“We have a situation here in Arizona where 24 out of 26 social equity licenses now are fully controlled by people or companies who do not belong to these special groups in order to get this licence.”
By Natasha Yee, Arizona Center for Investigative Reporting
Arizona lawmakers want to return the social equity licenses of marijuana dispensaries back to their original owners. They claim that private investors and cannabis companies used predatory tactics in order to take control of almost all lucrative licenses.
Senate Bill No. 1262 was introduced by Republican Senator Sonny Borrelli to give power back to the people who were meant to be benefited by the social equity program of the state: marginalized communities that have been disproportionately impacted by marijuana convictions in their past. The state Attorney General’s Office would be able to investigate and punish those who exploited these individuals.
Borrelli of Lake Havasu City said, “What we’ve got here is an injustice which needs to be corrected,” during a Senate hearing on February 13. In Arizona, 24 out of 26 social equity licenses have been taken over by people or companies who don’t belong to these special groups.
The bill comes less than a month after extensive reports by AZCIR revealed that the social equity program, part of a ballot initiative for 2020 which legalized recreational marijuana use in Arizona, was not working as intended. Powerful players were hijacking the process.
One original applicant has today fully owned their social equity license, and opened a dispensary that is independent of the large cannabis companies. Two others partnered with major brands to open dispensaries. They still own equity in their licenses. Other 23 licenses belong to investors and corporations with familiar names such as Sol Flower, Mint Cannabis Mohave Cannabis JARS Cannabis Story Cannabis.
Borrelli explained that the way that this social equity license is supposed to function is that those who apply are supposed to retain that 51 percent ownership. He explained that many applicants instead signed agreements with financial supporters who “muscled out” the applicants later. This is in line with one of AZCIR’s key findings.
“Technically speaking, people who are supposed to hold a license for social equity don’t have it.” Borrelli stated that those who don possess the social equity license wouldn’t qualify for it at all. It’s unfair, whether you support the marijuana business or not.
SB 1262 has a long road ahead of it, even though the Health and Human Services Committee in the Senate gave the bill unanimous bipartisan approval. It is a voter-backed measure, so it requires the support of three quarters of both the House and Senate in order to become law.
If it is successful, this measure will give those who have been squeezed out of their social equity licenses a new avenue to fight back.
AZCIR, for example, detailed Denzel Mason’s story in July last year. Denzel was recruited by Copperstate Farms, a cannabis powerhouse, to apply for a license for social equity. Copperstate Farms, which operates one of the nation’s largest indoor grow operations and nine Sol Flower-branded dispensaries in Arizona, recruited Mason and other potential partners via a program called Your Bright Horizon. The company submitted 106 applications along with its social equity counterparts.
Copperstate, along with its partners, secured three licenses when the Arizona Department of Health Services selected winners out of more than 1,300 applicants for its April 2022 lottery. This included the one that Mason had applied for, who worked in the cannabis sector for many years and planned to open his dispensary.
Copperstate claimed that the LLC Mason owned jointly with Your Bright Horizon was owed up to $3,000,000 by the company. Copperstate would have received $800,000. This amount was to partially reimburse Copperstate for the money it spent on the social equity program. It also included the community outreach activities it used to recruit Mason.
After Mason refused to accept these terms, the court sided with Copperstate and temporarily removed Mason from his position as manager of the business. Copperstate purchased Mason’s license stake a few months later for an unknown amount.
Mason had not responded to a press request for comments on SB 1262. This would allow him and other license holders to report investors and corporations that they believed targeted them with predatory deals and possibly regain control.
SB 1262 defines predatory agreements as “any agreement that was signed before or in the first 12 months following the issuance of a license for social equity and required the principal officer or board members… to sell, transfer or hand over control of their ownership interest at a price less than the minimum fair market value.”
Anavel Vasquez, a Tucson resident, was another case that AZCIR has highlighted.
Vasquez, who is not a native English speaker, was among 140 applicants for a social equity license. She partnered with investor Michael Halow via his Wyoming-based LLC Helping Handz. She was also one of the five from that group to win ADHS’s lottery. Vasquez’s license is no longer hers, even though she does not speak English fluently.
She signed a contract that stated disputes would be resolved through arbitration, even though she had not originally entered into an agreement with Halow. In July 2023, a third-party arbitrator decided that Vasquez’s social equity license would be transferred back to Helping Handz.
According to arbitration records obtained from AZCIR, Vasquez is yet to receive compensation for her majority interest in the license. The arbitrator instead ruled that Vasquez would be responsible for Halow’s legal fees.
Rene Mendoza is Vasquez’s partner. He said that SB 1262 would help those who had been subjected predatory contracts to get their licenses. “This program is for social equity and not for people with licenses who are rich.”
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Long before lawmakers intervened, advocacy groups alerted officials to the vulnerabilities of Arizona’s social justice program. Acre 41, the Greater Phoenix Urban League, and other nonprofits sued the state in November 2021 because they predicted that Arizona’s social equity licenses will be handed over to big cannabis.
Acre 41 continues to voice its concerns about what it believes is mismanagement in the program of the State over recent years. It’s now voicing its support for SB 1262.
The group that created the website to promote this legislation states: “We live in a world where social equity has not leveled the playing field but instead allowed well-capitalized companies to dominate the marketplace further.”
Celestia Rod, an activist with Acre 41, said in a statement sent to AZCIR that the “end-goal is to correct the wrongs committed by the administration of [the social equity] program.”
Borrelli’s bill is not the only thing that raises concerns about the abuse of the program by bad actors. The senator, during the hearing in February, highlighted an investor with five social equity licenses and claimed that the individual was a felon who had violated program application rules.
SB 1262 aims to solve these problems by removing the licenses of those who have committed certain felonies and those who have violated marijuana laws.
Borrelli stated, “The bottom line is that we have felons convicted of a crime who have forced out someone who was supposed to hold a license for social equity.”
Mint Cannabis owns three of the four licenses listed. This is a violation of the rule that two licenses can’t be operated at the exact same address, as a former ADHS spokesman stated to AZCIR back in 2023.
Mint Cannabis has not responded to repeated requests for comments.
The Department of Health Services which oversees this program has also not responded to numerous requests for comments regarding the deadline or other alleged violations.
“Things must work fairly.” When they don’t work, it is our duty as legislators that we can step in and tell them, “This is what must be done.” Sen. LupeDiaz, one the three Republican cosponsors of the bill, told AZCIR. “The bill will help with that.
This article was first published by the Arizona Center for Investigative Reporting.
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The article Arizona bill aims to claw back Marijuana social equity licenses from investors and corporate dispensaries first appeared on Marijuana Moment.
