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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
AMENDED
public benefits; fraud; remedies
(NOW: predatory agreement; marijuana establishment license)
Purpose
Subject to voter approval, statutorily allows the Attorney General (AG) to investigate and commence legal action against any marijuana facility agent for entering into a predatory agreement or fraudulently acquiring a marijuana establishment license and prescribes actions for enforcement.
Background
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 old, to be regulated and overseen by the Department of Health Services (DHS). Monies collected from the sale of recreational marijuana are deposited in the Smart and Safe Arizona Fund and then allocated to outlined entities, including DHS, the Arizona Department of Revenue, the Supreme Court, the Department of Public Safety, community college districts, municipal fire and police departments and county sheriffs' departments, the Highway User Revenue Fund, the Justice Reinvestment Fund and the AG (A.R.S. Title 36, Chapter 28.2).
DHS must adopt rules to enforce and regulate marijuana laws and marijuana-related products and establishments that include requirements for the creation and implementation of a Social Equity Ownership Program to promote the ownership and operation of marijuana establishments and marijuana testing facilities by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws (A.R.S. § 36-2854).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
2. Specifies that enforcement actions may include:
a) the revocation of any marijuana establishment license; and
b) the denial or revocation of a marijuana facility agent's card.
5. Becomes effective if approved by the voters and on proclamation of the Governor.
Amendments Adopted by Committee of the Whole
1. Removes the establishment of the Attorney General Marijuana Enforcement Fund and all related requirements and authorizations.
2. Removes the following authorizations and requirements prescribed to provide oversight over marijuana establishments licensed under the Social Equity Ownership Program:
a) to appoint receivers to oversee establishments that participate in fraudulent or predatory activities and take outlined actions to remedy violations and restore licensure;
b) to petition the AG to retore a license if prescribed conditions for receivership apply;
c) the restoration of a marijuana establishment license after the AG determines that one or more conditions have been met and that the proposed transferee meets all applicable requirements;
d) to file a complaint with the AG for original establishment owners who are the subject of a predatory agreement or other outlined conditions;
e) for a person who has been the subject of a predatory agreement to bring a private action if the predatory agreement constitutes fraud against the State of Arizona; and
f) for DHS to take action against a party to a predatory agreement at marijuana establishment license or facility agent card renewal as directed by the AG.
3. Removes from the allowed enforcement actions the AG may take in consultation with DHS:
a) the revocation of any marijuana establishment when held only by the violating party;
b) the permanent disqualification from holding any marijuana establishment license or marijuana facility agent card in the state; and
c) the appointment of a receiver.
4. Removes the authorization to hold an elected or appointed official of the state or any political subdivision of the state who knowingly votes for, approves or directs public monies to provide benefits, services or payments to individuals who are not U.S. citizens or lawful permanent residents personally liable for the total amount of public monies allocated and reasonable attorney fees and costs.
5. Removes the prohibition on the state or a political subdivision of the state from paying or reimbursing any judgment, settlement or legal fees incurred by a liable official.
6. Removes the prohibition on a person from committing the following fraudulent acts:
a) knowingly presenting a false or fraudulent claim for payment or approval;
b) knowingly making, using or causing an individual to make or use a false record or material statement;
c) having possession, custody or control of property or money used by the state and knowingly delivering less than all of the property or money;
d) knowingly making or using a false record or statement that is material to an obligation to pay or transmit money or property to the state or knowingly concealing, improperly avoiding or decreasing an obligation to pay or transmit money or property to the state;
e) knowingly obtaining a license, permit, certificate, registration or other authorization from any state agency or political subdivision of the state by fraud;
f) knowingly operating any activity or enterprise while authorization is obtained or maintained by fraud; and
g) knowingly benefiting from the fraud of another in connection with any programs or benefits offered by the state.
7. Removes the following penalties for a person is who commits an outlined fraudulent activity:
a) a civil penalty of at least $11,000 and not more than $25,000 for each violation;
b) triple the amount of damages sustained by the state; and
c) the costs of any civil action, including reasonable attorney fees and investigative costs.
8. Removes defined terms.
9. Makes conforming changes.
Senate Action
PS 2/18/26 DP 4-3-0
Prepared by Senate Research
March 27, 2026
KJA/KM/hk