Cannabiz Eager for Arizona, New Jersey Legalization

By Willis Jacobson
Nov 2, 2020

Although located more than 2,000 miles apart, New Jersey and Arizona could find themselves in a similar position during Tuesday’s election.

The two states represent the most populous of the five where voters will decide on some form of cannabis legalization. Advocates in both states are optimistic both for the chances of success for their respective REC initiatives and in the possibilities – economically and as a driver of social and criminal reform – that legal cannabis could unlock in each state.

While the election could mark significant milestones, what happens after the votes are counted could be even more important, according to industry insiders familiar with the two states.

Alixon Collazos, a public affairs specialist with The BGill Group, a New Jersey-based consulting firm, didn’t discount the significance of New Jersey potentially beating larger neighbors like New York and Pennsylvania to REC legalization. But, she said, the weeks and months after the successful passage of New Jersey Public Question 1 – several polls suggest the measure is supported by up to two-thirds of voters – will be key.

“It would be nice to do this sooner rather than later, but I think the most important thing is to make sure that it’s done right – as correct and inclusive as possible,” she said. “Yes, it would be nice to do it quickly, but not if it’s not going to be done right.” 

‘Devil’s in the details’

Demitry Downing, founder of the Marijuana Industry Trade Association-Arizona (MITA-AZ), said he was confident that Arizona’s Proposition 207 – which is receiving more than 50% support, according to recent polls – would find success.

If it does pass, Downing said he expects the state’s cannabis market to double from its current total of about 250,000 MED patients to at least 500,000 REC consumers.

The campaign behind the ballot measure said it expects the REC market could generate around $300M per year in tax revenue, which could be used for programs like addiction treatment and mental health services.

Downing said the most significant impact to the state, though, will be the personal freedoms gained by residents and the damage the legal market could inflict upon its illicit counterpart.

“We all know about the economics of cannabis,” Downing said. “We’re just bringing the illegal activity into legal activity, so the people that will take the biggest hit, industry-wise, are the illegal actors. So the industry will benefit and Arizona will probably not even notice the difference from a societal standpoint.”

Arizona, a state of nearly 7.3M, saw a similar REC legalization initiative narrowly defeated in 2016.

Dan Pabon, general counsel and chief government affairs officer for multi-state operator Schwazze, said  operators are excited to set up shop in Arizona. While Schwazze does not currently operate in Arizona, other large MSOs like Harvest, Curaleaf and Copperstate Farms have supported the Prop 207 campaign.

Pabon stressed that regulations would need to be appropriately established in order for the market to reach its potential.

“I think the population and the demographics certainly lend itself to a good market, from a business perspective,” he said. “But the devil’s in the details because [regulators] can make it very easy for customers and patients to get products or make it very difficult; sometimes those things just have to be hashed out in the regulatory rule-making [part] of the process.”

Downing, with the MITA-AZ, said the development of those regulations, as well as how the state may or may not interact with the California and Mexico legal markets in the future, will be fascinating to watch and help construct.

He said that consumers might see an initial hike in prices due to lack of supply early on, but suggested that would level off as the market matures and supply increases.

On the business side, he said MITA-AZ anticipated expanding its reach.

“As with any jurisdiction, brands will be the name of the game,” he said, inviting new operators to contact MITA-AZ. “We’re looking forward to welcoming more and more brands into Arizona.”

‘Time has come’

Kristen Goedde, COO and founder of Trichome Analytical, a New Jersey-based testing lab that currently serves the state’s hemp market, said New Jersey legislators also have an important workload ahead of them.

Currently, the state health department tests the products at MED dispensaries, but Goedde said that testing would need to be expanded to third parties to handle the expected influx of new REC businesses if legalization is approved. Further, she said, the state will need to figure out how to equitably handle licensing and should use the experiences of other states to develop standards like limits for the amount of contaminants in products, for example.

“I think there will be a lot of competition in New Jersey trying to come in from out of state … so it’s very important for the regulations to give more licenses to the companies already in New Jersey and to give them more of a chance to play on the same field as these larger [out-of-state] companies,” she said.

Collazos, with The BGill Group, said social equity concerns should also play a foundational role in the state’s regulatory framework.

“It needs to be included early on in the process, not as an afterthought,” she said of social equity provisions, noting that the states that focused on equity early seem to be the ones that have produced the strongest regulations. 

Pabon, with Schwazze, said that New Jersey and Arizona stand to usher in the next wave of regulations that other states, or even the federal government, can follow in the future. 

“I think the opportunities for states to get a win-win for themselves and for their consumers is so powerful and, really, there’s nothing more powerful than an idea whose time has come,” he said. “And I think cannabis legalization’s time has come.”

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