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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
marijuana producers; licensure
Purpose
Requires, beginning January 1, 2029, requires the Department of Health Services (DHS) to accept applications for and issue marijuana producer licenses, as prescribed. Subjects licensed marijuana producers to various requirements that apply to licensed marijuana establishments and testing facilities. Contains requirements for enactment for initiatives and referendums (Proposition 105).
Background
In 2010, Arizona voters approved the Arizona Medical Marijuana Act to establish a regulatory system, overseen by DHS, that allows a dispensary to dispense a permissible amount of medical marijuana to a qualifying patient or the qualifying patient's designated caregiver (A.R.S. Title 36, Chapter 28.1). In 2020, Arizona voters approved the Smart and Safe Arizona Act which legalized the sale and use of recreational marijuana to Arizonans who are at least 21 years of age (A.R.S. Title 36, Chapter 28.2).
Current statute requires DHS to adopt rules to implement, enforce and
regulate marijuana, marijuana products, marijuana establishments and marijuana
testing facilities that include requirements for licensing marijuana
establishments. DHS may only issue one marijuana establishment license for
every 10 registered pharmacies that have obtained a pharmacy permit from the
Arizona Board of Pharmacy and that operate within Arizona. DHS may also only
issue a marijuana establishment license to two marijuana establishments per
county that have no registered nonprofit medical marijuana dispensaries, or one
marijuana establishment license per county that has one registered nonprofit
medical marijuana dispensary. Licenses issued by DHS to marijuana
establishments and marijuana testing facilities are valid for two years (A.R.S.
§ 36-2854).
A marijuana establishment is an entity that is licensed by DHS to
operate all of the following: 1) a single retail location at which the licensee
may sell marijuana and marijuana products to consumers, cultivate marijuana and
manufacture marijuana products; 2) a single
off-site cultivation location at which the licensee may cultivate marijuana,
process marijuana and manufacture marijuana products but which the products may
not be transferred or sold to consumers; and 3) a single off-site location at
which that licensee may manufacture marijuana products and package and store
marijuana and marijuana products but from which the products may not be
transferred or sold to consumers (A.R.S.
§ 36-2850).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Marijuana Producer License
1. Requires DHS, beginning January 1, 2029, to accept applications for marijuana producer licenses.
2. Requires DHS, until January 1, 2032, to accept applications only from entities that contracted by January 1, 2026, with a marijuana establishment, a nonprofit medical marijuana dispensary or a management company for a marijuana establishment or a nonprofit medical marijuana dispensary to have a right to cultivate marijuana or manufacture marijuana products and keep all or substantially all of the profits generated from that cultivation.
3. Requires DHS, until January 1, 2032, to prohibit:
a) the transfer or sublease of marijuana producer licenses; and
b) entities that lack a marijuana producer license from cultivating marijuana or manufacturing marijuana products at marijuana producer sites.
4. Requires DHS, beginning in 2030, to conduct an annual review of market conditions to determine whether consumers would benefit from the issuance of additional marijuana producer licenses.
5. Requires DHS, if market conditions are such that consumers would benefit from the issuance of additional marijuana producer licenses, to issue an appropriate number of marijuana producer licenses during the year following DHS's review.
6. Prohibits DHS from imposing any restrictions or obligations on marijuana producers that are not imposed on marijuana establishments, unless specifically identified in statute.
7. Requires the licenses issued by DHS to marijuana producers to be valid for a period of two years.
8. Prohibits DHS from issuing a marijuana producers license to an applicant who has ownership interest in an out-of-state marijuana equivalent license that has had its license revoked by the other state.
9. Prohibits an application for a marijuana producer license from requiring the disclosure of the identity of any person who is entitled to a share of less than 10 percent of the profits of an applicant that is a publicly traded corporation.
10. Requires DHS to maintain and publish a list of all marijuana producers by name and license number.
Rulemaking
11. Requires DHS to adopt rules to implement and enforce statutes relating to and regulating marijuana producers.
12. Requires the rules adopted by DHS to include:
a) requirements for licensing marijuana producers, including investigations and background checks to determine eligibility for licensing;
b) licensing and renewal fees for marijuana producers to be in amounts that:
i. are reasonable and related to the actual cost of processing applications for licenses and renewals; and
ii. do not exceed five times the fees prescribed by DHS to register or renew a nonprofit medical marijuana dispensary.
c) requirements for the security of marijuana producers;
d) requirements for marijuana producers to safely cultivate, process and manufacture marijuana and marijuana products;
e) requiring marijuana producers to procure, develop, acquire and maintain the prescribed marijuana and marijuana products tracking system for cultivation, manufacturing and sales, as applicable;
f) prohibiting a marijuana testing facility from having any direct or indirect familiar relationship with or financial ownership interest in a marijuana producer; and
g) prohibiting a marijuana producer from having any direct or indirect familiar relationship with or financial ownership interest in a marijuana testing facility or related marijuana business entity or management company.
