Arizona SB 1105: Dispensary Location Restrictions Close Preschool Loophole
Closing the Preschool Loophole—And Why It Barely Matters for Market Dynamics
The Silent Majority 420 | November 2025
The Bill at a Glance
| Field | Details |
|---|---|
| Bill | SB 1105 |
| Session | 2025 (57th Legislature, 1st Regular Session) |
| Title | Medical marijuana dispensaries; location |
| Sponsors | Bipartisan |
| Status | Signed into law |
| Effective | Upon signature (new licenses only) |
Executive Summary
Arizona SB 1105 expands the existing 500-foot buffer zone around cannabis dispensaries to include childcare facilities and preschool programs. The bill responds directly to an October 2024 Court of Appeals ruling that created a legal loophole allowing dispensaries to operate near early childhood facilities.
CBDT Assessment: This is regulatory maintenance, not market-moving policy. SB 1105 scores neutral (0 to -0.5 percentage points) on legal market capture. Arizona's limited license model—not location restrictions—is the binding constraint on dispensary expansion. The bill imposes no operational burden on existing operators, creates no consumer access barriers, and grants no competitive advantage to the black market.
The more consequential Arizona cannabis legislation in 2025 remains HB 2179 (advertising restrictions) and the defeated SB 1702 (hemp regulation), along with federal hemp restrictions that take effect November 2026.
What Happened: The Court of Appeals Loophole
On October 18, 2024, the Arizona Court of Appeals ruled that the state's medical cannabis law—the voter-approved Arizona Medical Marijuana Act (Proposition 203)—bars dispensaries from locating near K-12 schools but not preschools or childcare facilities.
The court's majority held that interpreting "school" to include preschools would undermine the Arizona Department of Health Services' ability to issue licenses and "adversely affect" voter intent. The dissent argued location restrictions should protect all children from marijuana exposure, whether in preschool, elementary school, or high school.
The ruling opened a gap: cannabis businesses could legally locate within feet of facilities serving children ages 0-5 while being prohibited from the same proximity to facilities serving children ages 6-18.
SB 1105 closes that gap.
What SB 1105 Does
| Provision | Before SB 1105 | After SB 1105 |
|---|---|---|
| K-12 schools | 500 ft buffer required | 500 ft buffer required |
| Childcare facilities | No buffer required | 500 ft buffer required |
| Preschool programs | No buffer required | 500 ft buffer required |
| Existing dispensaries | N/A | Grandfathered |
| New license applications | Schools only | Schools + childcare + preschools |
Key provisions:
- Includes childcare facilities and preschool programs in the list of prohibited locations within 500 feet of dispensaries and cultivation sites
- Prohibits municipalities from enacting ordinances permitting cannabis establishments within 500 feet of schools, childcare facilities, or preschools
- Applies only to dispensary registration certificates or marijuana establishment licenses issued after the bill's effective date
- Existing dispensaries are grandfathered—no relocation required
The CBDT Framework Analysis
The Consumer-Driven Black Market Displacement (CBDT) Framework identifies five levers that determine legal market capture of total cannabis demand. SB 1105 affects only one—access density—and minimally.
Lever 1: Price Gap (g) — NO EFFECT
Weight: 4× (highest impact)
SB 1105 does not affect cannabis pricing. The bill imposes no new taxes, fees, or compliance costs on existing operators. Consumer prices remain unchanged.
Black market advantage: None gained or lost.
Lever 2: Access Density (D) — MINIMAL NEGATIVE
Weight: 1×
The bill restricts where future dispensaries can locate. However, this effect is nearly zero in practice because:
- Arizona operates a limited license model. Approximately 170 dispensaries serve 7.4 million residents (2.2 per 100,000 population). The state issues only one dispensary license per 10 pharmacy permits. New license availability—not location restrictions—is the binding constraint.
- Existing dispensaries are grandfathered. No current operators must relocate. Consumer access to existing stores is unchanged.
- Future licenses are scarce regardless. Even without SB 1105, few new licenses would be issued under Arizona's restrictive model.
CBDT impact: -0.1 to -0.3 percentage points (negligible)
Lever 3: Safety/Quality (S) — NO EFFECT
Weight: 1.2×
SB 1105 does not affect product testing, lab certification, or quality standards. Arizona's existing testing requirements remain intact.
Lever 4: Convenience (F) — NO EFFECT
Weight: 1×
The bill does not change operating hours, delivery availability, product selection, or payment options. Consumer convenience is unchanged.
Lever 5: Enforcement (E) — NO EFFECT
Weight: 0.6×
SB 1105 is a siting restriction, not an enforcement measure. It does not affect penalties for unlicensed operators, interdiction resources, or black market suppression.
Fragmentation Modifier (F_frag) — NO EFFECT
Weight: −0.8×
The bill maintains policy coherence. It does not create conflicting regulatory frameworks, federal preemption concerns, or stakeholder confusion. The change is narrow and prospective-only.
