There is a Grand Canyon-sized gulf between medical cannabis and recreational marijuana in Arizona. Sales of medical marijuana continue to decline, while adult-use pot sales are climbing. 

The latest figures to be released by the Arizona Department of Revenue found that taxable medical cannabis sales totaled $31.3 million for October, representing the eighth consecutive month of decline.

Adult-use cannabis sales, on the other hand, amounted to $73.8 million in October, a new high for the state’s recreational pot program. 

Those totals mark the continuation of a trend for the Grand Canyon State’s dual cannabis markets. 

Voters in Arizona legalized medical cannabis in 2010, and sales began two years later. Arizona voters likewise approved a proposal legalizing recreational cannabis in 2020, with sales kicking off in January 2021. 

Medical cannabis sales outpaced recreational sales for the first 11 months of 2021.

In December of that year, adult-use marijuana sales totaled $70,317,105, compared with $57,971,859 in sales for medical marijuana that same month. 

Recreational pot sales have exceeded medical sales every month since. 

As the AZ Mirror noted this week, the “crumbling of the medical program follows a pattern other states have seen with medical markets outpaced by recreational sales in the wake of legalization.”

The outlet has more on the divergent sales trends: 

“The state collects 16% excise tax on recreational sales in addition to the standard sales tax; medical patients pay roughly 6% in state sales tax, levied as a Transaction Privilege Tax on cannabis outlets. Local jurisdictions charge an additional 2% or so for all marijuana sales. One-third of recreational taxes collected are dedicated to community college and provisional community college districts; 31% to public safety — police, fire departments, fire districts, first responders — 25% to the Arizona Highway User Revenue Fund, and 10% to the justice reinvestment fund, dedicated to providing public health services, counseling, job training and other social services for communities that have been adversely affected and disproportionately impacted by marijuana arrests and criminalization. The medical market has continued to bleed both sales and participants, following a trend in some states that have legalized adult-use cannabis years after establishing medical cannabis markets.”

Arizona was one of four states in 2020 where voters approved measures legalizing recreational marijuana sales (Montana, New Jersey and South Dakota were the other three).

The measure, Proposition 207, required the state 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 mandate that, among other things, designated the first two dozen dispensary licenses to individuals hailing from communities that have been affected by the War on Drugs.

Arizona’s Department of Health Services required those applicants to participate in classes in order “to ensure that social equity applicants are prepared for the application process and the challenges of running a marijuana business.”

Those classes, per the department, were led by veterans of the cannabis industry, and included “two days of content and education focused on a number of aspects of operating an adult-use marijuana business, including legal requirements, business practices, regulatory compliance, and fundraising, as well as marketing and strategic growth.”

For some prospective marijuana dispensary owners in Arizona, class is now in session. Social equity class, that is. 

It is a provision included in the ballot measure that voters in the state last year legalized recreational pot use for adults. The measure, Proposition 207, called on the state 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.”

What that means in practice: Arizona’s Department of Health Services will award 26 dispensary licenses to individuals from those communities particularly affected by long standing anti-pot laws. 

Per the department: “Social equity license holders will be required to comply with all statutes and rules that govern Adult-Use Marijuana Establishment licenses, including obtaining approval to operate before opening their retail location. Additionally, social equity license holders will be required to develop and implement policies to document how the Marijuana Establishment will provide a benefit to one or more communities disproportionately affected by the enforcement of Arizona’s previous marijuana laws.”

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Cannabis is officially a billion dollar business in the state of Arizona.

Voters in the Grand Canyon State passed a measure at the ballot in 2020 that made recreational pot legal for adults ages 21 and older. Medical cannabis, meanwhile, has been legal in the state since 2010.

That made 2021 the first year with both markets open for business, and the results were lucrative for Arizona.

According to figures released by the state Department of Revenue, medical and recreational cannabis sales combined to generate more than $1.23 billion in revenue last year.

“Rarely does an industry produce over $1.2 billion in revenue in its first year. This number shows that the legalization of cannabis is something Arizonans believe strongly in and the many benefits it contributes to the state’s economy,” said Samuel Richard, the Executive Director of the Arizona Dispensaries Association (ADA), as quoted by azfamily.com.

The Department of Revenue provided a detailed breakdown of the sales data, revealing that recreational adult-use pot brought in $528,001,278 in revenue, while medical cannabis generated $703,803,194.

According to the figures, November brought in $60,299,191 in adult-use sales, making it the highest-grossing month for recreational pot. It was also the only month of the year in which recreational sales topped $60 million. 

April was the top month for medical cannabis, with $72,944,477 generated then. Complete sales figures for December were not provided.

Moreover, the state raked in $196,447,570 in taxes on the combined sales last year, and that does not include sales in December. 

According to the Arizona Department of Revenue, “there is a transaction privilege tax (TPT) rate and an excise tax (16 percent) on the retail sales” of adult use recreational cannabis in the state.

In 2020, 60 percent of Arizona voters approved Proposition 207, a ballot initiative that legalized recreational pot use in the state. (Arizona was one of four states that year where voters approved legalization measures at the ballot, joining Montana, South Dakota and New Jersey in moving to end prohibition.) 

In August, Arizona launched a social equity program for aspiring cannabis dispensary owners as part of Prop 207’s commitment 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.”

Through the program, the state’s Department of Health Services will award 26 dispensary licenses to applicants who come from communities most adversely affected by anti-drug policies.

“The social equity ownership program is intended to promote the ownership and operation of licensed Marijuana Establishments by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws,” the Department of Health Services explained. “Social equity license holders will be required to comply with all statutes and rules that govern Adult-Use Marijuana Establishment licenses, including obtaining approval to operate before opening their retail location. Additionally, social equity license holders will be required to develop and implement policies to document how the Marijuana Establishment will provide a benefit to one or more communities disproportionately affected by the enforcement of Arizona’s previous marijuana laws.”

But that effort has also faced scrutiny, with a group of female investors filing a lawsuit in November targeting the program. The plaintiffs, a pair of organizations known as the Greater Phoenix Urban League and Acre 41, assert that the rules governing the program are inconsistent with the goals of Prop 207.

Defendants in the suit are the state of Arizona, Republican Gov. Doug Ducey, the state Department of Health Services and Don Herrington, the director of the Department of Health Services.

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