Arizona Organix Steps Out as the State's First Authorized Medical-Marijuana Dispensary

No "flags" were raised about the evolution from a compassion club at the same address, says Arizona Organix's lawyer, Ryan Hurley, who's spoken out against such clubs in the past.

The compassion clubs — along with dispensaries and cultivation sites — have been declared illegal by AG Horne. Hurley says it's possible under state law that caregivers could be reimbursed by patients for the cost of growing marijuana, thus permitting a small cannabis club to operate within the boundaries of state statute. But he says he continues to have concerns about the way other compassion clubs do business.

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More About

• Ryan Hurley
• Jan Brewer
• Bill Montgomery
• Medical Marijuana
• Marijuana

Once Arizona Organix or other dispensaries nail down their cultivation sites, no one knows whether the feds will try to shut them down. A May 2011 letter by former Arizona U.S. Attorney Dennis Burke to Governor Brewer suggested that the federal government may target "large" marijuana-cultivation sites whether or not they're authorized under state license. Brewer used the letter as ammunition to carry out her legal attack on the voter-approved law, which she'd opposed publicly in 2010, but Burke said Brewer was distorting his stance for political purposes.

New Arizona U.S. Attorney John Leonardo hasn't said he would or wouldn't order raids of dispensaries or grow sites operating within the guidelines of Arizona law.

Complicating matters, or perhaps easing them, voters in Colorado and Washington this month legalized marijuana for recreational use by adults. The federal government hasn't yet responded to the challenge. Whether newly re-elected President Barack Obama handles the rebellious states with a crackdown or capitulation could have consequences for Arizona's medical-pot program.

Also, the U.S. Court of Appeals for the D.C. Circuit held hearings last month on whether marijuana should remain as a Schedule 1 drug, with no accepted medical use, under U.S. Law; a decision is pending.

Taking marijuana from seeds or clones to mature plants that can be dried and sold to patients would take two to three months. Once open, Arizona Organix is expected to sell a wide range of indica and sativa buds and possibly smokable hashish or a powdered concentrate called kief. Pot-infused "edibles" probably also will be available, once the business passes a separate state inspection required whenever food is sold to the public.

Assuming the store opens and money begins to roll in, another hurdle will quickly present itself. Most U.S. banks have declined to allow any marijuana-related businesses to hold accounts. Hurley says no one has ordered them to do that, but "they've made internal risk decisions and decided this is not a good thing to get into."

Credit-card companies also don't want to deal with dispensaries, though Hurley says Arizona Organix, a registered nonprofit corporation in Arizona, can use "alternate payment systems," similar to PayPal, to take credit cards from patients. However, the banking problem will be a "constant challenge," requiring the company to do a lot of its transactions in cash.

Then, the problem becomes what to do with all that cash. And how to pay the Internal Revenue Service for taxes on products and services sold that violate federal law. And how to cut payroll checks for its directors, "budtenders," and other staff members.

Meanwhile, the state of Arizona supposedly will track the inventory of the dispensary from seeds to sale.

Other would-be dispensary owners are watching Arizona Organix carefully, waiting to make their own move until they see if the company gets hassled.

Arizona Organix is the first state-approved dispensary, but the history of marijuana in this country still is being written.