Arizona looking into if investors used 'predatory tactics' on social equity marijuana license winners
PHOENIX - A special Senate committee in Arizona is looking into whether "predatory tactics" were used by investors on the winners of the state's social equity marijuana licenses.
The special committee voted unanimously to move this forward to the full Senate, looking into whether the winners were scammed by these investors.
"What we have here is an injustice that needs to be fixed," Senator Sonny Borrelli said.
In 2022, Arizona used a lottery to give out 26 social equity marijuana business licenses.
Arizona Senator Majority Leader Sonny Borrelli led the committee discussion on a new bill that would return those licenses to the original winners if an investigation by the attorney general proves predatory tactics were used by partnering investors.
"The way this social equity license thing is supposed to work is the people who apply for it are supposed to maintain 51% ownership," Senator Borrelli said.
The Marijuana Industry Trade Association previously told FOX 10 that these businesses have the potential to do $500,000 to $1 million in business in a single month. The idea for the lottery was to stimulate the economy in specific zip codes around the state.
Arizona woman who won social equity license set to open dispensary as father serves 18-year marijuana sentence
Alicia Deals is set to open a marijuana dispensary, using one of the 26 social equity licenses that were issued following the passage of Proposition 207. What makes this story rather ironic is that Alicia's father is in prison for doing the exact same thing that Alicia is now doing legally.
Some winners, like Rene Dominguez Mendoza and his wife, partnered with an investor to help cover the $4,000 application fee and the start-up costs.
"They had fliers in the mailbox and we looked at it, and it said, ‘Own a dispensary at no cost to you. We will train you, we will teach you and we will fund everything. You will be 51 percent owner, at no cost whatsoever,’" Rene recalled.
He says they thought it was a good deal, so they signed a partnership agreement.
Arizona awards highly sought social equity marijuana licenses
The licenses are potentially worth millions of dollars. They were established under a 2020 ballot measure’s provision that ensured there would be licenses for "people from communities disproportionately impacted by the enforcement of previous marijuana laws."
"Once we got the license, it completely changed. They said ‘We’re going to take the license if you don’t sign the operating agreement. We will remove that license from you. We have the ability to do that,’ and through arbitration, they did," he said.
Just like that – the license was gone.
"We don’t have the funds to hire top attorneys and all to fight these guys. We’ll probably be in debt $1.5 million, something like that," he said.
The bill now heads to the full Senate to determine whether these lottery winners were subjected to predatory tactics that caused them to lose ownership of their new businesses.
We reached out to a few of the investors accused of this for a comment, but have not heard back.