CBDT Score Summary
| Lever | Weight | SB 1105 Impact | Contribution |
|---|---|---|---|
| Price Gap (g) | 4× | None | 0 |
| Access Density (D) | 1× | Minimal negative | -0.1 to -0.3 |
| Safety/Quality (S) | 1.2× | None | 0 |
| Convenience (F) | 1× | None | 0 |
| Enforcement (E) | 0.6× | None | 0 |
| Fragmentation (F_frag) | -0.8× | None | 0 |
| Net Effect | — | — | 0 to -0.5 pp |
Arizona legal market share:
- Current: 75-80%
- Post-SB 1105: 75-80% (unchanged)
Comparison: State Buffer Zone Requirements
| State | Buffer Zone | License Model | Dispensaries per 100K |
|---|---|---|---|
| Arizona (post-SB 1105) | 500 ft (schools + childcare) | Limited (~170 total) | 2.2 |
| Colorado | 1,000 ft (schools) | Open | 14.2 |
| Oregon | 1,000 ft (schools) | Open | 16.8 |
| California | 600 ft (varies by locality) | Limited | 3.8 |
| Washington | 1,000 ft (schools, playgrounds, parks) | Limited | 4.1 |
Arizona's buffer requirements remain comparable to or less restrictive than peer states. The childcare expansion aligns with standard practice rather than creating an outlier restriction.
Winners and Losers
Winners
| Stakeholder | Why |
|---|---|
| Public perception of legal cannabis | Proactive child safety regulation strengthens industry's social license |
| Existing license holders | Grandfathered in; marginal reduction in future competition |
| Families with young children | New dispensaries won't locate near early childhood facilities |
Losers
| Stakeholder | Why |
|---|---|
| Prospective license applicants | Reduced site selection options (marginal—few new licenses anyway) |
| Commercial landlords near childcare | Properties within 500 ft lose eligibility for cannabis tenants |
Neutral
| Stakeholder | Why |
|---|---|
| Existing dispensary operators | No operational changes, no compliance costs, no relocation |
| Consumers | No change in access, pricing, or product availability |
| Black market | Neither helped nor harmed—illicit operators don't rely on storefront proximity to childcare |
Political Context
SB 1105 represents the type of legislation that passes with minimal controversy. Bipartisan sponsorship. Narrow scope. Prospective-only application. No operational disruption.
The bill demonstrates that cannabis regulation can evolve incrementally without creating compliance crises or industry backlash. Legislators can claim they "protected children" while imposing zero burden on existing businesses.
This is the path of least resistance—and that's why it passed while more consequential reforms (SB 1702 hemp regulation) failed.
What SB 1105 Doesn't Do
The bill does not address Arizona's actual cannabis market challenges:
| Issue | SB 1105 Impact |
|---|---|
| Declining sales ($1.5B → $1.3B, 2022-2024) | None |
| Employment crisis (20K → 10K jobs) | None |
| Medical market collapse (-63% since 2021) | None |
| Hemp-derived product competition | None |
| 280E federal tax burden | None |
| Limited license oligopoly | None |
SB 1105 is a child safety siting bill. It is not cannabis market reform.
Related Arizona Cannabis Legislation (2025)
| Bill | Topic | Status | CBDT Impact |
|---|---|---|---|
| HB 2179 | Marijuana advertising restrictions | Signed (effective July 2026) | Neutral to +0.5 |
| SB 1105 | Dispensary location restrictions | Signed | Neutral (0 to -0.5) |
| SB 1702 | Hemp-derived product regulation | Defeated | -3 to -5 (hemp competition continues) |
| SB 1299 | Safe Community Enforcement Fund | Pending | +1 to +2 (illicit enforcement) |
| Federal | Hemp product restrictions (1mg cap) | Passed Nov 2025 | +3 to +5 (effective Nov 2026) |
The defeated SB 1702 and the federal hemp restrictions matter more for Arizona's market dynamics than SB 1105. The hemp loophole—unregulated intoxicating products sold outside licensed dispensaries—represents a 3-5 percentage point drain on legal market share that SB 1105 does nothing to address.
CBDT Verdict
Should Arizona have passed SB 1105? Yes. The bill closes an unintended legal gap without disrupting existing operations.
Does SB 1105 improve Arizona's legal market capture? No. The effect is within rounding error.
What would improve Arizona's market? Federal 280E elimination, SAFE Banking passage, hemp enforcement, consumption lounges, tribal compact expansion—not location restrictions on hypothetical future dispensaries.
SB 1105 is fine legislation. It's just not important legislation.
CBDT Framework Citation
This analysis applies the Consumer-Driven Black Market Displacement Framework:
The Silent Majority 420, "Consumer-Driven Black Market Displacement (CBDT) Framework: A Behavioral-Utility Heuristic for Illicit-to-Legal Market Transition," Zenodo, 2025. DOI: 10.5281/zenodo.17593077
Validation data: Harvard Dataverse, DOI: 10.7910/DVN/MDVDTQ
Related: Arizona Cannabis Market Analysis | Cannabis Bills Tracker
The Silent Majority 420 is an independent cannabis policy analyst. The CBDT Framework represents the first validated consumer-utility model for predicting market outcomes in vice legalization.
Analysis licensed CC BY 4.0