When Arizona voters approved adult-use cannabis initiative Prop 207 in 2020, it created a program called Justice Reinvestment Program, which directs the Arizona Department of Health Services (ADHS) cannabis tax funds to go toward a variety of public services.

The Justice Reinvestment Program includes funding for 1.) public and behavioral health services (such as substance abuse prevention/treatment), 2.) “Restorative justice, jail diversion, workforce development, industry-specific technical assistance or mentoring services” (to benefit those who are in areas that are disproportionately affected by high arrest rates), 3.) “addressing the underlying causes of crime” and targeting reduction in prison population and drug-related arrests, and 4.) funding the creation of tech or programs with a focus on “restoration of civil rights” and expunging records.

On Dec. 21, the ADHS announced that it has finally chosen the recipients of the first round of Justice Reinvestment Grants. This includes 18 nonprofit recipients which …”address all of the key focus areas outlined in the statute and in the community listening sessions and represent communities from across the state of Arizona,” ADHS wrote.

Northland Family Help Center, Hushabye Nursery, Axiom Community of Recovery, Cihuapactli Collective, Stuck Community Acupuncture, Inc, Phoenix Indian Center, Arouet Foundation, Friendly House, Jobs for Arizona’s Graduates (JAG), Persevere, Constructing Circles of Peace, Regional Center for Border Health, Inc. – Yuma, Regional Center for Border Health, Inc. – Parker, Arizona Democracy Resource Center, Southern Arizona Legal Aid, Inc, The Bambi Fund, Just Communities Arizona, and Our Sister Our Brother.

According to a press release, ADHS began working on this initiative by analyzing state data and determining which communities were impacted the most by the War on Drugs, specifically in relation to “drug enforcement, arrest, and incarceration.” During this time, 18 listening sessions were heard, and participants came up with a list of eight points of benefit for their communities: neighborhood safety/community gathering places such as parks or community centers, cultural awareness training, affordable housing, stigma reduction, offering tech classes for people who were once incarcerated, youth development services, and substance abuse education/prevention.

“Moving forward, the Office of Health Equity will develop a robust program evaluation process to ensure that funded projects serve the intended communities and create a positive impact,” ADHS continued. “The program evaluation will assess if awardees meet their determined goals and the data collected will be used in efforts to continuously improve the program. The Office will also facilitate a Community of Practice for all awardees and interested stakeholders to share best practices, lessons learned and build partnerships to support the communities served.”

State law says that the Justice Reinvestment Program will receive 35% from the Justice Reinvestment Fund, which includes 10% of cannabis sales tax revenue. Additionally, one-third of cannabis tax revenue goes to community colleges and districts, 31% to public safety (law enforcement, fire departments, etc.), and 25% for the Arizona Highway Revenue Fund.

When Prop 207 passed in 2020, it was widely celebrated by the cannabis community. NORML Executive Director Erik Altieri shared a statement about how it will benefit people in Arizona. “Until now, Arizona had imposed some of the strictest prohibition laws in the country; in some instances, the possession of even small amounts of marijuana was classified as a felony,” Altieri said. “By rejecting this failed policy, no Arizonan going forward will be saddled with a criminal conviction for engaging in the personal possession or cultivation of cannabis, or face the lifelong stigma that comes with it.”

Recently, Arizona met a milestone sales achievement. As of December 2023, the state has officially collected more than $1 billion in cannabis sales (with data collected between January 2023-September 2023). This includes a split of adult-use cannabis sales ($797 million) and medical cannabis sales ($267 million) for the same nine-month time period. Since January 2021 when sales first began, the state has collected more than $4 billion in combined recreational and medical sales.

Other states have also implemented similar programs to help fund various community services. The California Department of Cannabis Control (DCC) announced in February that it would be granting $20 million to bring cannabis retail stores to underserved areas through a Local Jurisdiction Retail Access Grant.

Later in June, the DCC awarded $4.1 million as part of the first phase of the grant process. “The Local Jurisdictional Retail Access Grant program will help provide access to regulated cannabis retail for over 2 million Californians that currently live in an area where access to licensed cannabis retail businesses is insufficient,” said DCC Acting Director Rasha Salama. “In addition to improving access to existing customers, these grants are another important step towards establishing legal pathways for legacy and social equity operators.”

