In recent months, there has been an increase in foreign investment in companies that maintain business relationships of various types with medical marijuana dispensaries here in Arizona. With this investment, there are questions relating to both legality and propriety, along with concerns of how this may affect those who rely on the products and services provided to them by their local dispensary.
First, let’s look at a brief overview of the legal scaffolding regarding dispensaries here in Arizona. Proposition 203 laid out that a dispensary must be “a not-for-profit entity that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, supplies, sells or dispenses marijuana or related supplies and educational materials to cardholders.”
Since its passage in 2010, there has been some uncertainty regarding the “not-for-profit entity” definition, but the general model is a corporation overseen by a board that makes decisions regarding the day-to-day and long-term operations of the dispensary.
Recent revisions to the rules set out by the Arizona Department of Health Services have expanded the scope of what constitutes a not-for-profit entity to include limited liability companies and partnerships. Once the entity has been formed and submitted the proper paperwork to DHS, a non-transferrable license is granted.
Since the terms of the Arizona Medical Marijuana Act indicate a dispensary must be operated as a non-for-profit business, it does not seem like the sort of environment where outside investment would be able to make any sort of return. However, if one looks more closely, the limits laid out by the act can be interpreted (at least at the present time) as being rather narrower than what it might look like.
There is nothing in the act, or current DHS rules, preventing or delimiting services that a dispensary might employ or utilize in the process of performing the activities specifically outlined. Put another way, while a dispensary is allowed to cultivate marijuana and transport it between the cultivation site and the dispensary’s storefront, the dispensary is not obligated to specifically own the buildings where the cultivation takes place or where the storefront is located, nor is it required to specifically own the vehicles used for transportation.
Legally, they could rent or take out long-term leases on transportation services and property. It is in these peripheral services, relating to logistics, real estate and property management, and other areas where investments are being made.
It’s unknown whether this particular arrangement will remain a viable model for the long term. Since DHS appears to have the regulatory authority to define the scope of what constitutes a non-for-profit entity, it would follow that they also have the regulatory authority to define what services and capital assets the dispensary must maintain by themselves in order to stay open.