Uncertainty, rumors after Arizona awards medical marijuana business licenses

By John Schroyer

When Arizona completed a long-awaited second round of medical cannabis business licensinglast week, the states MMJ industrywas left with a host of unanswered questions.

Did the bulk oflicenses go to entrepreneurs already running MMJ businesses in the state or newcomers to the industry?When will the latest crop of dispensaries actually open and compete with existing storefronts? Will lawsuits push back the timeline?

Most of the questions stem from the secretive nature of Arizonas licensing process, given that the state does not reveal the actual names of winning applicants. As a result, rumors are swirling that former state employees rigged the licensing systemand then walked away with a number of the 31 coveted licenses.

Some insiders now fear the uncertainty surrounding the identities of the winners could even play right into the hands of efforts to defeat a recreational marijuana measure on the Arizona ballot next month.

With this as the backdrop, the companies that won licenses are not only facing logistical issues tied to their business models, theyre also dealing with a potential backlash and trying to determine whether to publicly identify themselves.

So who won?

Due to a confidentiality clause in Arizona law, the state Department of Health Services (DHS) is prohibited from releasing the identities of companies selected to receive MMJ business licenses.

So theres no list of winners, and many of those that the state selected are not exactly shouting it from the rooftops.

The situation triggered a round of industry gossiplast week after the state awarded licenses, with cannabis insiders trading rumors and innuendo.

Everyone was calling each other the day after, going, Hey, did you get one? said J.P. Holyoak, the founder of Arizona Natural Selections, a Scottsdale dispensary.

Holyoak, who doubles as chair of the campaign behind the recreational ballot measure (called Proposition 205), said he doubts many of the licenses went to the existing 99 medical cannabis licensees.

Others tapped into the industry heard differently, however.

Most of them were won by people who are involved in existing dispensaries. There are very few new players to the market, said Demitri Downing, a cannabis industry lobbyist.

Industry insiders gave

Backlash fears

A handful of winners

Because of the campaign. Because the prohibitionist side of No on 205 is saying This is simply a money grab. This is all about making money for existing dispensary owners. Thats one of their overriding themes, Holyoak said when asked why existing dispensaries would prefer anonymity if they won new licenses.

Jason Medar, who headsthe anti-legalization group Marijuana Consumers Against Fake Marijuana Legalization, alleged that existing business operators dont want to be called out.

This has been talked about a lot in the community, that MMJ dispensaries are getting this oligopoly on the marijuana market, Medar said. Alot of the people who won these licenses dont want to catch any flak until we find out what happens with Prop 205.

Under the provisions of Prop 205, existing medical cannabis licensees would have first crack at the new rec retail licenses, leaving very few for those outside the industry.

Lawsuits may be looming

Theres also the very real possibility that legal action by one or more applicants who didnt win a license could delay the rollout of new MMJ businesses, several observers said.

Arizona attorney Jerry Chesler, who won a license and does not currently operate a permitted medical cannabis business in the state,said hes already hearing saber rattling on potential litigation against the state over the licensing process. He also believes such lawsuits could hamper the debut of new MMJ businesses.

Theres someone whos allegedly a former DHS employee who got five (new MMJ licenses), Chesler said. And theres concerns that guy must have somehow gamed the system.

Others dont think such lawsuits will be a major issue.

Those lawsuits are incredibly hard, and they would have to show that DHS really abused their discretion and thats really hard to do, said attorney Ryan Hurley, who helped a number of clients submit applications for the latest licensing round.

Downing, the industry lobbyist, added that any lawsuits would be immediately dismissed as sour grapes.

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