dispensaries now own half the licenses outright, with private investors holding equity in 10 more.
And among 13 Arizona dispensaries that have opened to date using a social equity license, just one of them is owned by an original licensee without support from a corporate dispensary. The remaining 12 operate under familiar names like Sol Flower, JARS Cannabis, Story Cannabis and Mint Cannabis