A bud tender displays medical marijuana at a dispensary in Los Angeles.
A bud tender displays medical marijuana at a dispensary in Los Angeles. - 
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Bob Moon: The business of selling medical marijuana hit a major setback in Arizona this week. June 1st was the supposed to be the day would-be pot dispensary owners could start submitting their applications to the state. But that date came and went, without a single application being processed. As KJZZ's Peter O'Dowd reports from Phoenix, it's not for lack of interest.

Peter O'Dowd: Perhaps it's fitting that Bob Marley ushers in this week's grand opening of We Grow. It's a supply superstore that owners describe as the Walmart of weed. The shelves are full of fertilizer and hydroponic gear. We Grow is not a dispensary, but it does cater to medical marijuana growers. And right now, in Arizona that clientele includes to about 4,000 patients who can legally use the drug. The only way they'll get it is by growing the weed themselves. That's because a lawsuit between Arizona and the federal government has put dispensary applications on hold.

Dhar Mann: It's going to be an uphill battle for a while.

Dhar Mann is the founder of We Grow. He says the state's lawsuit is an 11th hour surprise. Investors who hope to open a dispensary have been prepping since November, ever since voters approved medical marijuana. Still, Mann hopes the lawsuit will eventually get the industry moving.

Mann: If the intentions are genuine to provide more clarity in order to protect state employees and protect dispensary owners, then I don't necessarily think it's a bad thing.

All this drama began last month with a letter from the U.S. Attorney in Arizona. It reminded the state's health department that selling marijuana in the United States is illegal, and anyone who does it could face jail time.

Tom Horne: That's a pretty scary business model.

Arizona Attorney General Tom Horne is worried -- not only for the state employees who would stamp the applications, but also for the 120 or so entrepreneurs who would eventually distribute the pot.

Horne: So if they go into business thinking it's legal under state law, and the federal government comes in and arrest them and starts prosecuting them and they're facing prison, I think that's a terrible situation.

But the situation is already uncomfortable for Brooks Elliott. He's a prospective dispensary owner who needed $150,000 in cash before the state would even consider his application. Now the process is stalled, and Elliott is still paying several thousand bucks a month for a storefront he can't use.

Brooks Elliott: It's a nerve wracking thing. How can you just walk away from spending x amount of dollars, and just shake your head and say that's the way it has to be? It's serious money.

Business leaders predict the state's medical marijuana industry could be worth more than $2 billion a year.

In Phoenix, I'm Peter O'Dowd for Marketplace.