13. Prohibits DHS from adopting any rule that prohibits the operation of marijuana producers, either expressly or through requirements that make the operation of a marijuana producer unduly burdensome.
14. Prohibits a marijuana testing facility, until DHS adopts relevant rules, from having any direct or indirect familiar relationship with or financial ownership interest in a marijuana producer.
15. Prohibits a marijuana producer, until DHS adopts relevant rules, from having any direct or indirect familiar relationship with or financial ownership in a marijuana testing facility or related marijuana business entity or management company.
16. Allows any citizen, if DHS fails to begin accepting applications for marijuana producer licenses in accordance with statue, to commence a special action in superior court to compel DHS to perform the required actions.
Localities
17. Allows a locality to:
a) enact reasonable zoning regulations that limit the use of land for marijuana producers to specified areas;
b) limit the number of marijuana producers or any combination of marijuana producer with another marijuana establishment or testing facility;
c) prohibit marijuana producers or both any combination of marijuana producer with another marijuana establishment or testing facility;
d) regulate the time, place and manner of marijuana producer operations;
e) establish reasonable restrictions on public signage regarding marijuana producers; and
f) prohibit or restrict a marijuana producer's delivery within the locality's jurisdiction.
18. Prohibits a locality form enacting any ordinance, regulation or rule that:
a) makes the operation of a marijuana producer unduly burdensome if the locality has not prohibited marijuana producers; or
b) prohibits the transportation of marijuana producers on public roads.
Lawful Operation
19. Allows a marijuana establishment, or an agent acting on behalf of a marijuana establishment to purchase, sell or transport marijuana and marijuana products to or from a marijuana producer.
20. Allows a marijuana producer, or an agent acting on behalf of a marijuana producer, to:
a) possess marijuana or marijuana products;
b) purchase, sell or transport marijuana and marijuana products to or from a marijuana establishment or marijuana producer; and
c) cultivate, produce, test or process marijuana or marijuana products by any means, including chemical extraction or chemical synthesis.
21. Allows a marijuana producer to be owned or operated by a publicly traded company.
22. States that lawful operation requirements do not preclude DHS from imposing penalties against a marijuana producer for failing to comply with the marijuana regulatory statutes or rules.
23. Allows two or more marijuana producers to designate a single off-site location to be jointly used by those marijuana producers.
24. Prohibits marijuana producers that are subject to applicable federal or state antidiscrimination laws from paying their employees differently based solely on a protected class status such as sex, race, color, religion, national origin, age or disability.
Advertising
25. Allows a marijuana producer to advertise or authorize advertising for marijuana or marijuana products in accordance with the restrictions for marijuana establishments and nonprofit medical marijuana dispensaries.
26. Allows an advertising platform to host advertising for a marijuana producer if:
a) the advertising is authorized by a marijuana producer;
b) the advertising accurately and legibly identifies the marijuana producer responsible for the content of the advertising by name and license number or registration number.
27. Subjects a marijuana producer that violates the marijuana advertising requirements by the Attorney General to disciplinary action by DHS.
28. Specifies that an individual or entity that does not have a marijuana license, including a marijuana producer license, and advertise marijuana or marijuana products, is subject to a civil penalty of $20,000 per violation to the Smart and Safe Arizona Fund.
Packaging
29. Prohibits a marijuana producer from:
a) packaging or labeling marijuana or marijuana products in a false or misleading manner;
b) manufacturing or selling marijuana products that resemble the form of a human, animal, insect, fruit, toy or cartoon; or
c) selling or advertising marijuana or marijuana products with names that resemble or imitate food or drink brands marketed to children or otherwise advertise marijuana or marijuana products to children.
30. Subjects a marijuana producer that violates the marijuana packaging requirements to disciplinary action by DHS.
Contracts and Assessments
31. States that it is the public policy of Arizona that contracts related to marijuana producers are enforceable.
32. Immunizes a person that is licensed, certified or registered by any department, agency or regulatory board of Arizona from disciplinary action by that entity for providing professional assistance to a prospective or licensed marijuana producer for any lawful activity under the marijuana regulatory statutes.
33. Specifies that the State of Arizona and localities are prohibited from levying or collecting any fees or assessments of any kind on the sale of marijuana or marijuana products on the licensing, operations or activities of marijuana producers, unless the fee or assessment is of general applicability to individuals or businesses that are not engaged in the sale of marijuana or marijuana products.
Miscellaneous
34. Defines marijuana producer as an entity that is licensed by DHS to operate a single location at which the licensee may cultivate marijuana, process marijuana, manufacture marijuana products and package and store marijuana and marijuana products but from which marijuana and marijuana products may not be transferred or sold to consumers.
35. Requires for enactment the affirmative vote of at least three-fourths of the members of each house of the Legislature (Proposition 105).
36. Makes technical and conforming changes.
37. Becomes effective on the general effective date.
Prepared by Senate Research
February 16, 2026
JT/NRG/ci