Applications for Phase II of the Local Jurisdiction Retail Access Grant opened in October 2023, where $15 million is available in total funding. An announcement date has not yet been established.

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As states throughout the country continue to legalize medical and adult-use cannabis, the federal de-scheduling and later legalization of cannabis is likely to come sometime in the near future. But what exactly comes with such a widespread shift in policy?

As we look ahead at the potential for federal legalization, a new report warns lawmakers about taking a thoughtful approach, namely accounting for the potential unintended effects that interstate commerce on the current intrastate cannabis markets could have on social equity and small cannabis businesses.

Report Highlights Unintended Consequences of Federal Reform

While the shift would better align federal policy with state-level reforms and public opinion, “it will also disrupt and force the transformation of existing intrastate cannabis markets,” the report by Parabola Center for Law and Policy opens. “How the nation will shift from dozens of individual state cannabis markets to one national market, and the implications of that shift, is unknown but likely to be dramatic.”

The report continues, “It is also safe to assume that many advocates for federal de-scheduling are not aware of the consequences such a policy change portends for existing and entrenched state cannabis policies.”

The report, titled “How to Federally Legalize Cannabis Without Violating the Constitution or Undermining Equity and Justice,” offers a blueprint for Congress to protect cannabis professionals in the industry, promoting justice with care to avoid undoing the progress states with legal cannabis laws have worked toward through the past decade. 

The American cannabis market is worth $33.8 billion, composed primarily of small business owners making up more than 10,000 businesses providing an estimated 400,000 jobs across the U.S.

The report was authored by Tamar Todd, an attorney whose primary experience is drug policy alongside her role as a U.C. Berkeley School of Law lecturer teaching cannabis law and policy.

Protective Recommendations for Federal Cannabis Legalization

The report makes three key constitutional policy recommendations to mitigate the risks of corporate consolidation and monopolization that may come with federal reform. Parabola also includes draft text addressing the potential solutions. 

The first recommendation explicitly preserves states’ rights to set their own cannabis laws “as designed and without disruption” in the face of federal reform. The report states that Congress should “specifically state that it does not intend to preempt, prohibit, or otherwise limit any state law, regulation, or requirement regardless of whether the state law affects interstate commerce or favors in state interests.”

The second recommendation deems that small, social equity and worker-owned cannabis businesses should gain priority in interstate cannabis commerce. These guidelines, per the recommendation, would be regulated through a registration system with the federal government, with registrations reserved for state-licensed entities that are involved in promoting industry diversity, that offer support and services to “disadvantaged individuals, veterans, or individuals and communities most affected by cannabis prohibition and enforcement” or protect the rights of workers to organize and co-own businesses.

Parabola also recommended a focus on avoiding U.S. Constitution’s Dormant Commerce clause violations. This clause prohibits states from preventing or restricting interstate commerce, additionally granting Congress the authority to regulate this type of commerce. Should cannabis see federal legalization, the report explains that state regulatory structures could open themselves up to liability under federal legalization should they keep their industries within their respective states. 

Still Time to Mitigate Risk

The report warns that, should the government legalize cannabis on a federal level without “explicit federal protections for state-based intrastate markets, everything will change once cannabis is de-scheduled. The world of legal cannabis will look nothing like it does now.” 

Without these protections, the report predicts that the end of federal legalization and demise of interstate barriers “will likely lead to consolidation of the cannabis industry and a monopolization of the market by large cannabis companies. Additionally, large corporations currently operating in other areas will enter the cannabis market once the risks and constraints of federal prohibition are removed.”

While there are surely benefits to federal cannabis legalization, the report argues that that market is “unlikely to prioritize the social equity goals that have driven many states’ existing policies.”

Parabola ultimately calls on Congress to protect state-level cannabis equity programs and limit market consolidation and monopolization, otherwise warning that “state efforts to create an equitable and inclusive industry will be wiped out.”

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