State Spotlight is a monthly series curated by regional regulatory teams at Fyllo, providing a snapshot of recent cannabis regulatory activity in key markets across the country. This spotlight was prepared by Alex Kloster, Fyllo’s Southwest Regional Lead.

Arizona Overview

Arizona was the fastest state to establish a recreational cannabis market and turn around sales after legalization. Adult-use sales started just 54 days after certifying the election results that legalized cannabis in the state. However, this speed has created some issues, such as supply shortages, increased pricing due to strong demand, and limited product testing resources. Here’s what you need to know as of April 2021.

Population: 7.42 Million 

Medical Cannabis: Legalized in 2010

Recreational Cannabis: Legalized on November 30, 2020

State-Level Activity

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Voters approved the Smart and Safe Act back in November 2020, legalizing adult-use cannabis in the state. The Department of Health Services issued new regulations for the Adult-Use Program on January 15, 2021. Additional regulations and possible amendments are still expected to be adopted in the future.

Recreational sales started less than three months after the election results were certified, cementing the fact that the cannabis legalization measure passed. Adult-use sales began on January 22, 2021. The Department of Health Services has been issuing licenses on a rolling basis. All existing medical license holders have been granted adult-use licenses as well, which has allowed the cannabis marketplace to flourish quickly.

Every dispensary is required to test its products before sale. But authorized testing facilities are backed up, which has created a bottleneck in the supply chain. If this process is not streamlined soon, it will cause statewide shortages and price hikes for both medical and recreational products.

The limited number of licenses available has deeply affected the pricing of licenses. Some naked licenses, which are without real estate and other assets, have soared as high as $15M. As long as the state limits the number of dispensaries, it is safe to assume prices will remain high and licenses will be scarce.

Local-Level Activity

While some may move faster than others, localities are still largely in the early stages of adopting regulations related to adult-use cannabis. Notable recent local activity includes:

Tempe City Council held a second reading to amend zoning code to align code with Arizona Smart and Safe Act and to regulate cannabis on public property.  

Gilbert Planning Commission discussed amending city code to align it with the Arizona Smart and Safe Act. 

Phoenix Planning Commission discussed a proposal to amend the zoning code to align with the Smart and Safe Arizona Act.

Peoria City Council held a meeting and passed an ordinance amending the city code regarding retail cannabis.

Advertising Activity

The Arizona Department of Health Services sets advertising regulations.   

Only licensed establishments are allowed to advertise. In addition, they may only advertise if all three of the following conditions are met:

The licensed establishment has authorized/given permission for the advertisement; 

The advertisement includes the name of the establishment; AND

The advertisement includes the license or registration number of the establishment.

Direct/individualized communications must use age gating to verify that the recipient is 21+.

Non-licensees cannot take orders for cannabis 

Non-licensees cannot operate a sales platform for cannabis

Non-licensees cannot operate a listing service for the sale of cannabis

It is prohibited to advertise cannabis or cannabis products with names that resemble or imitate food or drink brands marketed to children or otherwise advertise cannabis or cannabis products to children.

Fyllo Coverage in Arizona

Fyllo’s municipal coverage in Arizona currently amounts to 58.89% of the state population in 27 jurisdictions. Continued coverage expansion is currently being mapped out and will largely be dependent on what localities ultimately receive adult-use licenses since those licenses are subject to a state cap.

Schedule a demo today to learn more about how Fyllo can help you keep pace with Arizona cannabis legislation, licensing, and relevant industry intelligence. 

The information provided is current as of April 1, 2021, and subject to change.

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