What new federal marijuana reclassification means for Arizona | Phoenix New Times

Feds to ease restrictions on weed. What that means for Arizona

“The impact is huge”: Move could fuel growth, adding more jobs and tax revenue for the state.
Reclassifying weed as a less dangerous drug could provide a financial boost to Arizona's billion-dollar cannabis industry.
Reclassifying weed as a less dangerous drug could provide a financial boost to Arizona's billion-dollar cannabis industry. O'Hara Shipe

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The federal government is rebranding cannabis, a move that could inject new growth into Arizona’s billion-dollar weed industry.

The U.S. Drug Enforcement Agency will soon move to reclassify marijuana from a Schedule I drug — think heroin and LSD — to Schedule III, which includes ketamine and anabolic steroids, according to the Associated Press. The move would recognize the medical benefits of cannabis but would not legalize recreational use federally.

The AP confirmed the DEA’s proposal, which is the last significant regulatory hurdle for cannabis to clear, with five people familiar with the matter.

Though Arizonans enjoy legal weed, medical marijuana sales are tanking and recreational sales have plateaued. In 2023, overall cannabis sales reached $1.43 billion for the third consecutive year

“We are going to see growth, which means more jobs and tax revenue for Arizona,” said Lilach Mazor Power, the owner of Giving Tree Dispensary and president of the Arizona Dispensaries Association.

“The impact is huge. But we have about six months before anything is signed and sealed,” she added.

The DEA’s reclassification must still be reviewed by the White House Office of Management and Budget, according to the AP. Once OMB signs off, the DEA will take public comment and an administrative judge will review the proposal before the drug agency’s reclassification becomes final.

Classifying marijuana as a less dangerous drug will help cannabis businesses with banking, lower their taxes, loosen up capital to expand their operations and make it easier to find vendors for a variety of services, including insurance, packaging, and health benefits and 401(k) plans for employees, Power said.

That could fuel growth in Arizona’s weed industry, which in turn would mean an uptick in the $173 million in excise tax that weed sales generated in 2023. The tax funds community college districts, public safety agencies, the Arizona Highway User Revenue Fund and public health services for communities adversely impacted by marijuana arrests and criminalization.

“I think we are going to see a lot more growth and diversity in people that can actually play in this market,” Power said.
click to enlarge Lilach Mazor Power
Lilach Mazor Power opened Giving Tree Dispensary in 2013 in North Phoenix. Federal restrictions make it difficult to operate a cannabis business, she said.
Kevin Brost

‘This could be really big’

Although Arizona has enjoyed recreational weed sales since January 2021, many banks won’t accept cannabis cash, which is why many dispensaries only accept cash. It also means cannabis businesses find it difficult to access loans and other financial services that would fund their growth, Power said.

Additionally, federal tax law prohibits cannabis businesses from claiming expenses as tax deductions like most other businesses can, meaning they face a significantly higher tax burden. For small business owners like Power, it takes a team of accountants, bookkeepers and tax attorneys to navigate the tax code for cannabis companies, Power noted.

That could go away with the DEA reclassification, she said.

“That relieves a lot of stress, resources and of course, the capital,” Power added.

Reclassifying cannabis also could lead to more research into weed by agricultural agencies and universities and the removal of restrictions by social media platforms that ban marijuana advertising and content, Power explained.

“On social media, from advertising to educating, we get shut down and shadow banned. We can’t advertise on social media. All of that is going to open. It’s an opportunity for service providers to business operators,” she said.

Even though weed is legal in Arizona, the industry’s nearly 10,000 employees in the state still face stigma — from banks that don’t consider their paychecks as legitimate income for mortgage applications to landlords who won’t rent to them, Power said. That could change under the reclassification.

“It is so hard to operate in this space, and this will open it up,” Power said. “It’s not just the sale of weed. It’s the services and the relationships. This could be really big. I’m really excited.”
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