Legal Weed Isn’t Enough to Suppress California’s Black Market…Yet

The black market is persisting in California

Recreational sales in California launched on January 1, a watershed victory for the legalization movement and for those Californians who have spent decades fighting prohibition. Sales were set to begin in January after California voters elected pot in the November 2016 ballot.

Despite California’s 22-year long history with legal cannabis for medicinal use, it did not seem likely that the Golden State would make their deadline. The wildfires that ravaged California in October wiped out a year’s worth of harvest for some growers, and insurance companies worried about cannabis’ federally illegal status were not there to help the industry pick up the pieces.

The preexistence of a medical market also complicated rather than streamlinedThe medical industry complicated framework for recreational the process for regulators who struggled to define two separate regulatory frameworks. With very little time remaining before the January deadline, the state merged the two frameworks into one, finally releasing regulations dispensaries had to rush to meet.

Deadline “Met”

Even though the state can officially say that it met its deadline, that is only a partial truth. The majority of California counties have had a difficult time accepting the will of the voters, and, rather than embracing the cannabis industry, have banned all or parts of its operation. In the weeks leading to 2018, some of the staunchest of these counties—including the most populated county in the nation, Los Angeles—gave into permitting some business within their lines. However, those late players barely gave business owners enough time to prepare for January 1. Consequently, recreational cannabis sales were really only happening in a handful of stores across the state.

Days after the nation’s most populated state initiated its recreational market, Attorney General Jeff Sessions made the decision to reverse Obama-era guidance – guidance that pressured federal prosecutors to let cannabis businesses in compliance with their states’ regulations be. While this reversal certainly threatens the cannabis industry’s existence, it’s also exceedingly difficult to imagine prosecutors in pot-loving California pursuing state-legal cannabis.

Black market cannabis is cheaper that recreational in CaliforniaSince 1996, California has offered its residents medicinal cannabis. From that time on, California’s reputation as a stronghold for legal weed has only been fortified. One of its greatest incentives has been the hope of eliminating its enormous black market. Logically, this makes sense. Once recreational sales are legal, it would seem that the demand for a black market would be significantly diminished.

Even so, prohibitionists and cannabis advocates alike are able to agree on one thing: unless the law embodies more radical progress, the black market is going to be just fine.

Without the Right Incentives, the Black Market Won’t Go Away 

There are three conditions propped up by current law that will prevent the total eradication of a black market of cannabis.


In an interview with the New York Times, chairwoman of the board of the California Growers Association conceded that black market weed is far less expensive than store-bought pot. She guessed that an eighth of an ounce of illegal cannabis could be purchased for $20. That’s a damned good deal when the price of a legal eighth is around $50 before taxes. Local taxes will vary from county to county, and stores may respond to the massive loss of crops due to the wildfire by raising tax prices. The layers of taxes will have customers paying up to an additional 45 percent. While most Californian cannabis consumers are probably thrilled that their state has launched legal recreational sales, that excitement will wear off as their bank accounts empty. Once that happens, the 60 percent discount they can get with their friendly neighborhood dealer is going to look a lot more attractive again.


The black market is not just comprised of customers looking for a good deal. It’s run by entrepreneurs who believe that conducting illegal business is a better investment than entering the legal market. That might sound foolish, but here’s the thing – America’s war on drugs has made the black market the only place for convicted felons to thrive, even in states that have legalized recreational weed. In California, convicted felons with drug-related offenses are barred from obtaining a cannabis business license. One of the most destructive aspects of our criminal justice system has been its neglect to rehabilitate ex-convicts and its allowance of discriminatory policies barring them from entering legitimate workspaces. These people need to make a living, too. Instead of allowing them to use their entrepreneurial experience and cannabis-related expertise to grow the legal cannabis industry, they have been relegated to the margins. Create incentives for dealers to get out of the black market, and they will. Fail to do so, and you leave them no choice but to stay where they are. Thankfully, cities like Oakland and Los Angeles have realized this and have created social equity programs designed to help marginalized communities including ex-felons enter the legal industry. But a couple of cities just aren’t enough.

Dismantling Federal Prohibition

Until cannabis is legalized at the federal level, pot laws are going to be problematic: banks and insurance companies will be reticent to support legal businesses, state-registered businesses will be even more vulnerable to federal prosecution than underground operations, and states without legal cannabis do nothing to diminish the control the black market has on the demand for weed. Those problems create incentives for customers to source their cannabis from black market dealers. Still, there are a lot of reasons to be optimistic that the final barrier of federal prohibition will be dismantled sooner rather than later. The wave of states and nations legalizing cannabis for medicinal use has forced even the most resistant prohibitionists to consider mounting evidence proving the plant’s medicinal properties. And the healthy, uncompassionate prohibitionist cannot deny the numbers: the cannabis industry is flooding the economy with revenue. The secret is out.  Cannabis is not the devil’s weed, and everyone—or at least the majority of America—knows it. Support for cannabis legalization has reached an all-time high for the second year in a row, and this time, that statistic is true even for Republicans (except for Jeff Sessions, I suppose).

The people are speaking, and their voices will make a tangible difference when elections roll around. Congress, it’s time to take a stand. And let’s face it. You could really use a win these days.

Legal Weed Isn’t Enough to Suppress California’s Black Market…Yet was last modified: by