How the Cannabis Black Market Continues to Thrive

While legalization and decriminalization have helped to reduce seedy cannabis manufacturing and distribution organization, the black market is still alive and well.

Cannabis and money exchange hands in a deal

As the legalization of recreational adult-use marijuana becomes more and more prevalent throughout North America, and medical cannabis has reached a total of 33 states and the District of Columbia, it’s a bit surprising that black market cannabis remains so ubiquitous. The answer as to why the black market continues to thrive is complex, and the primary reasons vary depending on location.

In Canada, where recreational and medical marijuana is legal nation-wide, a government survey found that in 2019, only 29.4% of cannabis users reported that they’d gotten all of their weed legally. 40.1% said they’d gotten weed from an illegal supplier. The country legalized recreational marijuana in June of 2018, and Canada’s first dispensaries opened their doors four months later. Yet that year, 51.7% of respondents said they’d gotten weed through illegal avenues. Another 9.9% said they grew their own weed in both 2018 and 2019.

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This table from the National Cannabis Survey compares Canadian consumers with household populations aged 15 or older who accessed cannabis from a variety of sources, before and after the product was legalized.

So why, if you can get marijuana legally, would some Canadians choose to commit a criminal act to get it instead? The Reddit community has two answers for that: price and quality. The overall consensus on that platform is that government-regulated cannabis is more than twice the price of black-market weed. Plus, as one user put it, ‘The legal stuff is garbage.’

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People complained about a number of issues with their product arriving dry, and said there isn’t enough variety to choose from, or even information on the stuff you do pick. One user put it succinctly:

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“Only the government could screw up selling weed.

In B.C. the government website is terrible to navigate, you can’t search by product size so if you want to buy a 15 gram bag you have to click on EVERY. SINGLE. STRAIN only to find out they are all out of stock.

The packaging is a bit excessive.

The price is ridiculous.

Most of the product was packaged like 8 months ago and dry as hell.

The product is usually pretty good but I’m getting black market stuff now for cheaper than when I was in high school 15 years ago.”

Alright, so how about in the United States?

Even in states like California, where recreational cannabis has been legal for years, the black market still takes a huge chunk out of the businesses that sell the same stuff but also pay taxes. A report by BDS Analytics, a research firm that focuses on cannabis news, found that the black market will likely make up 53% of all sales by 2024. That number could be even higher with unpredicted repercussions of the coronavirus.

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The fact is, California taxes its weed out the wazoo. On top of state taxes and local taxes, buyers shell out the dough for a 15% excise tax. Together, that means buying weed legally will cost you an extra 45% in government tolls. The study says California has the world’s largest legal cannabis market, but still bleeds hundreds of millions’ worth of tax revenue through illicit avenues of cannabis sales.

“Given the tax and regulatory load being carried by the legal market, California’s illicit market is predicted to make up 53% of all sales in 2024; compared with the majority of other states with more supportive regulatory regimes whose illicit markets are expected to shrink to 30% or less of total sales in that time frame… California currently has a relatively low number of retailers for its population, with only one licensed retailer for every 35,147 adults over the age of 21. Contrastingly, Oregon has one dispensary for every 5,567 adults over 21, while Colorado––the first state to launch an adult-use market––has 4,240 adults age 21 and over for each retailer.”

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What we think of as the “black market” is also different in reality than the shady backyard growth operation some guy you met in high school has going on. A state audit from an advocacy group called California’s Cannabis Business Association said that in 2019, there were 3,757 dispensaries and delivery services listed on the platform Weedmaps. Of those, only 922 were legally licensed to sell that product. That means more than three quarters of dispensaries in the state are operating within the black market realm.

Another major issue is the inconsistency with regulation and enforcement. In Oregon, the of the United States to decriminalize cannabis, the State Police Sergeant says the problem of illegal cannabis is growing faster than the solutions for it. The Oregon Liquor Control Commission said in a 2019 report the state has enough marijuana to cover more than half a decade of demand. The result is, that weed that should have been legal is instead flooding into the black market and out of the state, at a rate the U.S. Office of National Drug Control Policy calls prolific.

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In 2016, the year before recreational cannabis was legal in Oregon, state troopers in Idaho said they sized 508 pounds of the drug. Now, state troopers say they’re seizing 665% more illegal marijuana – over ton in weight – and most of it is coming from Oregon.

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In Chicago, people said they’re so used to buying pot under the table, they might not transition to heading to a dispensary right away. What’s worse, the legal industry in Illinois is expecting shortages, which will only drive the prices up even higher than the rates people are already unaccustomed to and hesitant to pay. That also impacts the complaint about a lack of options that customers in Canada referenced.

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One solution, cannabis experts predict, is to make marijuana more affordable. Many brands have started rolling out bargain strains. That’s proven especially important amongst the coronavirus pandemic, but will likely be crucial for years to come, as the black market dealers don’t seem to be going anywhere. Relaxed government regulations on payment options and delivery services for non-medical users could also be crucial for those who go the legal route.

Editor’s note: Since the publishing of this article a representative from Weedmaps clarified that they no longer allow unlicensed retailers on their platform and haven’t since January 2020. 

How the Cannabis Black Market Continues to Thrive was last modified: by